Purchasing property in Israel involves various taxes and fees that buyers should be aware of. This guide provides a comprehensive breakdown of these costs and recommends consulting with an Israeli tax lawyer for personalized advice.
Purchase Tax (Mas Rechisha)
Purchase tax is a significant cost when buying property in Israel. The tax rate depends on the property’s value and the buyer’s residency status. Here are the general brackets:
- First-time buyers (permanent residents): Reduced rates apply.
- Non-residents and investors: Higher rates apply.
Israeli Tax Authority – Purchase Tax Rates
VAT (Value Added Tax)
For new properties purchased from a developer, VAT is applicable at the standard rate of 17%. This is usually included in the purchase price quoted by developers.
Capital Gains Tax (Mas Shevach)
If you sell the property in the future, you may be subject to capital gains tax on the profit made from the sale. The tax rate varies based on the length of ownership and residency status.
- Residents: May qualify for exemptions or reduced rates based on duration of ownership and other conditions.
- Non-residents: Standard rates typically apply.
Israeli Tax Authority – Capital Gains Tax
Lawyer Fees
Engaging an Israeli lawyer is crucial for handling the legal aspects of the transaction. Legal fees typically range from 0.5% to 1.5% of the property’s purchase price, plus VAT.
Real Estate Agent Fees
Real estate agents in Israel usually charge a commission of around 2% of the purchase price, plus VAT, payable by the buyer.
Registration Fees
Registering the property in your name at the Land Registry Office (Tabu) incurs additional fees. These are relatively nominal compared to other costs.
Mortgage Costs
If financing your purchase with a mortgage, consider these additional costs:
- Mortgage Arrangement Fee: Typically 0.25% to 1% of the loan amount.
- Appraisal Fee: A professional appraisal of the property may be required.
- Life and Property Insurance: Required by most lenders.
Annual Property Taxes (Arnona)
Once you own the property, you will be responsible for annual municipal taxes, known as Arnona. Rates vary by municipality and property size.
Municipal Tax Rates
Additional Considerations
- Renovation Costs: If the property requires renovations, these costs can add up and should be factored into your budget.
- Maintenance Fees: For apartments in managed buildings, monthly maintenance fees (Va’ad Bayit) are payable for upkeep of common areas.
Recommendations
Consulting with an Israeli Tax Lawyer: It’s highly recommended to seek advice from an Israeli tax lawyer to navigate these taxes and fees effectively. They can provide tailored advice based on your specific situation and help ensure compliance with all local regulations.
Conclusion
Understanding the taxes and fees associated with buying property in Israel is crucial for making informed investment decisions. At Genesis, we provide comprehensive support and connect you with trusted professionals, including tax lawyers, to ensure a smooth and successful property purchase.
For more detailed insights and personalized assistance, feel free to contact us. We’re here to help you navigate the complexities of the Israeli real estate market and make informed investment decisions.
