A Guide to a Purchaser of a Residential Dwelling - Purchase tax
Dear residential buyer,
The information provided here is intended to assist you in buying
a residential dwelling.
Each buyer of a residential dwelling is required by law to submit
a declaration of the purchase and to pay purchase tax.
"Residential Dwelling"
"Residential Dwelling" is defined as a dwelling whose
construction is completed, (is ready to move in), and is intended
for residence by its nature. The purchase tax in respect to residential
dwelling is an incremental tax levied differently than other rights
as outline below.
If you purchased an unfinished apartment from a contractor, and
the contractor is not obligated to finish it, then, it is not considered
as a "residential dwelling," thus the purchase tax rate
on it will be equivalent to the tax on land, i.e., 5% of the value
of the acquisition. Only if the contractor obligated in the agreement
to finish the building of the apartment it consider as "Residential
Dwelling" for tax purpose.
Please note that if the purchase of a residential dwelling is not
totally intended for residential use, rather for business purposes,
then it is not eligible to the progressive purchase tax rates, which
apply on residential dwellings, and the tax rate will be 5% of the
purchase price.
The regional offices of real property taxes handle property and
betterment taxes on residential dwellings.
Purchase Tax
Purchase tax is levied on any person who purchases real estate
for residence. Thereafter, when you register the property at the
Land Registry office, you will not be required to pay additional
tax to the state treasury for the registration.
| It is recommended that when you purchase the dwelling, the
contractor presents to you a confirmation from the tax authorities
of the payment of the purchase tax on the land, so when the
time comes, the registration of the dwelling under your name
will not be delayed due to the contractor's debts. |
Tax Rates
Single Dwelling
The tax rates on a residential dwelling purchased by a "single
person" who is a "resident of Israel" and this is
his only residence, are progressive and divided into three levels
according to the value of the property: - on the first level of
the value, the tax rate is 0.5%; on the second level of the value,
the tax rate is 3.5%; on the third level of the value, which is
the highest bracket, the tax rate is 5%.
The range of each level (called tax brackets) is adjusted every
three months (January 16, April 16, July 16, and October 16 every
year), in accordance with the changes to the "housing services
owned by the tenants index."
For Example:
You purchased a residential dwelling for NIS 1,000,000 on 16.01.05.
The tax calculation will be done according to the brackets valid
on the day of the purchase (from 16/01/05 to 15/4/05):
| VALUE FOR TAX PURPOSES (NIS) |
TAX RATE
(Percentage) |
TAX (NIS) |
| To 444,910 |
0.5 |
2,225 |
| From 444,910 to 690,530 (on NIS 245,620) |
3.5 |
8,597 |
| From 690,530 to 1,000,000(On NIS 309,470) |
5 |
14,474 |
| Total Tax |
|
26,296 |
Additional Dwelling
Whoever purchases an additional dwelling will not benefit from
the first bracket of 0.5%, and will be subject only to the two tax
brackets of 3.5% and 5%, respectively.
However, if the purchaser sells his first dwelling within 18 months
from the day he purchased the second dwelling, he will be eligible
for the lower tax bracket of 0.5%, like anyone who purchases his
first dwelling.
Foreign resident who is purchasing a dwelling in Israel
will be subject to the two tax brackets of 3.5% and 5%, respectively
as indicated above, unless he is a resident of a county with a tax
treaty that specifies relief for double - taxation including a non
- discrimination clause.
If you wish to know the updated purchase tax rate on residential
dwellings, you may call the answering service at 03-5656444, and
you will receive the requested information.
You may also use the calculator for purchase tax computation available
on the internet.
Persons Eligible for Reduced Purchase Tax (0.5%).
A. Disabled Persons
| • |
A disabled person with a permanent medical disability of 100%,
or 90% disability due to accumulation of disabilities of various
limbs; |
| • |
A disabled person as defined in the National Insurance Law,
who is incapable to earn a living at a rate of at least 75%
permanently; |
| • |
A disabled person with at least 50% permanent disability,
who is either one - armed, one legged or paralyzed; |
| • |
A disabled person as a result of a car accident, who was determined
as having at least 50% permanent disability. |
| • |
A disabled person by virtue of the Disabled Persons Law, or
the Disabled Persons in the War against the Nazis Law determined
as having at least 19% disability level. |
| • |
A disabled person as defined by the Nazis Victims Law as having
at least 50% disability level. |
| • |
A victim of hostilities (in accordance to the Victims of Hostilities
Compensation Law), determined as having at least 19% disability
level. |
| • |
A couple who buys a dwelling for personal residence, only
one of which is disabled, is eligible for reduced tax. |
B. Bereaved Families and Victims of Hostilities
* Family members (parent, widow and an orphan until the age of
40) of a soldier killed in action are eligible for compensation.
* Relatives of a victim who is eligible for an allowance by law.
Disabled and bereaved family members mentioned above who purchased
a personal residence are eligible for a reduction on the purchase
tax at the rate of 0.5% of the value of the acquired property. This
eligibility can be used only twice.
The tax exemption applies only for a resident in which the disabled
person will actually reside.
In order to obtain the reduction on the purchase tax, the person
must submit an application to the regional real property tax office
(in the region where the property is located) on form 2973 which
can be obtained in the same office.
C. New Immigrants
* A person with an immigrant card or visa (pursuant to the Law
of Return);
* A person with a temporary resident card or visa type A 1 (pursuant
to the entry into Israel regulations);
All of the above are based on registration certificates issued
by the Ministry of Interior.
A new immigrant is eligible for a reduced purchase tax rate equal
to 0.5% up to a certain ceiling, adjusted every three months. Beyond
that ceiling, a tax of 5%, is levied. The ceiling amount is adjusted
on 16.1, 16.4, 16.7, and 16.10 every year. (As of 16.10.04, the
ceiling was NIS 1,087,695).
A new immigrant is eligible for purchase tax exemption in the
following events:
| 1. |
Once for the purchase of a dwelling for his personal residence
or for the purchase of vacant land to build a residential dwelling
for his personal residence. |
| 2. |
Additional time for purchasing a business or vacant land
to build a business, in which the new immigrant himself and/or
his relatives will work.
For this purpose, a business includes agriculture farm. |
The new immigrant is eligible for this privilege provided that he
purchases the residence within 7 years from the date of immigration,
or a year before he immigrated. This period cannot be extended. The
period of regular army service is not counted in the 7 years.
A couple who buys a residence and only one immigrates, is eligible
for reduced tax. Likewise, a couple of which only one immigrates
and purchases the residence prior to their marriage is eligible
for the reduction if they marry within a year of the purchase.
To qualify for the tax benefit, it is necessary to provide the
regional land tax office with a permit from the Ministry of the
Interior attached to the application on form 2973.
In all of the above cases, the condition for the reduced tax is
that the property is intended as the personal residence of the purchaser.
A discount for a person who receives a residential dwelling
as a gift (without consideration) from a relative
It is stipulated as a rule that a person receiving a residential
dwelling as a gift from his relative (without consideration) will
pay purchase tax at a discount of 1/3 (one third) of the normal
rate of the purchase tax.
The transfer of rights between a couple, provided they live together
in that residence, as a gift (without consideration) is fully exempt
from purchase tax. If the couple is not living in that residence,
they will pay purchase tax of 1/3 of the normal rate like any another
relative.
"A relative" for this matter is a spouse, a parent descendent
(child, grandchild, great- grandchild) the spouse of the aforementioned,
a brother or a sister.
When part of a residence is gifted to a relative, the purchase
tax calculation will be done on the whole residence and the recipient
of the gift will pay 1/3 of the tax of the relative portion he received
from the relative.
Purchase tax calculation on a residence that was received
as a gift (without consideration)
The value of a residence is determined by its market value, namely,
what a willing buyer is willing to pay to a willing seller. Thus,
you may appraise the value of the property according to your best
knowledge and the information you posses, and calculate accordingly
the purchase tax rates. In other words, you can prepare your own
assessment and declare it accordingly. The manager of real property
tax will accept your self - assessment, if he finds that assessment
to be reasonable and the tax calculation computed correctly.
The obligation to declare
A person who purchases a residential dwelling must declare within
30 days of the purchase to the regional real property tax office,
in the region where the property is located, on form 7002.
Thereafter he will receive a purchase tax assessment that should
be paid within 14 days from the time it was received.
If the purchaser calculates the tax himself, he can submit a declaration
to the regional office on form 7002 with the tax payment, which
he calculated - within 50 days (instead of 30) from the date of
purchase. Any delay in payment will be charged with linkage, interest
(of 4%) and a fine.
The tax can be paid in all banks with a payment voucher that can
be obtained from the real property tax office at the time of submitting
the declaration, or by attaching a check to the declaration.
Please note,
The purchase day is the day when the parties came into agreement,
namely, the day of the signature on the agreement memorandum, or
the day of first payment, if these days preceded the date of signing
the purchase agreement.
It is recommended to verify that your representative submits
the declaration on time, that the tax is paid, that title of the
property is transferred to your name, and that is legally registered
at the Land Registry office (Tabu/ Israel Land Administration a
mortgage company).
Dear purchaser,
When you purchase a "second hand residence," confirm
that the property is clear of any liens, mortgages, or collaterals.
Assure that the tax authorities will not delay the transfer due
to debts owed them by the seller. (Either registered or not registered
liens). It is necessary to assure that you receive the exemption
from betterment tax from the seller.
We hope that this information will help you and we will be happy
to assist you in the real property tax office.
These guidelines are general and do not constitute or interpret
the law.
Published by the Sector of Guidelines and Service Improvement at
the Income Tax and Real Property Tax Commissioner
|