Israel Property Tax Guide 2026

Overview — Property Taxes in Israel

Israel imposes several taxes on property ownership and transactions, administered by the Israel Tax Authority and local municipalities. These include transaction taxes (purchase tax, betterment tax), recurring taxes (Arnona), and capital gains taxes on property sales. The system distinguishes between residential and commercial property, and between owner-occupied and investment properties. Special rules apply to foreign residents purchasing Israeli property.

Purchase Tax (Mas Rehisha)

Purchase tax (Mas Rehisha) is a one-time tax paid by the buyer upon acquisition of property. Rates are progressive based on the property value and the buyer's status:

• Up to ₪2,100,000: 0% (for owner-occupied residential property — first-time and repeat buyers)
• ₪2,100,001 to ₪6,300,000: 3.5-5% depending on buyer status
• ₪6,300,001 to ₪20,000,000: 8%
• Over ₪20,000,000: 10%

Higher rates apply for investment properties and second homes. Non-resident buyers may face additional surcharges (typically 8-10% additional purchase tax). Purchase tax is calculated on the higher of the purchase price or the official property value (Shovi – the tax authority's valuation).

Betterment Tax (Mas Shevach)

Betterment tax (Mas Shevach — מס שבח) is levied at 50% on the increase in land value resulting from zoning changes, planning approvals, or building permit grants. The tax is triggered when land value increases due to government decisions (rezoning, density increases, change of use). Key points:

• Rate is 50% of the appreciation in land value attributable to the planning decision
• Payable by the landowner upon realisation (sale or development)
• Applies to both residential and commercial land
• May be deferred in certain circumstances (e.g., if the land is not sold)
• Exemptions apply for owner-occupied residential properties up to certain limits

Arnona — Municipal Property Tax

Arnona (ארנונה) is the annual municipal property tax levied by each local authority. Rates vary significantly by city and property type:

• Range: Approximately ₪60 to ₪200 per square metre per year for residential property
• Tel Aviv: Highest rates — approximately ₪120-200/m²/year for residential areas
• Jerusalem: Moderate — approximately ₪80-140/m²/year
• Peripheral cities: Lower — approximately ₪60-100/m²/year
• Commercial: Rates are significantly higher than residential (typically 2-3×)
• Discounts are available for seniors, low-income residents, and certain other categories

Capital Gains Tax on Property

Gains from the sale of property are subject to capital gains tax:

• Standard rate: 25% on real (inflation-adjusted) gains
• Controlling holders: 30% on gains from property held as part of a controlling interest
• Inflation adjustment: The cost basis is indexed for inflation (using the Consumer Price Index), so only real gains are taxed
• Owner-occupied exemption: Full exemption on the sale of a primary residence under certain conditions (one sale per 4 years, or up to 18 months overlap)

Land Appreciation Tax (Mas Shevach — Land)

Land appreciation tax applies to gains from the sale of land and buildings, with rates depending on the holding period:

• Held 4+ years: 25% on real gains (favourable rate for long-term holders)
• Held less than 4 years: Up to 49% depending on the gain and taxpayer status
• The tax applies to the inflationary-adjusted gain (cost basis indexed to CPI)

FAQs

Do foreign buyers pay additional purchase tax?

Yes, foreign residents (non-Israeli tax residents) purchasing residential property in Israel generally pay a surcharge of 8-10% on top of the standard purchase tax rates, significantly increasing the total transaction cost.

Is Arnona deductible for tax purposes?

For investment properties, Arnona is deductible as an expense against rental income. For owner-occupied properties, Arnona is not deductible.

What is the "Shovi" valuation system?

The Israel Tax Authority maintains a database of official property values (Shovi) used for tax calculation purposes. Purchase tax is calculated on the higher of the actual purchase price or the official Shovi value.

Disclaimer

This guide provides general information about Israeli property taxes for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Israeli tax advisor or real estate lawyer (Orech Din) for advice specific to your situation. InvestmentKit does not provide tax advice.