Jewish Times Asia March 2015
Tax considerations for buying/selling Israeli property Supplied by
Ahia Oren, Real Estate Agent Century 21 Property Agency
Over the past 5 years, the price of real estate in Israel has been constantly rising, with up to a 75% increase in the price of apartments. It is forecast that prices will rise between 5-10% in 2015 due to increasing demand by foreign residents over the past two years. The reasons for this increase are the rising anti-Semitism in Europe together with the fact that the property in Israel is a growing market. Furthermore, Israeli economics has proven itself to be stable, for instance, following the international depression in 2008, Israel survived without any negative impact on the economy. In the next series of articles,
we will cover the real estate business in Israel, the reasons for the increasing prices, the best investments in the Israeli market, the directions of this market, urban regeneration, as well as other topics. In this article, we will focus on taxes for foreign concerning buying or selling property in Israel. In Israel there are two kinds of taxes you should pay attention to: Purchase Tax when buying an apartment and Capital Gains Tax on real estate when selling an apartment. Purchase Tax –buying an apartment There are several tax brackets, which change from time to time by the government. The tax brackets currently, please refer to table on right. Here is an example: Mr Jacob Levi bought, with our assistance, a sea view apartment in a luxury project “City
Tower” in Bat Yam City. Bat Yam is located on Israel’s Mediterranean Sea coast, on the central coastal strip, just south of Tel Aviv. The place is very popular with beach-goers. It has 3.2 km long promenade along the ocean lined with pubs and restaurants. The city has six beaches, one of which is protected by a breakwater. Mr Levi paid for 4,000,000 NIS (about US$1 million) for his luxury apartment. Purchase amount (Million NIS) 0 – 1.16 1.16 – 3.48 3.48 – 4.8 4.8 – 16 16+ He paid as follows:
5% 6% 7% 8% 10%
5% for the amount of 58,000 the first 1.16m: 6% for the next 2.32m: 139,200 7% for the final: 36,400 Total: 233,600
Anyone can buy an apartment in the Holy Land, but with me you are guaranteed the best deal, with a professional and reliable service.
For enquiries, please do not hesitate to contact me: firstname.lastname@example.org +972-528384308 logistics and economics. Bar ILan university. Achiya Oren BA Ma logistics management. Bar ILan university. Major IDF.
Capital gains tax on real estate – selling an apartment The maximum tax rate is 25%. During 2014, tax exemptions for foreign resident who sells the sole apartment was cancelled and instead can enjoying linear protection: The seller will pay tax only for what has been gained (“profit”) from 1 January 2014 until the selling date. The seller can deduct from this profit all his expenses regarding his apartment, such as maintenance, renovation, legal fees, real estate agent. This calculation method is decreasing significantly the tax payment, in order to encourage people to sell properties and, by that, creating bigger supply. Here is an example: In January this year, I sold Mr. Dov apartment in Bat Yam. He purchased his apartment three years ago with my help.
He bought for 2.1m NIS and sold it for 2.7m NIS. The apartment’s value on 1 January 2014 was 2.5m NIS, so the tax calculation relates to 200,000 NIS profit. After the expense deduction of about 90,000 NIS, Mr Dov paid a negligible sum of 27,500 NIS. No doubt Mr Dov made an excellent deal considering the rent payments during the years and the rapidly increasing value of his property. In conclusion In the foreseeable future, the real estate prices would keep rising, due to limited and inadequate supply, together with increasing demand by local and foreign residents. The Israeli government is encouraging investments equally to foreign investors and local investors, in all aspects – mortgage rate, taxes etc. All the above relates to foreign residents but not for returning residents, or new immigrants (who made aliyah), these individuals are entitled to additional benefits. This article was written with the help of Ella Rudnick, lawyer and not meant to replace legal opinion or legal consultation