Real Estate Taxes in Israel: mas rechisha, mas shevach, arnona (2026)

Real Estate Taxation in Israel: Understanding Purchase, Sale and Ownership Taxes

Buying, selling or owning property in Israel involves three main taxes that every investor must know before committing. The amount of these taxes can change dramatically depending on your status: resident, non-resident, olé hadash, first purchase or investment. Ignoring taxation means risking paying tens of thousands of shekels more than necessary — or blocking a transaction for failing to anticipate.

This guide details each tax, its brackets, exemptions, and the most common special cases.

📖 This article is part of theUltimate Real Estate Guide in Israel

Mas Rechisha — The Acquisition Tax

Themas rechisha(מס רכישה) is the tax that the buyer must pay to the State upon any real estate acquisition. It is calculated as a percentage of the purchase price, according to a progressive bracket system. It is generally the most important tax item in your transaction.

Brackets for a Single Property (Primary Residence)

If you are an Israeli resident and this is yoursole property(dira yehida), you benefit from reduced brackets. The first millions of shekels are partially or completely exempt. Beyond that, the rate increases progressively up to 10% for the highest bracket.

💡 Good to know:The brackets are reassessed annually by the tax administration (Rashout Hamisim). The exact amounts change on January 16 each year. Your lawyer will calculate the exact amount at the time of your transaction.

Brackets for an Additional Property (Investment)

If you already own property in Israel and are buying a second (or more), the starting rate is8%and rises up to10%on the higher brackets. This is a considerable difference compared to the first property.

Concretely, for an apartment at 2 million shekels, the mas rechisha as a first property can be almost nothing, while it will reach about 160,000 shekels as a second property. This is a gap that can change the entire equation of an investment.

Brackets for Non-Residents

Buyers who are not Israeli tax residents are treated assecond propertybuyers, even if it's their first purchase in Israel. The rate therefore starts at 8%. This is a crucial point for investors based in France or elsewhere who buy a pied-à-terre without having made their aliyah.

⚠️ Warning:The definition of "resident" in Israeli tax law does not depend on your nationality or passport, but on your center of life. If you live abroad more than 183 days per year, you are probably considered a tax non-resident, even with a teudat zehout.

Advantages for olim hadashim

New immigrants benefit from afavorable tax regimefor a limited period after their aliyah. This regime allows benefiting from the reduced "single property" brackets even in certain cases where the normal bracket would be higher.

The precise conditions and duration of these advantages change regularly. This is an area where your lawyer must verify your exact eligibility at the time of the transaction — the rules that applied last year are not necessarily the same this year.

Declaration and Payment Deadline

The mas rechisha declaration must be filed within30 daysfollowing the signing of the sales contract. Payment is due within60 days. Your lawyer handles the declaration and calculation, but it's up to you to provision the funds.

Mas Shevach — The Capital Gains Tax

Themas shevach(מס שבח) is the tax due by the seller on the profit made when selling a property. The taxable profit is the difference between the sale price and the acquisition price (adjusted for inflation and certain deductible expenses like renovations, lawyer fees at purchase, and agency commission).

Exemption for Single Primary Residence

If you are an Israeli resident and you are selling yoursole property(dira yehida), you can benefit from atotal exemptionfrom mas shevach, under certain conditions. This is a considerable advantage that has no equivalent in France.

The main conditions: the property must be your primary residence, you must not own any other residential property in Israel, and you must not have used this exemption in the previous 18 months.

Calculation for Other Cases

If the exemption does not apply (second property, investment, non-resident), the capital gain is taxed. Since the 2014 reform, aproportional calculationapplies: only the capital gain accumulated after January 1, 2014 is taxed at the full rate. The prior portion benefits from a reduced rate or linear exemption.

The marginal tax rate on real estate capital gains is25%for residents and25% to 50%for non-residents (according to applicable tax treaties).

💡 Advice:If you have owned a property for a long time (before 2014), the proportional calculation can considerably reduce your taxation. Have your lawyer run a simulation before setting your sale price — the tax burden directly influences your net price.

Special Case: Gift Between Relatives

A real estate gift between relatives (parents-children, spouses) is subject to specific tax rules. The mas rechisha is reduced, but the mas shevach can be transferred to the beneficiary. This is a complex area that absolutely requires legal assistance.

Arnona — The Municipal Property Tax

Thearnona(ארנונה) is the local tax payable to the municipality (iriya). Unlike the previous taxes which are one-time (at purchase or sale), arnona is arecurringcharge, payable every two months.

How It Is Calculated

The amount depends on three factors: thecity(each municipality sets its own rates), theareaof the property (in square meters), and thezonewhere the property is located within the city.

The gaps between cities are significant. For a 100 m² apartment, arnona can vary from 3,000 to 8,000 shekels per year depending on the municipality. The cities with the highest arnona are not necessarily those where real estate is most expensive — this is a factor to consider in your recurring budget.

Exemptions and Reductions

Several categories of residents can benefit from arnona reductions:

Theolim hadashimbenefit from a significant reduction (up to 90%) during the first 12 months following their aliyah, then degressive reductions in the following years. This is one of the most concrete and immediate advantages of aliyah.

Theelderly,large families,disabledand beneficiaries of certain allowances can also claim reductions. Each municipality has its own criteria.

💡 Important:Reductions are not automatic. You must register with the municipality and provide supporting documents. If you are olé hadash, present your teudat oleh as soon as you move in. The exemption does not apply retroactively.

Tenant or Owner: Who Pays?

It's theoccupantof the property who pays arnona, whether owner or tenant. If you rent an apartment, you pay the arnona — not your landlord. This point is important in calculating the real cost of your rental.

VAT on New Projects

Purchasing new property from a developer (kablan) is subject to17% VAT(ma'am). Unlike resale properties where there is no VAT between individuals, new properties are considered a commercial service.

In practice, the price displayed by the developeralready includes VAT. You don't pay it additionally. But you need to be aware of this because it means that on a new 2 million shekel apartment, about 290,000 shekels is VAT. This information is important if you're comparing a new property with a resale property at the same price — the "pre-tax" price of the new property is actually lower.

⚠️ Warning:VAT is added to mas rechisha. On a new purchase, you pay VAT (included in the price) AND the acquisition tax (calculated on the price including VAT). The double tax effect of new properties is often underestimated.

Rental Income: How Is It Taxed?

If you rent out your property, rental income is taxable. But the tax regime depends on the type of rental and your total income.

Residential Rental

Rent from residential properties benefits from anexemptionup to a ceiling of about 5,500 shekels per month (the exact amount is reassessed annually). Beyond this threshold, you have two options:

Theflat rate of 10%on all rent (not just on the part exceeding the threshold). It's simple, no charge deductions, but the rate is low.

Theprogressive scale taxationwith deduction of actual charges (depreciation, repairs, mashkanta interest, arnona, insurance). More complex but potentially more advantageous if your charges are high.

Short-term Rental (Airbnb type)

Short-term rental is considered acommercial activity. Income is taxed at the normal progressive scale, with VAT obligation if turnover exceeds the threshold. This is a much less favorable regime than long-term rental.

Commercial Rental

Commercial property rent (offices, shops) is taxed at the progressive scale and subject to VAT. Residential exemptions do not apply.

France-Israel Tax Treaty

For French buyers, theFranco-Israeli tax treatyis a crucial element. It determines in which country you pay your taxes and how to avoid double taxation.

As a general rule, real estate income (rent and capital gains) from property located in Israel is taxablein Israel. But if you are a French tax resident, you must also declare this income in France. The treaty provides tax credit mechanisms to avoid paying twice.

⚠️ Complexity:International taxation is a specialized field. If you reside in France and buy in Israel (or vice versa), consult a lawyer or accountant who masters both systems. Errors in this area can be very costly and statute of limitations are long.

Summary Table: Fees to Expect

⚠️ Practical rule:For a resale purchase as first property (resident), expect about 4 to 6% additional fees. For a second property or purchase as non-resident, count 10 to 13%.

Common Tax Mistakes

Believing that olé status protects from everything.Tax advantages for olim are real but limited in time and amounts. And they don't apply to all situations (second property, commercial investment, short-term rental).

Forgetting to declare within deadlines.The mas rechisha declaration must be made within 30 days. A delay results in automatic penalties and late interest.

Not anticipating mas shevach before selling.The amount of capital gains tax can be an unpleasant surprise if you haven't calculated it before setting your sale price. Your net price is the sale price minus mas shevach — not the sale price outright.

Ignoring the tax impact of the bilateral treaty.If you are a tax resident of another country, declaration obligations exist in both countries. Failure to declare in your country of residence can result in significant reassessments.

Confusing price including VAT and price excluding VAT on new properties.The price displayed by the developer includes VAT. When you compare with resale, keep this in mind.

Also Read

👉Back to the Ultimate Real Estate Guide in Israel

👉The Purchase Process — the 8 Essential Steps

👉The Mashkanta — Financing Your Purchase in Israel

👉Taxation — mas rechisha, mas shevach, arnona

👉The Best Cities to Invest in Israel

👉Buying Off-Plan — New Projects, Tama 38

👉The 10 Pitfalls to Avoid in Israeli Real Estate

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The brackets and rates mentioned are indicative and subject to modification by Israeli tax authorities. Consult a specialized lawyer for a calculation adapted to your situation. Last update: March 2026.

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