Purchase Tax (Mas Rechisha) for Foreign Buyers in Israel

If you are buying property in Israel as a foreign national or non-resident, purchase tax is almost certainly the largest transaction cost you will face — and unlike many countries, it is imposed on the buyer, not the seller. Understanding exactly how much you will owe before you sign a purchase contract is essential for budgeting your acquisition and avoiding surprises at closing. This guide explains exactly how mas rechisha works, the rates that apply to foreign buyers, and whether any relief is available to you.

What Is Purchase Tax (Mas Rechisha)?

Purchase tax — known in Hebrew as mas rechisha — is a transaction tax levied on every real estate purchase in Israel. It is paid by the buyer and is calculated as a percentage of the purchase price, or the appraised value if that is higher. Unlike the stamp duty systems found in the UK, Australia, and many other countries, Israel does not impose a separate registration fee or stamp duty. The purchase tax is the primary government transfer cost in any property acquisition.

The tax is administered by the Israel Tax Authority (Rashut HaMasim) under the Land Taxation Law (Appreciation and Purchase) — 1963 (Chok Mas Shevach v'Rechisha). The tax brackets are updated periodically by the Finance Ministry, typically on an annual basis to reflect inflation, so the precise thresholds may differ slightly from year to year. The figures quoted in this article reflect recently published brackets — your attorney will confirm the exact current amounts at the time of your transaction.

Purchase tax is distinct from betterment tax (mas shevach), which is a capital gains tax paid by the seller on any profit from the sale. When budgeting for a purchase, you need to account for both: your purchase tax as the buyer, and whether any betterment tax liability on the seller's side may affect the deal or negotiation.

One important aspect of Israeli purchase tax that surprises many foreign buyers: it applies to all types of real estate, including apartments, houses, commercial properties, land, and parking spaces acquired separately. There are different rate schedules for residential versus commercial property, and the rates depend heavily on whether the buyer qualifies as an Israeli resident purchasing their first or only home.

Purchase Tax Rates for Foreign Buyers (Non-Residents and Foreigners)

Foreign buyers — meaning individuals who are not Israeli residents for tax purposes — face significantly higher purchase tax rates than Israeli residents buying their first home. This is because Israeli law reserves a preferential zero-rate bracket for Israeli residents acquiring a single residential property, a benefit that reflects housing policy goals. Non-residents, and Israeli residents who already own one or more properties, are placed in a higher tax bracket.

The current purchase tax rates for foreign buyers and investors (applied regardless of how many properties they own in Israel) are:

• 8% on the first NIS 5,525,070 of the purchase price
• 10% on any amount above NIS 5,525,070

These rates apply whether you are purchasing a residential apartment, a house, or a commercial property as a non-resident. There is no exemption bracket — every shekel of the purchase price is taxed from the first shekel upward.

By contrast, an Israeli resident purchasing their first and only home pays 0% on amounts up to approximately NIS 1,978,745 (the exact threshold is updated annually), and then graduated rates on higher amounts — reaching a maximum of 10% only on amounts exceeding NIS 17,794,305. The gap between the Israeli first-home rate and the foreign buyer rate represents a substantial cost difference, particularly for mid-range property purchases in Tel Aviv or Jerusalem where prices commonly fall in the NIS 3–6 million range.

Israeli residents who already own one or more properties (i.e., buying an additional property or investment property) also pay higher rates, though their schedule differs slightly from the foreign buyer schedule. If you hold Israeli permanent residency but are not an Israeli citizen, your tax residency status for purchase tax purposes needs to be confirmed with your attorney based on your specific circumstances.

Note: These brackets are updated periodically by the Finance Ministry. Always confirm the current figures with your Israeli attorney before signing any contract.

How to Calculate Your Purchase Tax

Calculating purchase tax for a foreign buyer is straightforward once you know the brackets. The tax is applied progressively — the 8% rate applies to the first NIS 5,525,070 of the purchase price, and the 10% rate applies only to the portion exceeding that threshold. Here are two worked examples:

Example 1: Apartment purchased for NIS 4,000,000

Since the entire purchase price falls within the first bracket (below NIS 5,525,070), the calculation is simple:

• 8% × NIS 4,000,000 = NIS 320,000 (approximately USD 87,000 at current exchange rates)

Example 2: Apartment purchased for NIS 7,000,000

The purchase price exceeds the first bracket threshold, so two rates apply:

• 8% × NIS 5,525,070 = NIS 442,006
• 10% × NIS 1,474,930 (the amount above NIS 5,525,070) = NIS 147,493
• Total purchase tax: NIS 589,499

These numbers illustrate why purchase tax is a material cost that must be factored into your acquisition budget from the outset. On a NIS 4 million apartment, you are effectively paying an additional 8% on top of the agreed purchase price. This is in addition to legal fees (typically 0.5–1.5% of the purchase price), real estate agent commission (if any), and any mortgage costs.

It is worth noting that if the Israel Tax Authority appraises the property at a value higher than the contractual purchase price — which can happen in transactions where the declared price appears low — purchase tax will be calculated on the higher appraised value. Contracts should therefore accurately reflect the true consideration being paid.

Tax is due and must be paid within 60 days of signing the purchase contract. This is not 60 days from closing or from receiving the keys — it is 60 days from the date of the contract signature. Your attorney will typically prepare and file the purchase tax declaration (hashba'at mas rechisha) well in advance of this deadline.

Tax Benefits for New Immigrants (Olim)

One of the most significant financial incentives available under Israeli law for new immigrants is a substantial reduction in purchase tax. New immigrants — olim chadashim — who have not owned property in Israel in the previous 7 years are entitled to be taxed at the Israeli resident first-home rate rather than the foreign buyer rate. This can represent a saving of tens of thousands of shekels, depending on the purchase price.

The benefit is available once per person within the first 7 years after making Aliyah (immigrating to Israel under the Law of Return). The oleh must apply to the Tax Authority with their teudat oleh (immigrant certificate) and demonstrate eligibility. The reduced rate applies even if the oleh has not yet established their primary residence in Israel at the time of the purchase.

To put the saving in concrete terms: on a NIS 3,000,000 apartment, a foreign buyer would pay 8% = NIS 240,000. An oleh paying the Israeli first-home rate would pay 0% on the first ~NIS 1,978,745 and a graduated rate on the remainder — potentially reducing the tax liability to NIS 60,000–80,000. The saving can easily exceed NIS 150,000 on a single transaction.

If you are planning to make Aliyah and purchase property in Israel, the timing of your purchase relative to your Aliyah date matters significantly from a tax perspective. It is worth taking specific legal advice on the optimal sequence of events. In some cases, it may be worthwhile to delay a purchase until after Aliyah is completed, or conversely to understand what pre-Aliyah purchase arrangements are available.

Note that the oleh purchase tax benefit is separate from other oleh tax incentives (such as income tax exemptions under the 10-year tax holiday). Each benefit has its own eligibility requirements, and you should confirm your specific entitlements with your attorney.

How and When Purchase Tax Is Paid

The procedural mechanics of paying purchase tax in Israel are handled primarily by your attorney. Here is how the process works in practice:

Filing the Declaration: The buyer's attorney prepares a purchase tax declaration (hashba'at mas rechisha) — a formal document that sets out the purchase price, the parties' details, and the tax calculation. This is filed with the Israel Tax Authority, specifically with the Land Taxation Office (misrad mas mekarkein) that has jurisdiction over the property's location.

Payment deadline: Tax must be paid within 60 days of the date on which the purchase contract is signed. There are no extensions available as a matter of routine — the 60-day deadline is firm. Most attorneys aim to file and pay within 30 days to provide a buffer.

Penalties for late payment: If purchase tax is not paid by the deadline, the outstanding amount is subject to interest (rishit pigurim) and indexation to the Consumer Price Index (hatzmadat madad). These can add up quickly. There is no grace period — the penalties run from day 61.

Tax clearance certificate: Once the tax is paid, the Tax Authority issues a purchase tax clearance certificate (ishur mas). This certificate is a prerequisite for registering the transfer of title in the Land Registry (Tabu). Without it, the Land Registry will not process the transfer application. This means that obtaining the clearance certificate is on the critical path to completing your registration of ownership.

Practical timing: In a typical transaction, the sequence is: contract signed → attorney files declaration within a few weeks → tax paid → clearance certificate obtained → combined with other closing documents → title registration filed with Land Registry. The entire post-signing process to registration typically takes 2–4 months, depending on the complexity of the title and the responsiveness of the Tax Authority.

For foreign buyers making payments from abroad, ensure that your attorney has clear instructions and the necessary bank mandate or power of attorney to receive and disburse funds on your behalf. The purchase tax payment must be made in Israeli shekels — factor in currency conversion costs and timing when budgeting for the payment.