Purchase Tax — Rates, Exemptions and Calculation | Attorney Rozil Amir

What is Purchase Tax and Who Pays It?

Purchase tax is a direct tax paid by the buyer (or new owner) when purchasing real estate in Israel. It is a tax on the transfer of rights in a property, as mandated by the Capital Gains Tax and Linkage Law (5734–1974) and by income tax laws and amendments. It is due upon registration at the Land Registry (Israel Land Authority) and is essential for completing any real estate purchase transaction — whether an apartment, house, land, or commercial property.

In recent years, purchase tax has become one of the most significant expenses in a real estate transaction, sometimes representing approximately 7–10% of the purchase value (depending on the applicable rate). A precise understanding of the rates, exemptions, and discounts applicable to us can save tens of thousands of shekels and educate us about our rights as buyers.

Who Pays Purchase Tax?

• First-time buyer: A person purchasing real estate as a resident of Israel for the first time — may be entitled to substantial discounts (see exemptions below).
• Second-time and subsequent buyers: Those who have already held real estate — pay at the full rate (according to type and value).
• Corporations: Companies, funds, and institutions — pay at different rates and sometimes higher rates.
• Family transactions: Parents and children, spouses — purchase tax is also due here, but partial exemptions or discounts may apply under certain conditions.

It is important to note that purchase tax is a debt that falls upon the buyer, who is responsible for its payment. If not paid, the Land Registry will not register the property in his or her name until the tax is paid or a payment arrangement is made with the tax authority.

Purchase Tax Rates — 2026 Update

Purchase tax rates in Israel vary according to several parameters: the type of property (residential apartment, house, land, commercial property), the property's value, the buyer's status (first-time buyer or not), and whether applicable legal discounts exist. Below is a table of current rates:

Important Note: The above table reflects current practice. Purchase tax rates may change in accordance with new legislation. It is recommended to consult with a law firm or licensed tax advisor before any transaction to obtain accurate information.

Exemptions and Reductions in Purchase Tax

Israeli law grants significant exemptions and reductions in certain cases, particularly for first-time buyers and families. Understanding these exemptions is essential for substantial savings on purchase costs.

Full Exemption or Significant Reduction — First-Time Buyer

A first-time buyer purchasing a residential apartment in Israel is entitled to a significant reduction in purchase tax. Generally, the applicable rate is 0% up to a certain property value (ceiling amount), and then increases gradually. For example:

• Up to a certain ceiling amount (approximately NIS 650,000–750,000, depending on the year): full exemption (0%).
• From that amount to a higher amount: graduated rate (1%–3%).
• Above the upper ceiling: 3.5% (or higher for certain properties).

The ceilings change annually in accordance with economic indexation. Therefore, it is critical to verify updated information from the Tax Authority before signing an agreement.

Reduction for First-Time Buyer Spouses (Joint Custody)

If two spouses purchase real estate together and both are first-time buyers, each is entitled to a first-time buyer reduction on their share. This may significantly reduce the financial burden.

Exemption or Reduction in Family Transactions

In a transaction between a parent and child, between spouses, or between siblings, a significant reduction may apply (sometimes as low as 0% or 1%) — but subject to strict conditions:

• Family relationship must be proven (identity card, marriage certificate, etc.).
• Approval must be obtained from the Tax Authority or a qualified attorney.
• If consideration is involved, it must be at fair market value (or an agreed value documented).
• In certain cases, an application to the Income Tax Authority for tax reduction must be filed.

Exemption for Disabled Persons and Those with Disabilities

A person with a disability or disability status is entitled to an exemption or significant reduction when purchasing a residential apartment. An official certificate from the National Insurance Institute or the Ministry of Social Affairs must be presented.

Exemption for New Immigrants (Olim Chadashim)

A new immigrant who immigrated to Israel in recent years may be entitled to an exemption or reduction for a limited period (usually up to 3–5 years from immigration). A certificate of immigration from the Jewish Agency must be presented.

Reduction in Special Category Transactions

In rare cases, such as purchasing a property in Tel Aviv as part of an urban development plan or in properties with certain characteristics, state-funded reductions may apply. These require case-by-case examination.

Purchase Tax Calculation — Scenarios and Sample Calculations

To understand how purchase tax is calculated in practice, we will review several typical scenarios. The following calculations reflect the situation in 2026, but it should be noted that rates and caps may change.

Scenario 1: First-Time Buyer Purchases an Apartment for 700,000 NIS

Dan is a first-time buyer purchasing an apartment for 700,000 NIS in Tel Aviv. Let's assume the full exemption cap is 650,000 NIS:

• On the first 650,000 NIS: 0% tax = 0 NIS.
• On the additional 50,000 NIS: 2% tax = 1,000 NIS.
• Total purchase tax: 1,000 NIS (approximately 0.14% of property value).

This is an example showing how the first-time buyer discount saves significantly compared to a regular rate of 5–8%.

Scenario 2: Repeat Buyer Purchases an Apartment for 1,200,000 NIS

Judith already owns an apartment and is purchasing a second apartment for 1,200,000 NIS. She pays the full rate:

• On 1,200,000 NIS: 7% tax = 84,000 NIS.
• Total purchase tax: 84,000 NIS (7% of property value).

The difference between a first-time buyer and a repeat buyer is very significant: in this example, the repeat buyer pays tens of thousands more.

Scenario 3: Parent Sells an Apartment to Child for 800,000 NIS

Abraham (the parent) sells an apartment to his son Moses for 800,000 NIS. Moses is a first-time buyer, and they are requesting a family discount:

• Family discount: 1% tax (instead of 3.5%).
• On 800,000 NIS: 1% tax = 8,000 NIS.
• Total purchase tax: 8,000 NIS (1% of property value).

The family discount saves approximately 20,000 NIS here compared to the regular first-time buyer rate without family relationship.

Scenario 4: Purchase of Built Land (Not an Apartment) for 500,000 NIS

Israel is purchasing a plot of built land (not an apartment in a building) for 500,000 NIS. He is a first-time buyer, but land does not qualify for the same discount as an apartment:

• Rate on land: 5% (carries a higher base rate).
• On 500,000 NIS: 5% tax = 25,000 NIS.
• Total purchase tax: 25,000 NIS (5% of property value).

Note: Land is taxed at a higher rate than an apartment, even for a first-time buyer.

Additional Costs Related to Purchase

It is important to understand that purchase tax is not the only ancillary cost associated with real estate purchase. There are additional expenses:

• Land Registry Registration Fees: Fixed or sliding fees for registering the property in the new owner's name (typically hundreds to thousands of shekels).
• Attorney Fees: Fees for the attorney handling the transaction (typically 1,500–3,500 NIS).
• Capital Gains Tax: Tax on the seller's profit (not on the buyer, but affects the property price).
• Legal Review (Title Search): Review of property rights (up to 500 NIS).
• Title Insurance: Recommended insurance to cover legal risks (approximately 1,000–2,000 NIS).
• Broker Commissions (if applicable): Typically 2–3% of property value (usually paid by the seller, but affects the price).

In total, ancillary costs associated with purchase (purchase tax plus other fees) may reach 10–12% of property value. Proper financial planning and legal advice can save significantly on these costs.