Israel Purchase Tax 2026: Complete Guide for Foreign Buyers (Mas Rechisha)

Quick Answer

Foreign buyers and non-residents pay 8% purchase tax (Mas Rechisha) on the first ₪6,055,070 of property value, with higher rates above that threshold (2026 brackets — confirm current figures at israeltax.gov.il). New olim buying their first home within 2 years of aliyah pay significantly lower rates. Purchase tax must be paid within 60 days of signing the contract.

What Is Mas Rechisha?

Mas Rechisha (purchase tax) is a one-time tax paid to the Israeli Tax Authority when buying property. It is paid by the buyer, not the seller. It applies to every property purchase in Israel. The rate depends on your residency status, whether this is your first home purchase in Israel, and the property value. It is one of the largest transaction costs in an Israeli property purchase and must be budgeted for explicitly — many diaspora buyers are caught off guard by the size of this payment.

Purchase Tax Rates 2026

Foreign buyer / non-resident (applies to most diaspora Jews without Israeli residency):

• On the first ₪6,055,070: 8%
• Above ₪6,055,070: 10%

Israeli resident — first home buyer:

• Up to ₪1,978,745: 0%
• ₪1,978,746-₪2,347,040: 3.5%
• ₪2,347,041-₪6,055,070: 5%
• ₪6,055,071-₪20,183,565: 8%
• Above ₪20,183,565: 10%

Israeli resident — not first home (already owns property in Israel): starts at 8% on the full value.

Note: Tax brackets are updated annually by the Israel Tax Authority. Confirm current brackets at israeltax.gov.il or with your lawyer before signing.

The Oleh Discount — The Most Valuable Tax Benefit Available

New olim (those who have made formal aliyah) receive a significantly reduced purchase tax rate on their first home purchase in Israel within 2 years of aliyah. The oleh rate allows new immigrants to purchase at reduced rates regardless of property value — effectively treated more favourably than the standard foreign buyer rate. The exact oleh purchase tax rate changes periodically — confirm your specific rate with your Israeli lawyer after you have your Teudat Oleh, and use this benefit before the 2-year window closes.

This is arguably the most financially valuable benefit available to new olim buying property. A diaspora Jew buying a ₪4M Tel Aviv apartment as a foreign buyer pays ₪320,000 in purchase tax. The same person buying as a new oleh within 2 years of aliyah pays substantially less. The difference can be ₪100,000-₪200,000 or more depending on the property value.

Real Purchase Tax Examples (2026)

Example 1: Foreign buyer, ₪3M apartment. Purchase tax: 8% × ₪3M = ₪240,000. Add lawyer fees (1.2%): ₪36,000. Agent commission (2% + VAT): ₪70,200. Total buying costs above purchase price: ₪346,200.

Example 2: New oleh within 2 years of aliyah, ₪3M apartment. Reduced oleh purchase tax rate (confirm with lawyer — typically much lower than 8% for the value range). Lawyer fees and agent commission same as above. Total savings vs foreign buyer: potentially ₪100,000-₪200,000.

When and How to Pay

Purchase tax must be paid to Rashut HaMiskim (Israel Tax Authority) within 60 days of signing the purchase contract. Your lawyer handles the filing and coordinates payment. Late payment results in significant interest and penalties. The payment is made via Israeli bank transfer to the tax authority's account — your Israeli bank account must be set up before this deadline.

FAQ

Q: Can I avoid purchase tax by buying through a company?
A: No. Purchasing through an Israeli or foreign company does not reduce purchase tax for residential properties and may create additional tax complications. Consult an Israeli tax advisor (yoetz mas) before setting up any corporate structure for property purchase.

Q: Does purchase tax apply to parking spaces and storage rooms?
A: Yes. If you purchase a parking space or storage room as part of the property transaction, purchase tax applies to the allocated value of those additions. Ensure your purchase contract clearly specifies the allocation of value between the apartment and ancillary units.

Q: Is there a way to reduce purchase tax as a diaspora buyer who has not yet made aliyah?
A: The primary route is making aliyah and using the oleh rate within 2 years. Some diaspora buyers with a spouse who is an Israeli citizen may have different rate implications — consult a lawyer. There is no legitimate mechanism to reduce the 8% foreign buyer rate other than through formal aliyah status.

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