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Jul 29, 2020

Changes in the purchase tax rates for a second residential apartment

Dear clients and colleagues,

Several years ago, a temporary order for the period between June 24, 2015 and December 31, 2020 (the “Temporary Order”), determined that the purchase tax rates in Israel for a second residential apartment was increased in order to discourage investors from purchasing apartments in Israel. Accordingly, purchasing an investment apartment in Israel were (i.e., an apartment for investment purposes) subject to purchase tax of 8% on the purchase value of up to NIS5.2m (approximately, US$1.5m), and a tax rate of 10% on residential apartments when the amount of the purchase value is higher than that.

On July 28, 2020, the Israeli Knesset’s Finance Committee approved the termination of the said Temporary Order. Thus purchase tax rates are expected to return to the rates listed below (there may be several adjustment to the amounts), as they were prior to the enactment of the Temporary Order.

This is an amendment to primary legislation, therefore the termination of the Temporary Order is still subject to the completion of legislative procedures in the Knesset.
The following are the purchase tax rates expected for a second residential apartment after the cancellation of the Temporary Order by the Knesset:

(C1C)(1) In the sale of a right in real estate, which is a building or part of it which is a residential apartment, made on or after August 1, 2013, purchase tax will be paid at the rate of the value of the right sold as set forth below:

“(A) on the part of the value up to NIS1,162,120 (approximately US$332k) – 5%;

(B) for the part of the value that exceeds NIS1,162,120 (approximately US$332k) and up to NIS3,486,350 (approximately US$996k) – 6%;

(C) for the part of the value that exceeds NIS3,486,350 (approximately US$996k) and up to NIS4,800,605 (approximately US$1,372k) – 7%;

(D) for the part of the value that exceeds NIS4,800,605 (approximately US$1,372k) and up to NIS16,002,015 (approximately US$4,572k) – 8%;

(E) For the part of the value that exceeds NIS16,002,015 (approximately US$4,572k) – 10%.

We will continue to keep you informed of any further developments in this matter.

Tax Department 
Herzog Fox & Neeman