Taxation in an Apartment Transaction: What Is Paid, When to Report and When to Pay

Two taxes, two payers

The buyer pays purchase tax. Section 9(a) of the Real Estate Taxation (Betterment and Acquisition) Law, 5723-1963, provides that on the sale of a right in real estate the purchaser shall be liable to purchase tax, at a rate of the sale value or in a fixed amount, as determined by the Minister of Finance with the approval of the Finance Committee.

The seller pays betterment tax on the gain, that is, on the difference between the sale value and the acquisition value, less recognised expenses. Exemptions are available for a qualifying residential apartment, the principal one being the sole apartment exemption.

Purchase tax brackets

The brackets for a sole residential apartment of an individual resident of Israel are set out in section 9(c1c)(3) of the Law. The brackets for an apartment that is not a sole apartment are set out in section 9(c1f) and are a temporary provision. The figures below are taken from the Israel Tax Authority's Real Estate Taxation Implementation Directive No. 1/2026 of 18 January 2026.

Sole residential apartment, from 16 January 2025 to 15 January 2028:

• Up to NIS 1,978,745: no tax
• Above NIS 1,978,745 and up to NIS 2,347,040: 3.5%
• Above NIS 2,347,040 and up to NIS 6,055,070: 5%
• Above NIS 6,055,070 and up to NIS 20,183,565: 8%
• Above NIS 20,183,565: 10%

Residential apartment that is not a sole apartment, from 16 January 2025 to 31 December 2026:

• Up to NIS 6,055,070: 8%
• Above NIS 6,055,070: 10%

Two points worth knowing. First, section 9(c2) ordinarily provides for an annual update of the amounts on 16 January according to the owner-occupied housing services index, but the update has been frozen for the 2025 to 2027 tax years, so the amounts do not change for the time being. Second, the brackets for an additional apartment are a temporary provision that expires on 31 December 2026 and may be extended by order. In a transaction scheduled close to the end of the year, it is worth checking what the law will be on the date of the sale itself.

Further reliefs are available under the Real Estate Taxation (Betterment and Acquisition) (Purchase Tax) Regulations, 5735-1974, including relief for new immigrants and for the purchase of an agricultural holding.

The betterment tax exemption for a sole apartment

The main route is set out in section 49B(2) of the Law, and its three conditions are cumulative:

• The apartment being sold is the seller's only apartment in Israel and in the Area (Judea and Samaria).
• The seller has held the right in it for at least 18 months from the day it became a residential apartment.
• In the 18 months preceding the sale, the seller has not sold another residential apartment with an exemption under the same paragraph.

Alongside it there is a further route in section 49B(5), for an inherited apartment, subject to three cumulative conditions: the seller is the spouse, a descendant or the spouse of a descendant of the deceased; before his death the deceased owned only one residential apartment; and had the deceased been alive and sold the apartment, he would have been exempt.

The 18-month condition is the one that defeats the most transactions, particularly for those who bought and sold within a short period, or who sold a previous apartment with an exemption less than a year and a half earlier.

The deadlines, and this is the costly part

Reporting: 30 days. Section 73 imposes a duty to file a declaration on both parties. The seller must submit a declaration to the Director within 30 days of the date of sale, and the buyer within 30 days of the date of purchase. A declaration that does not include all the required particulars is deemed not to have been filed.

Payment: 60 days from the date of sale. Section 90A provides that tax under the self-assessment is to be paid within 60 days of the date of sale, not of the date the notice is received. Section 94(a) adds that tax not paid within 60 days of the date of sale bears linkage differentials and interest from the end of that period until the date of payment.

Director's assessment: 15 days. Under section 91(a), any balance of tax under an assessment that has been served is payable within 15 days of the date the notice is served. Where an objection has been filed, the amount not in dispute is payable within 30 days.

In practical terms: the date of sale is the reference point for the entire timetable, not the date the agreement is signed if the two differ, and not the date the demand arrives from the Tax Authority. Anyone who waits for the notice pays interest and linkage for the time that has passed.

What this means in practice

• Calculate the purchase tax before agreeing on a price, not afterwards. In ordinary transactions, the difference between the sole apartment bracket and the additional apartment bracket runs to hundreds of thousands of shekels.
• Check the buyer's apartment holdings as at the date of purchase, not the date of signing, including inherited apartments and partial shares in apartments.
• On the seller's side, check the 18-month condition and the history of exempt sales before making any commitment.
• Mark the date of sale in your diary, and count from it 30 days for reporting and 60 days for payment.
• Plan your cash flow: purchase tax is paid before the apartment is in your hands, and sometimes before the mortgage has been released.

Bottom line

Taxation in an apartment transaction is not a calculation made at the end, but a factor that affects the price, the payment schedule and sometimes the decision itself. The figures in this article are correct as at the date of writing, and in every transaction the current amounts and rates should be checked on the Israel Tax Authority website.

Nothing in this article constitutes legal advice or tax advice, or a substitute for either, and every case is assessed on its own circumstances.