What is mas rechisha in Israel?

Mas rechisha (מס רכישה) is a one-time purchase tax paid by the buyer on Israeli real estate transactions, levied by Rashut HaMisim (the Israel Tax Authority). It is due within 60 days of signing a binding purchase agreement.

What is the purchase tax rate for foreign buyers in Israel in 2026?

Foreign residents pay 8% on the first approximately 6,055,070 ILS of purchase price and 10% on the amount above that. These brackets are frozen through end of 2027 per a January 2025 government order (source: gov.il). A 4,000,000 ILS purchase generates approximately 320,000 ILS in tax.

Do Olim Hadashim get a reduction on purchase tax?

Yes. New immigrants making Aliyah receive a one-time Olim exemption: 0.5% on the first approximately 1,978,745 ILS and 5% on amounts up to approximately 6,055,070 ILS. On a 4,000,000 ILS apartment this saves roughly 209,000 ILS versus standard foreign-resident rates. The benefit applies only to the first residential property within seven years of immigration.

Can I get a mas rechisha refund if I later become an Israeli resident?

Possibly. If you establish Israeli residency within approximately two years of your property purchase, you may apply to Rashut HaMisim to reclassify the transaction at resident first-home rates, potentially generating a refund. The process is not automatic and requires documentation of your center of life shifting to Israel.

Does VAT apply when buying property in Israel?

VAT at 18% (as of January 2025) applies to new construction purchased directly from a developer. Resale properties (yad shniya) sold between private individuals are generally exempt from VAT. Mas rechisha is separate from and additional to VAT on new builds.

What do US citizens need to know about Israeli property purchases?

US citizens must comply with FBAR/FATCA reporting for Israeli bank accounts used in property transactions. The US-Israel tax treaty (in force since 1995) generally allows capital gains taxes paid in Israel to credit against US liability, but the interaction is complex. Work with a dual-qualified tax advisor before buying or selling.

Purchase Tax in Israel for Foreign Buyers 2026: The Complete Mas Rechisha Guide

For diaspora buyers and non-resident investors entering the Israeli property market, purchase tax (mas rechisha, Hebrew: מס רכישה) is often the single largest surprise in the transaction. It is not a small line item. A foreign buyer purchasing a 3,000,000 ILS apartment in Tel Aviv will typically pay more in purchase tax than a first-time Israeli resident buying the same property. Understanding the structure, the rates, and where exemptions exist for Olim and returning residents, can mean a difference of hundreds of thousands of shekels. This is the complete guide to mas rechisha for non-Israeli buyers in 2026. --- ## What Is Mas Rechisha? Mas rechisha is a one-time purchase tax levied by the Israel Tax Authority (Rashut HaMisim, Hebrew: רשות המיסים) on real estate transactions. It is paid by the buyer, not the seller, and is due within 60 days of signing a binding purchase agreement. Failure to pay on time can result in interest and penalties. The rate depends on three factors: 1. The declared purchase price 2. The buyer's residency status (Israeli resident vs. foreign resident) 3. Whether the buyer is purchasing their sole or first residential property in Israel There is no flat rate. The tax is calculated on a bracket system, with different rates applying to different slices of the purchase price. --- ## Rates for Foreign Residents in 2026 Foreign residents, generally defined as individuals whose center of life is outside Israel, face significantly higher rates than Israeli residents. Purchase Price Bracket | Tax Rate Up to approximately 6,055,070 ILS | 8% Amount above 6,055,070 ILS | 10% These thresholds were frozen by a temporary government order issued in January 2025 and are expected to remain unchanged through the end of 2027, meaning they will not be adjusted for inflation during this period. The current bracket values are published on the Israel Tax Authority's official website (gov.il, Mas Rechisha indexation table, January 2025). A practical example: A foreign buyer purchasing an apartment at 4,000,000 ILS in 2026 would pay approximately 320,000 ILS in purchase tax (4,000,000 x 8%). A property at 7,000,000 ILS would generate approximately: 484,405 ILS (8% on the first 6,055,070 ILS) plus 94,493 ILS (10% on the remaining 944,930 ILS), for a total of approximately 578,898 ILS. One important nuance: Rashut HaMisim assumes that a foreign resident likely owns or occupies property in their country of residence. Even if the Israeli property you are purchasing is your only property globally, you are classified as a foreign-resident investor and pay from the first shekel at the 8% rate. You do not benefit from the zero-rate bracket available to Israeli residents buying their sole home. --- ## The Olim Exemption: A Major Benefit for New Immigrants New immigrants (Olim Hadashim) who have made Aliyah are entitled to a significant one-time reduction in purchase tax on their first residential property in Israel, provided it is purchased within seven years of immigration. The exemption is anchored in the Law of Return and implemented through Rashut HaMisim regulations (gov.il, Oleh purchase tax exemption provisions). Under the Olim exemption (current rates as reported by Rashut HaMisim and confirmed by specialist firms including Ascend Israel Properties and davidson-realestate.com, 2025-2026): Purchase Price Bracket | Tax Rate First bracket (up to approximately 1,978,745 ILS) | 0.5% Above first bracket, up to approximately 6,055,070 ILS | 5% Above 6,055,070 ILS | Standard foreign/investor rates apply This is a one-time benefit. It applies to residential property only, not commercial real estate, not vacant land, not second properties. Once used, it cannot be applied again to a future purchase. The savings are substantial. An Oleh purchasing a 4,000,000 ILS apartment would pay approximately: 9,894 ILS (0.5% on 1,978,745 ILS) plus 101,063 ILS (5% on the remaining 2,021,255 ILS), for a total of approximately 110,957 ILS. This compares to 320,000 ILS at standard foreign-resident rates, a saving of roughly 209,000 ILS on a single transaction. Use the Israelos Mas Rechisha Calculator to run your own scenario instantly. Enter your purchase price and residency status and the calculator applies the current ITA brackets automatically. The implication for diaspora families planning Aliyah: the sequence and timing of your property purchase relative to your immigration date matters financially, not just logistically. --- ## Reclassification: From Foreign to Resident Rates There is a lesser-known mechanism that benefits buyers who purchase as a non-resident and subsequently obtain Israeli residency. If you establish Israeli residency within approximately two years of your property purchase, you may be eligible to apply for a reclassification of the transaction, moving from foreign-resident tax rates to the resident first-home bracket system. This can result in a meaningful tax refund from Rashut HaMisim. The reclassification is not automatic. You must apply, document that your center of life has shifted to Israel, and meet the ITA's criteria for residency status. For buyers who are genuinely planning to relocate, not just investment buyers maintaining a non-resident status, it is worth factoring into the financial model from the outset. --- ## Other Taxes Buyers Should Know Mas rechisha is the largest one-time tax, but it is not the only one. VAT (Maam) at 18% as of January 2025: VAT applies to purchases of new construction from a developer, not to resale transactions between individuals. If you are buying a new-build apartment directly from a developer, expect to pay 18% VAT on top of the sale price. This is separate from mas rechisha. Resale properties (yad shniya) between private parties are generally exempt. Capital Gains Tax (Mas Shevach): For non-residents selling Israeli residential property, capital gains are generally taxed at 25% of the nominal gain. Residents benefit from various exemptions and a different calculation method. For diaspora buyers holding property as an investment, this affects exit planning. Arnona (Municipal Property Tax): An ongoing annual levy set by the local municipality, based on property size and location. New Olim typically receive a partial arnona exemption during their first years in Israel. --- ## A Note for US Citizens: Double Taxation Treaties and FBAR American Olim and US-citizen investors face an additional layer of compliance that does not apply to most other diaspora buyers. The United States taxes its citizens on worldwide income and gains regardless of residency. This creates two specific considerations. FBAR and FATCA reporting: If you hold Israeli bank accounts or financial assets exceeding certain thresholds, these must be reported annually to the US Treasury and IRS. Property itself is not a foreign financial account, but the bank accounts used to purchase it and the rental income flowing through them are. Israel-US Tax Treaty: The US-Israel tax treaty (Convention for the Avoidance of Double Taxation, in force since 1995) provides mechanisms to avoid paying capital gains tax twice on the same gain. In general, gains taxed in Israel can generate a credit against US tax liability. However, the interaction between Israeli mas shevach rates, US long-term capital gains rates, and the treaty's specific carve-outs is complex. US citizens should work with a tax advisor who is qualified in both jurisdictions before purchasing and certainly before selling. --- ## How to Pay Mas Rechisha Rashut HaMisim has moved much of the mas rechisha filing process online. The standard flow: 1. Submit a property transaction declaration (shuma) to Rashut HaMisim within 30 days of signing the purchase agreement. 2. Receive an assessment from the ITA. 3. Pay the full amount within 60 days of signing. In practice, most diaspora buyers handle this through an Israeli lawyer (orech din), who manages the declaration, responds to any ITA queries, and ensures payment reaches the right account on time. Attempting to navigate this independently from abroad is possible but adds risk, particularly if the ITA has questions about residency status or property valuation. --- ## Questions That Come Up Frequently What if my declared price is below market value? Rashut HaMisim performs independent valuations on many transactions and can assess mas rechisha on what it determines to be the true market value, not just the declared price. Under-declaring is a compliance risk with penalties. My property is under joint ownership with an Israeli spouse. What rate applies? Joint ownership situations are assessed on a pro-rata basis. The Israeli spouse's share may be taxed at resident rates, while the non-resident spouse's share is taxed at foreign-resident rates. Structure matters. I am buying through a company. Does that change anything? Purchases through Israeli companies are generally taxed at investor-equivalent rates regardless of where the shareholders reside. Corporate structures add complexity and rarely reduce tax burden for residential purchases. --- ## Start With the Numbers Mas rechisha is one of the first major financial decisions in an Israeli property transaction, and the rate difference between foreign resident and Oleh can run to 150,000 to 300,000 ILS or more on a typical Tel Aviv or Jerusalem apartment. The decisions you make about timing, residency status, and ownership structure before signing a purchase agreement determine which bracket you fall into. Run the numbers for your specific scenario on the Israelos Mas Rechisha Calculator, or explore city-by-city price data to understand how purchase tax sits alongside property values in the cities you are considering. --- Explore more: Buying Property in Israel | Aliyah Housing Guide | Israeli Mortgage Guide for Foreigners

Purchase Tax in Israel for Foreign Buyers 2026: The Complete Mas Rechisha Guide

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