Tax bracket for foreign’s buying a property in Israel

Purchasing property in Israel can be a complex process for foreign buyers, particularly when it comes to taxes. In this article, we will explain the tax bracket for foreign individuals buying property in Israel, including income tax, capital gains tax, and value-added tax (VAT).

Income Tax

Foreign individuals buying property in Israel are subject to Israeli income tax on rental income from the property. The tax rate ranges from 10% to 50%, depending on the individual’s tax bracket. The tax bracket is determined by the individual’s worldwide income and the number of days they spend in Israel. For example, if an individual’s worldwide income is less than NIS 564,000 (approximately $170,000) and they spend 183 days or more in Israel, they will be subject to the highest tax bracket of 50%.

Capital Gains Tax

Foreign individuals are also subject to capital gains tax when they sell a property in Israel. The tax rate is 25% on the gain, which is calculated as the difference between the sale price and the purchase price, adjusted for inflation. However, there are exemptions and reductions available for individuals who meet certain conditions. For example, if an individual has lived in the property for at least three years before selling it, they may be eligible for a reduced tax rate of 20%.

Value-Added Tax (VAT)

Foreign individuals buying a new property in Israel are subject to VAT at a rate of 17%. However, if the property is not for the individual’s primary residence, they may be eligible for a refund of the VAT paid. The refund process can be complex and time-consuming, so it is recommended that foreign buyers seek professional advice.

In summary, foreign individuals buying property in Israel are subject to income tax, capital gains tax, and VAT. The tax rates and exemptions vary depending on the individual’s worldwide income, the number of days they spend in Israel, and the purpose of the property. It is important for foreign buyers to seek professional advice to ensure compliance with Israeli tax laws and to take advantage of any exemptions and reductions available to them.

It’s important to note that this article is not professional tax advice. It is recommended to consult with a tax professional or a lawyer who is familiar with Israeli tax laws to ensure you understand the tax implications of buying a property in Israel.