Purchase Tax on a New Apartment Explained

What Purchase Tax Is and When It Is Paid

Purchase tax (mas rechisha) is a one-time tax charged to anyone acquiring real-estate rights in Israel, including buyers of a new apartment from a developer. It is paid to the Israel Tax Authority and depends on the contract price and on your personal status as a buyer: whether this is your only home, whether you already own another property, and whether you are an Israeli resident.

Keep in mind that purchase tax is not one of your payments to the developer, and it is never included in the advertised price of a project. It is a separate expense that should be budgeted in advance, alongside legal fees, mortgage costs, upgrades and moving expenses. Planning for it early spares you an unpleasant surprise at the stage when every shekel counts.

The Bracket Mechanism: A Progressive Tax

Israeli purchase tax is progressive: the apartment price is divided into brackets, and each portion of the price is taxed only at the rate set for that bracket. In practical terms, even when the price crosses a bracket threshold, the higher rate applies only to the portion above the threshold — not to the whole amount. As a result, the effective tax rate on the full transaction is almost always lower than the top bracket you reach.

The bracket amounts are updated from time to time, usually once a year, so there is little point in memorizing figures you heard or read in the past: the binding numbers are the ones published by the Tax Authority at the time of your transaction. Later in this guide we explain exactly where to check the current brackets and how to estimate your expected tax in advance.

Sole Residence, Additional Property and Foreign Residents

The most significant distinction in purchase tax is between buyers of a sole residence and buyers of an additional property. If the apartment you are buying will be your only home, you benefit from especially favorable brackets, and within a certain price range you may effectively pay nothing. By contrast, buyers who already own a home and are purchasing an additional apartment — whether to live in or as an investment — pay considerably more, starting from the very first shekel of the price.

Foreign residents are generally not entitled to the favorable sole-residence brackets, even when the apartment is their only property in Israel, and are taxed at the higher brackets. New immigrants (olim) and returning residents have separate arrangements and benefits, whose terms have changed more than once over the years. If you belong to one of these groups, check the current rules with a lawyer or tax adviser before committing.

Upgraders: The Window to Sell Your Current Home

What happens when you own a home and are buying a new one to replace it? The law recognizes this in-between situation: upgraders can be treated as sole-residence buyers for purchase-tax purposes, provided they sell their existing home within a period set by law. The length of this window has changed several times in recent years, and when buying off-plan from a developer there are sometimes special arrangements tied to the delivery date — a point worth clarifying precisely with your lawyer.

If the existing apartment is not sold within the window, the assessment is retroactively updated to the additional-property brackets, plus linkage differentials and interest. It pays to build a realistic sale timeline in advance rather than leaving it to chance or to the last minute.

Buying New from a Developer: What Is Different

When you buy a new apartment from a developer, the contract price includes VAT — and that is also the price from which purchase tax is calculated. In other words, the tax is computed on the full VAT-inclusive price, not on the pre-VAT amount. In addition, extras and upgrades agreed as part of the purchase deal may count toward the apartment's value for tax purposes, so it is worth understanding in advance how additions are presented in the contract.

Another important point concerns timing: the tax liability arises when the purchase contract is signed — even if you bought off-plan and delivery is years away. Reporting and payment deadlines run from the signing date, not from key handover, and that is a consideration to factor into your cash-flow planning.

Reporting and Payment in Practice

A real-estate transaction must be reported to the Tax Authority within a short period fixed by law from the signing date. Reporting is done online today, and in most cases the lawyer handling your transaction files it for you, including a self-assessment of the purchase tax — a calculation that you declare (through your lawyer) and that the authority is entitled to review.

Late reporting or late payment can trigger linkage differentials, interest and penalties, so make sure to clarify with your lawyer who is responsible for filing and what the exact timeline is. Keep copies of the report and the payment confirmations — you will need them later on, for example when registering title to the apartment in your name.

Where to Check Current Figures and How to Plan Ahead

The Israel Tax Authority publishes the current purchase-tax brackets on gov.il and offers a public simulator — a purchase-tax calculator — that estimates your expected tax based on the transaction details and your personal status. It is the tool to open before you sign, and again before the reporting deadline.

• Run the Tax Authority simulator with the full apartment price, including VAT and extras.
• Include the purchase tax when calculating the equity you need, alongside the other transaction costs.
• If you own an existing home, build its sale timeline around the window the law sets.
• In complex situations (inheritance, gifts, foreign residency, aliyah), consult a lawyer or tax adviser before signing.

Before You Decide

This guide is meant to give you a general picture of how purchase tax works when buying a new apartment; it is not legal, tax or financial advice. Brackets, rules and benefits change from time to time, and every transaction has its own circumstances — so before deciding, check the current figures on the Tax Authority website and consult qualified professionals.

You are welcome to browse our new projects at /en/projects or simply talk to us. At Way To Israel we accompany buyers personally from the moment of choice to key handover, with over five years of activity, hundreds of satisfied clients — and no broker fee for the buyer.