What are the considerations when choosing a property in Israel?

When deciding to purchase a property (apartment, house or any other real estate property) in Israel, there are several considerations that are important to take into account:

Potential increase in value of the property. The can be assessed according to the region and the type of property;
Accessibility to transportation arteries in general and public transportation in particular: train, light rail, bus, etc.;
the character of the tenants and the neighborhood;
Demand, which exists in the market for renting and/or selling the property;
A suitable place to live for the buyer (if there is a chance that the buyer will want to use the property for his residence);

Is it possible to get tax breaks?

First alternative – Those who immigrated (Aliyah) to Israel:
The definition of “Resident of Israel” is broad. Those who within two years from the date of purchasing the apartment “become a resident of Israel or a long-time returning resident” will be able to enjoy the benefits of the purchase tax

First alternative – Those who immigrated (Aliyah) to Israel:
The definition of “Resident of Israel” is broad. Those who within two years from the date of purchasing the apartment “become a resident of Israel or a long-time returning resident” will be able to enjoy the benefits of the purchase tax

Second alternative – returning resident:
It is important to note that a person who was previously a resident of Israel, left the country, became a foreign resident (that is, changed the center of his life, etc.), and was a foreign resident during a period of ten years or more. If and when he returns to Israel, he will be considered a “long-time returning resident” and can benefit from the definition of “resident of Israel” for purchase tax purposes.

A third alternative – a new immigrant:
It should be noted that a foreign resident who purchases an apartment and receives the status of a new immigrant must require that the apartment be used by him on a permanent basis, otherwise he will not be entitled to benefit from the tax relief.

Who is a foreign resident for purchase tax purposes?

The term “foreign resident” is anyone who does not fall under the definition of “resident of Israel” automatically considered as a foreign resident.

Who is a resident of Israel for purchase tax purposes?

The term resident of Israel according to the real estate taxation law also includes a person who within two years of purchasing the apartment became a resident of Israel for the first time or a long-time returning resident.
Regarding the definition of the term “Resident of Israel”, the law states that the center of his life should be in Israel.

In order to determine the place of the center of an individual’s life, all of his family, economic and social relationships will be taken into account, including among other things:

(1) his permanent home;
(2) his place of residence and that of his family members;
(3) his usual or permanent place of work or his permanent place of employment;
(4) the place of his active and substantial economic interests;
(5) his place of activity in various organizations, unions or institutions;
(6) The presumption is that the center of an individual’s life in the tax year is in Israel –

  • If he stayed in Israel in the tax year for 183 days or more;
  • If he stayed in Israel in the tax year for 30 days or more, and the total of the entire period he was in Israel in the tax year and in the years preceding it is 425 days or more;
    Therefore, in order to determine whether an individual is considered a resident of Israel, the center of life principle will be applied

Who is entitled to a purchase tax discount?

In order to be entitled to benefit from reduced purchase tax rates on a residential apartment, the buyer must fulfill two conditions:

  • He is “residents of Israel”
  • He owns a “single” apartment

Is there a purchase tax for a foreign resident?

Anyone who purchases a ‘real estate right’ in Israel is required to pay purchase tax.
Tax laws in Israel distinguish between those who are residents of Israel and those who are residents abroad. The same is true of purchase tax rates for a foreign resident for buying a residential apartment.
The purchase tax rates applicable to foreign residents (even if it is a single apartment of a foreign resident, and he does not have an apartment in his country of residence) are the same as for Israeli investors with multiple apartments (buyers of a second, third apartment, etc.).

These are two tax levels (updated from 01.16.2023 to 01.15.2024) as follows:

8% on the part of the purchase value up to: 5,872,725.
10% on the part of the purchase value that exceeds: 5,872,725. (inclusive)

How will the payment mechanism be carried out?

The consideration chapter in the sales agreement is very important, the payment mechanism and the conditions involved. Our representative or a lawyer who specializes in real estate will be able to guide you and assist you in this matter, in order to build you a payment mechanism that will be optimal and convenient for you.

Is a foreign resident allowed to get a mortgage in Israel?

In the vast majority of cases, the amount of equity that a foreign resident brings with him for the purpose of buying an apartment is higher compared to the equity that the average Israeli has, but many times a foreign resident also needs bank financing in order to finance the transaction.
In order to get a mortgage on the purchased apartment, a foreign resident must contact one of the mortgage banks and his application will be examined.
It is recommended to use a mortgage consultant and do so ahead of time and of course before signing the deal, in order to avoid malfunctions and unpleasant surprises.
For the most part, banks in Israel usually give foreign residents a mortgage loan of up to 50% of the value of the purchased apartment, but in some cases it is possible to get a loan at a higher percentage.

Is it possible to open a trust account for a foreign resident?

The lawyer representing a foreign resident can open a dedicated trust account for the transaction.
Through this account, a foreign resident will be able to transfer the funds to Israel, where all the various payments required in connection with the transaction will be made (such as: payments of the consideration to the seller, payment of purchase tax, broker’s commission, etc.).

Does a foreign resident have to open a bank account in Israel?

It is desirable for a foreign resident to manage a bank account in Israel, as this will facilitate and simplify the process.

In order to open an account by a foreign resident, the following documents are required:

  • A valid foreign passport.
  • Another official identification document (including a photo): such as: driver’s license.
  • For a US citizen – presentation of a personal secret number from abroad.
  • For the student – confirmation from the place of study that he is a student studying there.

If you want to get a mortgage to finance the purchase of the apartment, you will have to open a bank account in Israel (for the purpose of loan repayments, placing a deposit as collateral if necessary, and more).
A citizen from abroad can open a bank account as a ‘foreign resident’ if he meets the following conditions:

  • Filling out a customer declaration form about being a foreign resident (due up to 14 days after opening the account).
  • The US resident will also fill out a W9 form and must submit it at the bank branch.
  • Those who are not US residents will be required to submit a W8 form

What documents will I need to sign?

In the State of Israel, the bureaucratic processes with all authorities (including the Land Registry Bureau (the Taboo), the Israel Land Authority (Israel Land Administration), and most banks) are in Hebrew.

The deal can be done without coming to Israel, but it requires proper management of the process.

It is necessary to sign documents in front of the Israeli consul abroad. For a large part of the documents, your proxy can sign for you and there are documents that you will have to sign.

The main documents you will need to sign (or through a proxy) are:

  • Signing a contract;
  • Signing documents for the tax authorities;
  • Signing the mortgage documents (if you need a mortgage to finance the purchase of the property);
  • Signing the registration documents in Tabu;

How to buy an apartment from afar?

Carrying out the transaction remotely requires preparatory work, through professional legal treatment by a well-versed and experienced lawyer accompanying the process of purchasing the apartment by a foreign resident.
It should be taken into account that all the documents and bureaucratic processes involved with the relevant authorities in Israel are in the Hebrew language.
Therefore, a foreign resident must be accompanied by a personal representative and an Israeli lawyer, who specializes in real estate law and taxation, including being knowledgeable in all the specifics related to the execution of real estate transactions for Israeli citizens.
For this purpose, we recommend that you authorize an Israeli representative or a relative or the lawyer on your behalf and equip him with a suitable notarial power of attorney to perform notarial actions, through which he can act on your behalf to investigate the advanced documents and promote the purchase.

Does a foreign resident have to come to Israel in order to buy an apartment?

No. A foreign resident can carry out a real estate transaction in Israel, from start to finish, even without coming to Israel.