Purchase Tax Benefits for New Immigrants
The Knesset Finance Committee recently approved a significant amendment to the Real Estate Taxation Regulations, affecting tax benefits for new immigrants purchasing real estate in Israel. This amendment aims to improve the tax benefit given to immigrants, to continue encouraging immigration to Israel, by increasing the benefit for immigrants purchasing a single apartment. For the purpose of these regulations, immigrants are eligible for a discount on purchase tax for a property they bought in Israel during the period between one year before their immigration and up to 7 years after their immigration.
According to the new amendment, a new immigrant purchasing a single residential apartment will enjoy substantial tax benefits. For the portion of the property value up to 1,978,745 NIS (as of 2024), no purchase tax will be paid at all. For the portion between 1,978,745 NIS and 6,000,000 NIS, a reduced purchase tax of only 0.5% will apply. For the portion exceeding 6,000,000 NIS, the regular purchase tax rates for a single apartment will apply, which can reach up to 8%.
This significant benefit is limited to properties valued at no more than 20,000,000 NIS. In cases where the property value exceeds this amount, the benefit will not apply at all.
This change represents a significant improvement over the previous situation. In the past, new immigrants paid a purchase tax of 0.5% on the portion of the value up to the first bracket, and 5% on the portion beyond that, regardless of whether it was a first apartment or an additional one. This situation created a distortion where the benefit did not significantly help immigrants who purchased a single apartment, while creating a substantial benefit for immigrants purchasing additional apartments for investment.
The new amendment corrects this distortion and aligns the benefits with the overall government policy, which aims to ease the burden on first-time home buyers and increase the tax burden on investors, with the goal of lowering housing prices. Now, immigrants purchasing a single apartment enjoy a significant tax benefit, while immigrants purchasing additional apartments will pay the regular tax rates applicable to the general population.
Alongside the changes in the housing sector, immigrants purchasing rights in a business property will continue to enjoy the reduced tax rates that were in place until now. This is an important point for immigrants interested in investing in businesses in Israel.
The amendment also includes important transition provisions. Immigrants who arrived in Israel before the new regulations came into effect can choose whether to apply the new regulations or remain under the previous tax regime, whichever is more beneficial to them. However, it is not possible to enjoy double benefits – an immigrant who has already purchased a residential apartment under the previous regulations cannot request to apply the new regulations to it.
