Significant tax benefits approved for Olim purchasing a home

Perhaps it is worth disconnecting and joining again? The Knesset Finance Committee on 29 of July approved an amendment to real estate taxation regulations that provides benefits to which new immigrants are entitled when purchasing property in Israel. According to the amendment, new immigrants will pay only a 0.5% purchase tax for a residential unit valued up to 6 million shekels. This is in contrast to the 3.5% to 5% paid by veteran Israeli residents.

The new tax regulations specify that an immigrant who acquires rights to a residential unit will not pay tax on the value up to the first threshold established by the real estate taxation law for the purpose of purchase tax rates in the case of a residential unit - 1,978,745 shekels in 2024, similar to veteran Israeli residents.

The benefit applies to the portion of the value exceeding the threshold up to approximately 6 million shekels. This results in two tax brackets in which the new immigrant will pay a purchase tax of 0.5% - significantly less than veteran Israelis who will pay 3.5% on the portion of the value up to approximately 2.35 million shekels, and 5% on the portion of the value up to approximately 6 million shekels.

For the portion of the value above 6 million, the new immigrant will pay according to the regular purchase tax rates set in the purchase of a residential unit, like any Israeli resident. It should be noted that the aforementioned benefit will not be granted if the value of the acquired right exceeds 20 million shekels.

The amendment to the regulations is intended to enhance the tax benefit provided to immigrants for the purpose of further encouraging immigration to Israel by increasing the benefit for immigrants purchasing a residential unit. Until the amendment was approved, new immigrants paid a purchase tax of 0.5% on the portion of the value up to the first threshold, and 5% above the first threshold, whether it was a residential unit or an additional apartment. 

This situation created a reality where the benefit did not help immigrants who purchased a residential unit, while creating a significant benefit for immigrants purchasing an additional apartment, contrary to government policy to increase the burden of purchase tax on investors in order to lower housing prices.

Now, as mentioned, the benefit has been adjusted so that immigrants purchasing a residential unit will pay reduced tax rates, and immigrants purchasing an additional apartment will pay regular tax rates.

However, it is stipulated that an immigrant who acquires a business property will continue to pay the increased tax rates that were previously in effect. It is also stipulated that those who arrived in the country before the regulations began can choose whether the regulations apply to them as they were worded before the amendment or the law as it was worded after the amendment, at their discretion. However, an immigrant who purchased a residential unit to which the regulations applied before the amendment will not be able to request that the regulations apply to them as they were worded after the amendment, in order to prevent duplicating benefits.

"An important step for the immigrants and for the State of Israel"

Finance Minister Bezalel Smotrich: "The State of Israel embraces immigrants. Especially at this time, as a country, we need to do everything possible to ease the burden on new immigrants from around the world returning home. Today, we have taken another important step for immigrants and for the State of Israel."

Minister of Aliyah and Integration, Ofir Sofer, welcomed the approval of the move: "This is good news that will help many immigrants adapt in the country, and encourage prospective immigrants to make a decision and move to Israel. Since the beginning of the war, immigration to Israel has continued and interest is growing. The Ministry of Aliyah and Integration is working diligently to assist immigrants in various areas, including housing assistance, Hebrew studies, community support, and academic studies."