Capital Gains Tax in Israel (Mas Shevach): What a Foreign Seller Pays

Israel charges 25% on the real gain when you sell an apartment, wherever you live. A single-apartment exemption runs to ₪5,008,000 of sale value, but a non-resident gets it only by producing a certificate from their home tax authority — and in 7 of our 11 tracked Tel Aviv neighborhoods the median asking price already exceeds that ceiling.

The charge: 25% on the real gain

Selling a right in Israeli land triggers mas shevach, the land-appreciation tax under the Land Taxation (Appreciation and Acquisition) Law, 5723–1963. An individual pays 25% on the real gain — the appreciation after stripping out the part attributable to inflation — under s.48A(b)(1). The inflationary slice is charged separately at 10%, and at 0% for a qualifying residential apartment under s.48A(c)(2), which is why the inflationary component is usually a non-event on an ordinary apartment sale. A company pays the corporate rate instead of the individual rate, under s.48A(a).

The charge does not ask where the seller lives. Israel taxes the land, and a non-resident selling a Tel Aviv apartment is inside the same charging section as a resident selling the flat next door. Residence enters the law one layer down — in the exemptions — and there it is decisive.

The pre-2014 clock: how the linear relief actually splits the gain

If the apartment is a qualifying residential apartment bought before the transition day of January 1, 2014, s.48A(b2) exempts the real gain accrued up to that day outright and charges 25% only on the rest. This is the relief that makes long-held Israeli property unusually attractive to sell — and the part that is almost always described wrongly.

The split is by elapsed time, not by valuation. Nobody asks what the apartment was worth on 1 January 2014. The exempt share is simply the period from purchase to the transition day divided by the period from purchase to sale, as defined in the s.47 definition of “real appreciation up to the transition day”. That has a consequence worth stating plainly: the relief shrinks every year you wait, because the denominator keeps growing while the numerator is frozen.

An apartment bought in January 2010 and sold today has 24.1% of its real gain exempt, leaving 75.9% taxable at 25% — an effective 19.0% across the whole real gain. Bought in January 2000 instead, the effective rate falls to 11.9%. Note what the table does not say: it says nothing about how much money you made, only how the law slices whatever gain there was.

A right that is not a qualifying residential apartment — land, commercial premises, an apartment that fails the definition — runs on the older three-window ladder in s.48A(b1) instead: the top marginal income-tax rate on gain up to November 7, 2001, up to 20% between then and January 1, 2012, and 25% after. Same time-apportionment mechanic, harsher rates, and no exempt window at all.

The exemption ceiling, and what Tel Aviv prices do to it

The single-apartment exemption is capped. Section 49A(a1) sets the ceiling at ₪5,008,000 of sale value ($1,353,514). Above it, the excess is treated as the sale of a separate chargeable right, with the purchase value and deductions apportioned to it pro rata — so the appreciation attributable to the top slice is taxed at 25% even when the exemption is otherwise fully available.

Two things about that number are routinely got wrong. First, it is frozen for tax years 2025-2027: it does not index annually at present, and the next indexation is measured against the index published before 1 January 2027. Any source telling you to look up a higher figure for this year is out of date. Second, it is a fixed shekel amount meeting a market that does not care — and this is where our own data has something to say that no general tax explainer can.

Across the 11 Tel Aviv neighborhoods where our tracked panel clears the publication threshold, the median asking price is above the exemption ceiling in 7 of 11. Citywide the median asking price is ₪4,850,000, which sits ₪158,000 — 3.2% — below the ceiling: close enough that roughly half of Tel Aviv sales cross it. In Neve Tzedek the median asking price exceeds the ceiling by ₪6,992,000.

The practical reading: in 7 of these 11 neighborhoods, a seller who fully qualifies for the exemption still has a taxable slice on a median-priced apartment. In the other 4 — Jaffa / Noga, City Center, Old North, Florentin — the median clears the ceiling with room to spare. The exemption is not a yes/no; above ₪5,008,000 it is a partial answer, and in this city that is the normal case rather than the exotic one.

The condition a non-resident has to clear first

Before any of that arithmetic matters, a foreign seller has to get through s.49A(a) — and this is the single most consequential sentence on this page. The exemption is open to an Israeli resident or to a foreign resident who has no residential apartment in the country where they are resident. So far, so reasonable. The section then adds:

For the purposes of this subsection, a foreign resident shall be regarded as someone who has a residential apartment in the country in which he is a resident, so long as he has not produced a certificate from that country’s tax authorities that he has no such apartment.

Absence of proof is treated as ownership. The default outcome for a non-resident is therefore no exemption, and the entire job is obtaining a negative certificate from a foreign tax authority — an institution that may have no procedure for issuing one, and no interest in your Israeli filing deadline. This condition was added in 2013; before that a non-resident could claim without proving anything, which is why older English-language material describes a materially more generous rule than the one now in force. If you own a home in London, New York or Paris, the exemption is simply not available, and the 25% applies to the taxable share.

The other conditions apply to everyone. Under s.49B(2) the apartment must be the seller’s only apartment in Israel, held for at least 18 months since it became a residential apartment, with no other apartment sold under this exemption in the preceding 18 months. Section 49C then forgives some second apartments: one bought as a replacement within 24 months of the sale, a protected tenancy predating 1 January 1997, a share of no more than one third (one half if inherited), or an inherited apartment meeting the s.49B(5) conditions.

The relief a non-resident cannot use at all

Section 48A(e) lets a seller ask for the real gain to be spread backwards over up to 4 tax years (or the holding period, if shorter) and taxed against each year’s own rates and unused credit points. For a seller with modest Israeli income it can cut the bill materially. Then s.48A(e)(1) closes with a definition: “the seller” means a seller who is an Israeli resident. This is one of the few places where the statute draws the residence line in so many words, and it draws it against the non-resident.

The cash-flow surprise: your buyer withholds before you are paid

Where the consideration is money only, s.15(b) does not wait for the assessment. It makes the buyer remit an advance against the seller’s tax straight to the Tax Authority: 15% of the consideration where the seller’s purchase date precedes November 7, 2001, and 7.5% where it does not. It is transferred once more than 40% of the price has been paid over to the seller, or on filing the s.73(c) declaration, whichever is later.

On a sale at our citywide median asking price of ₪4,850,000, that is ₪363,750 ($98,311) on the 7.5% rate, or ₪727,500 ($196,622) on the 15% rate for an apartment bought before November 7, 2001 — money that leaves the transaction before the seller sees it, on the gross price rather than on the gain. It counts as tax paid by the seller and as consideration paid to the seller, and any excess comes back with indexation and interest under s.15(d)(3). It is not an extra tax. It is a timing gap, and it is the item foreign sellers are most often unprepared for — particularly the ones expecting a full exemption.

The filing clock is short: 30 days from the sale date for the seller’s declaration under s.73(a), covering the right, the deal, both considerations and dates, the deductions claimed, the tax computed and any exemption relied on. The buyer files separately on the same clock. Section 73(d) treats an incomplete declaration as no declaration at all, so a partly-filled form is worse than it looks.

The other charge on sale: the betterment levy

Heitel hashbacha is a municipal levy, entirely separate from mas shevach and payable to the local authority rather than the Tax Authority. It is charged on the betterment — the rise in the land’s value caused by approval of a plan, the grant of a relief (hakala), or permission for a non-conforming use (shimush choreg), under Third Schedule s.1(a) to the Planning and Building Law, 5725–1965.

The rate is 50% of the betterment (Third Schedule s.3), and the owner pays it (s.2(a)); where the land is held on a long-term lease the lessee pays and may recover part from the owner. Since May 1, 2022 the rate on residential land is 25% where the betterment arises from approval of a pinui-binui plan, and a local authority may divide its area into zones of at least 30 dunam and set one half, one quarter, or none. That is a recent change and one worth checking locally rather than assuming.

It falls due on “realization of rights”, which expressly includes transferring the land — so an ordinary sale triggers whatever levy has accrued, as does taking a building permit the plan made possible. Transfers by operation of law and gifts to a relative are excluded. On a straightforward resale of an existing apartment with no planning event behind it there is nothing to charge, which is why our closing-cost model carries it at ₪0. Where it does arise — a TAMA 38 or urban-renewal building, a plot with unused development rights, an apartment whose block was recently rezoned — it is large, and it is the seller’s.

The parts we could not pin down

Three things we will not put a number to, because we could not verify them to the standard the rest of this page is held to. The exemption-request mechanics for a non-resident: the statute requires a certificate from the foreign tax authority but does not prescribe its form, and practice on what the Israeli assessor accepts — and from which countries — is not something we can source. Treaty relief: most of Israel’s double-tax treaties leave gains from immovable property taxable where the property sits, so Israel taxes first and your home country usually credits it, but the mechanics are your own country’s rules and the treaties are not uniform. Deductible expenses: the list of additions and deductions that reduce the gain — improvements, purchase tax, agent and legal fees, mortgage interest in defined cases — is real and materially reduces the base, but it is fact-specific enough that publishing a generic list would mislead more than it helps. All three are questions for an Israeli real-estate tax adviser about your specific facts.

Frequently asked questions

Where this fits

This is the exit line of the ownership cycle. It opens with eligibility (can foreigners buy) and the one-off purchase tax, runs through tax on rental income while you hold — where choosing the flat track quietly adds depreciation back to the sale value taxed on this page — and ends here. Around it sit the closing-cost stack, TAMA 38 (the usual reason a betterment levy exists at all), and the full foreign-buyer guide. The prices this page is measured against are the citywide asking panel and the per-neighborhood breakdown (methodology).