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Israel Tax Authority revises residence purchase tax rates

The Israel Tax Authority has adjusted the purchase tax rates for housing according to the rate of increase in the relevant price  indices published on Tuesday, which rose 1.9% in 2018. The result of this adjustment is a decrease in purchase tax on homes. The minimum threshold for this tax is now NIS 1,696,750; a sole residence purchased for less than this is exempt from purchase tax. Tax must be paid on homes purchased for more than the threshold according to status (whether or not the purchaser already owns a housing unit) and the price of the purchased home. The tax rate for a purchaser who does not own another housing unit ranges from 3.5% to 10%, while the tax rate for a purchaser who already owns a housing unit ranges from 8% to 10%.

The revised purchase price brackets and applicable tax rates for purchasers of a sole residence are:

Up to NIS 1,696,750 - no tax.

NIS 1,696,751-2,012,560 - 3.5%.

NIS 2,012,561-5,192,150 - 5%.

NIS 5,192,151-17,307,170 - 8%.

Over NIS 17,307,170 - 10%.

The revised price brackets and tax rates for purchasers who already own a housing unit are:

Up to NIS 5,194,255 - 8%.

Over NIS 5,194,255 - 10%.

New immigrants are entitled to a tax break on the purchase of a residential housing unit and/or business premises during a period starting the year before immigration to Israel and ending seven years after immigration. The tax rates for new immigrants:

Up to NIS 2,857,881 - 0.5%

Over NIS 2,857,881 - 5%.

The tax rates are progressive, so that, for example, the purchaser of a sole residence for NIS 2,200,000 will pay no tax on the first NIS 1,696,750, NIS 11,053 on the next NIS 315,810  (NIS 2,012,560 - NIS 1,696,751 x 3.5%), and NIS 9,372 on the remaining NIS 187,440 (NIS 2,200,000 -NIS 2,012,560 x 5%), giving total purchase tax of NIS 20,425. The total tax on the same purchase last year would have been NIS 22,127.