A new immigrant to Israel (also called Oleh Chadash) will be eligible for a significant discount on their purchase tax payment. However, using said discount may not be recommended for every purchase. Sometimes, a new immigrant might save significantly more money on purchase tax payments if he chooses the regular payment route. What kind of discount is given to new immigrants on purchase tax? When is it worthwhile to use the benefit? Who is eligible for the benefit? All the answers and more – are in the following article.
Oleh Chadash Purchase Tax Obligation:
The Real Estate Taxation Law imposes a purchase tax obligation on all purchasers of real estate rights. The purchase tax rate depends on the number of apartments owned by the purchaser. As long as the purchaser owns only one apartment or does not own more than a third of an additional apartment, the tax rate that will apply to the transaction will be that of a single apartment. On the other hand, if the purchaser owns additional real estate assets, the transaction will be taxed at higher rates.
Purchase tax for a single apartment:
Anyone who purchases an apartment and does not own an additional apartment, or alternatively owns less than 1/3 of an apartment or 1/2 of an apartment that was inherited, is entitled to pay a correspondingly reduced appreciation tax. The law grants a full exemption from purchase tax on a portion of the apartment price up to 1,928,220 shekels.
On the remaining apartment price up to 2,276,360, the purchaser will pay a purchase tax at a rate of 3.5%. If the price of the apartment is higher, the buyer will pay a 5% purchase tax on the balance.
Purchase tax – 2 apartments or more:
As long as a person owns 2 apartments or more, the purchase tax rate that will apply to the transaction will be 8%! If the price of the apartment exceeds 5,872,725, the buyer will pay a purchase tax of 10% on this portion. These are very high rates, which impose a tax payment of approximately hundreds of thousands of shekels.
Oleh Chadash (new immigrant) purchase tax benefit:
Regulation No.12 of the Real Estate Taxation Regulations provides a very significant discount to buyers who purchase real estate rights in Israel for residence or business. According to the regulations, a buyer who is a Oleh Chadash (new immigrant) will pay a purchase tax of only 0.5% on an apartment up to a price of 1,928,220 shekels. On the remaining price, the new immigrant will pay a purchase tax of 5%. It is important to emphasize that this discount can be accompanied by additional personal discounts to which the buyer is entitled.
Definition of an Oleh Chadash
An Oleh Chadash is defined under sections 2 and 3 of the Law of Return, as well as individuals with visas or temporary residence permits under regulation 6(a) of the Entry into Israel Regulations. Essentially, Jewish immigrants are the primary beneficiaries of this exemption. Before purchasing property, it is crucial to verify your Oleh Chadash status.
Who else Can Benefit?
The regulations extend the discount to spouses of new immigrants. Even if only one spouse qualifies as an Oleh Chadash, both partners can enjoy the benefit when purchasing property together.
Duration of Eligibility
The benefit applies starting one year before immigration to Israel and extends up to seven years afterward. However, it can only be used once, so careful planning is essential.
Oleh Chadash benefit – when does it pay off?
The Oleh Chadash discount doesn’t always offer the best savings. For a single apartment purchase, the standard tax rates are often lower than the rates under the Oleh Chadash benefit. Therefore, using the regular tax route is more cost-effective for a primary residence.
However, when purchasing a second apartment, an apartment not intended as a residence, or even a building plot, the Oleh Chadash benefit can save substantial amounts. For such transactions, the discount is highly advantageous.
Oleh Chadash Purchase Tax – Osher Elkayim Law Firm:
New immigrants? Buying an apartment in Israel and wishing to use the Oleh Chadash benefit? Contact us at the Osher Elkayim Law Firm to clarify your eligibility and take advantage of the discount. Attorney Osher Elkayim, a lawyer and economist specializing in real estate taxation, will be happy to advise you on everything related to real estate taxation. Contact our firm and avoid unnecessary payments.
Disclaimer:
The information on this page and website is meant to only provide initial and basic information and does not/ will not constitute as legal advice and guidance or a substitute for individual legal advice provided by the firm. Nothing stated on this page can be constituted as guidance and/or recommendation and/or instructions for taking and/or avoiding taking various legal proceedings.
We recommend consulting with a professional attorney before taking any action. The responsibility for any result caused by the reliance of the information above shall apply solely to the user.
