Taxes involved with buying a property in Israel

Buying a property in Israel

When buying a property in Israel, there are several taxes that must be taken into consideration. These include the purchase tax, value-added tax (VAT), and annual property taxes.

The purchase tax, also known as the “arrears tax,” is a one-time tax that is paid to the Israeli Tax Authority at the time of purchase. The tax rate varies depending on the purchase price and whether the property is considered to be a first-time purchase or a subsequent purchase. For first-time buyers, the tax rate is generally lower than for subsequent purchases. The purchase tax is calculated based on the purchase price of the property, and is paid by the buyer.

Value-added tax (VAT) is also applicable on property purchases in Israel. The VAT rate is currently 17%, but it can be reduced to 5% for certain types of properties, such as those that are designated for residential use. The VAT is paid by the buyer and is calculated based on the purchase price of the property.

Tax and VAT

In addition to the purchase tax and VAT, property owners in Israel are also responsible for paying annual property taxes. These taxes are based on the value of the property and are assessed by the local municipality. The tax rate can vary depending on the location and value of the property. Property owners are also responsible for paying any municipal taxes or fees, such as garbage collection fees or sewage charges.

It’s also worth mentioning that in Israel, there is a property tax on rental income which is called “Arnona” and is paid by the owner of the property. Arnona is calculated based on the value of the property and the number of days in the year that the property is rented out. The Arnona rate varies depending on the location and value of the property.

It’s essential to consult with a real estate lawyer and a tax advisor before buying a property in Israel to ensure that you fully understand the taxes involved and to take advantage of any tax incentives or exemptions that may be available. Additionally, it’s important to be aware that tax laws and regulations can change frequently in Israel, so it’s essential to stay informed and up-to-date on any changes that may affect your purchase.

Summary

In summary, buying a property in Israel involves several taxes such as purchase tax, value-added tax (VAT) and annual property taxes. Additionally, rental income also has a property tax known as “Arnona” which is also paid by the owner. It’s important to consult with a real estate lawyer and a tax advisor before making a purchase to ensure you understand the taxes and take advantage of any available exemptions or incentives.