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It’s official – the purchase tax for investment apartments is reduced: 5% up to NIS 1.29 million; 6% up to NIS 3.87 million

It’s official – the purchase tax for investment apartments is reduced: 5% up to NIS 1.29 million; 6% up to NIS 3.87 million

Welcome news to real estate investors in Israel: the purchase tax for investment apartments has been significantly reduced. The first tax bracket will be 5% instead of the 8% it was until now – thus ending the temporary provision drafted under the previous minister of the treasury, Moshe Kahlon, that was supposed to end at the end of his year.

The Knesset’s assembly officially approved today (Wednesday) the amendment proposal for the land taxation law by the minister of the treasury, Israel Katz, in order to significantly reduce the tax rate of the tax brackets for purchasing a second residential apartment – an amendment that will be validated immediately upon its official publication.

As mentioned, this amendment replaces the temporary provision given during minister of the treasury Kahlon’s period and set the purchase tax to apply to those buying an additional residential apartment at 8% of the value sum of up to NIS 5,340,425 of the cost of the apartment. The previous temporary provision set a rate of 10% for the remainder. This temporary provision was supposed to expire on 31.12.2020 and it seems that the entire market – let alone during the Coronavirus – has been waiting to see where the wind blows.

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It now seems that at least in this area, certainty returned, and perhaps even the vitality of real estate investors. The new amendment sets the purchase tax brackets as the following:

  • For the value sum of up to NIS 1,292,280 of the apartment’s cost– the purchase tax will be 5%.
  • For the value sum exceeding NIS 1,292,280 and up to NIS 3,876,835 – 6%.
  • For the value sum exceeding NIS 3,876,835 and up to NIS 5,338,290 – 7%.
  • For the value sum exceeding NIS 5,338,290 and up to NIS 17,794,305 – 8%.
  • For the value sum exceeding NIS 17,794,305 – 10%.

The tax authority emphasizes that regarding the purchase of a first residential apartment, there is no change in the purchase tax brackets.

Prior to this publication, the Israel Builders Association announced that lowering the purchase tax will “create” 15,000 apartments for rent in the following year. Opinions about lowering the tax rate are split – and many claim that a real effect will only be achieved by lowering the purchase tax to zero, even if only for a set period. 

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Malki

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