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Jerusalem Post: Purchasing an Apartment in Israel

June 30, 2017
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Immigrating into a country is far from an easy process.  New environment, new language and in a lot of cases also new job, kids' education, health insurance coverage and more.  To this, one need to add the need for new housing, by itself a complex transaction.  Understanding such difficulties and in an attempt to ease the immigration process, the State of Israel undertook certain aid systems dedicated to new immigrants moving to Israel under the Israel Law of Return, 1950, which set in legislation the right of Jews and their descendants to relocate into Israel.   In this article, we will point out certain right of immigrants who received the status under such law and are called "Olim Hadashim" (each, an "Oleh Hadash").

Before signing any agreement, purchasers of real estate should pay attention to many important aspects of the transaction such as: the physical condition of the property and its environment and inquiries of the planning and legal status of the property, all of which are beyond the scope of this article.  Purchasing an apartment when the purchaser is an Oleh Hadash is even more complex than a normal land transaction and certainly requires the assistance of an experienced lawyer who is familiar with the local language (and preferably also with the language of the purchaser) and understands the special needs.   It is important to receive the legal representation even during negotiations and before signing a memorandum of understanding or any other binding documents.

Acquisition tax

A non-negligible part of the process of purchasing real estate in Israel is the tax aspect of the transaction.  The land purchase tax rate is dependent on the amount of the transaction and is in brackets of between 0% and 10% of the transaction (2017 purchase tax brackets for a person with a single apartment are 0% on the amount up to ILS 1,600,175, 3.5% on the amount above that and up to ILS 1,898,005, 5% on the amount above that and up to ILS 4,896,615, 8% on the amount above that and up to ILS 16,322,055 and 10% for any amount above that).  Tax is higher when a person has more than one apartment. The purchase tax must be paid within limited time after the signing of a binding agreement and any delay in payment may result in penalties.

An Oleh Hadash may once request a reduction of the purchase tax for a residential property and some other types of real estate assets (2017 purchase tax brackets benefit for Oleh Hadash are 0.5% up to ILS 1,734,225 and 5% on the amount above that).  The reduction will be granted if the real estate was acquired within seven years of the immigration ("Aliyah") or one year before becoming "Ole Hadash".  This benefit is not subject to an effective residency criterion and applies both to those who are already owners of another apartment (in which case a high tax will usually apply).  It should be noted, however, that the property in question must be occupied or used by the immigrant or close family relatives (as defined by law) and not rented out.

Privileged mortgages

Some attractive mortgages plans are especially designated for Olim Hashahim. Once the Immigrants will obtain the certificate of eligibility ("Teoudat Zakaout") from the Israeli Ministry of Housing, certain state-subsidized mortgage benefits apply.  The scope of the benefit will be determined by criterions such as: age, family status, number of years in Israel and, if applicable, military service and disability. This advantage applies within 15 years from the date of immigration into Israel and is granted only for the purchase of first residential asset in Israel.  Benefits are accumulative also with benefit of family members who share the status of "Ole Hadash", up to a certain level of leverage.

City Tax Reduction

The city tax (knows as "Arnona") is owed by the actual occupant of the property, whether such occupant is the owner or just a lessee.  The tax level is fixed by the municipality and new immigrant are entitled to a significant reduction of up to 90% (depending on location) on up to 100 square meters of their "Arnona" bill for 12 out of their first 24 months in Israel.

We note that the above is a partial list of benefits and issues related to purchase of an apartment in Israel (ordinarily or by an Oleh Hadash). Each transaction is unique and one should obtain legal advice with an attorney knowledgeable in that area of law and preferably one who is fluent in the native language of the Oleh.