Let me tell you about two couples who bought nearly identical apartments in Tel Aviv on the same week for the same price—2.5 million shekels each.
David and Rachel, both Israeli citizens buying their third property as an investment, paid 220,000 shekels in purchase tax.
Mark and Sarah, new immigrants buying their first apartment in Israel, paid 12,000 shekels in purchase tax.
Same city. Same price. Same week. A difference of 208,000 shekels in tax.
Welcome to Mas Rechisha—Israel’s purchase tax. It’s one of the most significant costs you’ll face when buying property in Israel, and yet it’s also one of the most misunderstood. The amount you pay depends on a complex web of factors: who you are, what you’re buying, whether it’s your first property, how long you’ve been in Israel, your marital status, and more.
Get it right, and you could save hundreds of thousands of shekels. Get it wrong—either through ignorance or error—and you’ll overpay massively or face penalties that can dwarf the original tax amount.
Today, I’m breaking down everything you need to know about Mas Rechisha—how it’s calculated, who qualifies for reductions, how to maximize your benefits, common mistakes that cost people fortunes, and how to navigate this system successfully.
This is your complete guide to understanding and minimizing Israel’s purchase tax.
WHAT IS MAS RECHISHA?
Mas Rechisha (מס רכישה) literally translates to “purchase tax” or “acquisition tax.” It’s a one-time tax paid by the buyer when purchasing real estate in Israel.
Basic Principles:
Who Pays: The buyer (you), not the seller
When Paid: At the time of the purchase transaction (usually at closing)
Calculated On: The purchase price of the property
Administered By: Israel Tax Authority (Mas Hachnasa)
Purpose: Generate government revenue and implement social policy through tax breaks
Why It Matters:
On a 2.5 million shekel apartment, the purchase tax can range from:
- 0 shekels (if you qualify for full exemption as a first-time buyer)
- To over 200,000 shekels (if you’re buying as an investor with no exemptions)
That’s not a rounding error—that’s a life-changing amount of money. Understanding this tax and how to minimize it legally is one of the most important financial aspects of buying property in Israel.
THE BASIC RATE STRUCTURE: HOW MAS RECHISHA IS CALCULATED
Purchase tax uses a progressive rate system—different portions of the purchase price are taxed at different rates, similar to income tax brackets.
THE STANDARD RATES (FOR THOSE WITH NO SPECIAL BENEFITS):
For a single property (not your first, not eligible for any reductions):
| Purchase Price Range | Tax Rate |
|---|---|
| Up to 1,844,505 NIS | 3.5% |
| 1,844,505 – 1,982,535 NIS | 5% |
| 1,982,535 – 5,493,955 NIS | 8% |
| Above 5,493,955 NIS | 10% |
Note: These thresholds are updated periodically for inflation. The figures shown are as of 2024/2025.
How Progressive Rates Work:
You don’t pay the highest rate on the entire amount. You pay each rate on only the portion that falls within that bracket.
Example Calculation:
Buying an apartment for 3 million shekels (no special benefits):
- First 1,844,505 at 3.5% = 64,558 shekels
- Next 138,030 (1,982,535 – 1,844,505) at 5% = 6,902 shekels
- Next 1,017,465 (3,000,000 – 1,982,535) at 8% = 81,397 shekels
Total Purchase Tax: 152,857 shekels
That’s over 5% of the purchase price—a significant amount that must be paid in addition to your down payment, closing costs, legal fees, and everything else.
THE FIRST-TIME BUYER BENEFIT: THE BIGGEST TAX BREAK
This is where things get interesting and where most of the savings happen. Israel offers substantial purchase tax reductions for first-time homebuyers.
WHO QUALIFIES AS A FIRST-TIME BUYER:
You qualify if:
- You don’t own any residential property in Israel
- You’ve never owned residential property in Israel
- This will be your only residential property
IMPORTANT: It’s not about whether this is your first purchase ever—it’s about whether you currently own or have ever owned property in Israel. If you owned property 20 years ago and sold it, you don’t qualify as a first-time buyer anymore.
THE FIRST-TIME BUYER RATES:
The tax brackets and rates are much more favorable:
For Individual First-Time Buyer:
| Purchase Price Range | Tax Rate |
|---|---|
| Up to 1,844,505 NIS | 0% |
| 1,844,505 – 1,982,535 NIS | 3.5% |
| 1,982,535 – 5,493,955 NIS | 5% |
| Above 5,493,955 NIS | 8% |
For Couple (Both First-Time Buyers):
Even better rates if you’re married or buying together:
| Purchase Price Range | Tax Rate |
|---|---|
| Up to 2,023,070 NIS | 0% |
| 2,023,070 – 2,178,210 NIS | 3.5% |
| 2,178,210 – 5,902,130 NIS | 5% |
| Above 5,902,130 NIS | 8% |
Real Impact Example:
Scenario: Married couple buying apartment for 2.5 million shekels, both first-time buyers
Calculation:
- First 2,023,070 at 0% = 0 shekels
- Next 155,140 (2,178,210 – 2,023,070) at 3.5% = 5,430 shekels
- Next 321,790 (2,500,000 – 2,178,210) at 5% = 16,090 shekels
Total Purchase Tax: 21,520 shekels
Compare this to the 152,857 shekels they’d pay without first-time buyer status.
Savings: 131,337 shekels
This is massive. This is why first-time buyer status is the single most valuable tax benefit in Israeli real estate.
THE OLIM (NEW IMMIGRANT) BENEFIT: EVEN BETTER RATES
If you’re a new immigrant (oleh/olah), you get even more generous treatment.
WHO QUALIFIES:
- Made aliyah (became an Israeli immigrant under Law of Return)
- Purchasing your first property in Israel within 7 years of aliyah
- Can use this benefit only once
- Property will be your primary residence
OLIM PURCHASE TAX RATES:
| Purchase Price Range | Tax Rate |
|---|---|
| Up to 1,844,505 NIS | 0% |
| 1,844,505 – 2,023,070 NIS | 0.5% |
| 2,023,070 – 7,014,745 NIS | 5% |
| Above 7,014,745 NIS | 8% |
For Couple (Both New Immigrants):
| Purchase Price Range | Tax Rate |
|---|---|
| Up to 2,023,070 NIS | 0% |
| 2,023,070 – 2,466,615 NIS | 0.5% |
| 2,466,615 – 8,246,605 NIS | 5% |
| Above 8,246,605 NIS | 8% |
Real Impact Example:
Scenario: Married olim couple buying for 3 million shekels, both made aliyah 3 years ago
Calculation:
- First 2,023,070 at 0% = 0 shekels
- Next 443,545 (2,466,615 – 2,023,070) at 0.5% = 2,218 shekels
- Next 533,385 (3,000,000 – 2,466,615) at 5% = 26,669 shekels
Total Purchase Tax: 28,887 shekels
Without olim benefit (but with first-time buyer status): ~75,000 shekels
Without any benefits: ~153,000 shekels
The olim benefit saves an additional ~46,000 shekels beyond the already generous first-time buyer rates.
This is one of Israel’s most significant financial incentives for immigration.
RETURNING RESIDENTS (TOSHAV CHOZER): A LESSER-KNOWN BENEFIT
If you’re an Israeli citizen who lived abroad and returned, you may qualify for benefits similar to olim.
WHO QUALIFIES:
- Israeli citizen who lived abroad for at least 2 consecutive years
- Returned to Israel to live permanently
- Purchasing first property since returning
- Purchasing within 7 years of return
BENEFITS:
Generally similar to olim benefits, though some details differ. The tax authority reviews each case individually.
Requirements:
- Prove you lived abroad continuously (lease agreements, utility bills, employment records)
- Prove you returned with intent to stay permanently
- Declare your intention to make Israel your permanent residence
Why This Matters:
Many Israelis work abroad for a few years (Silicon Valley, London, etc.) and then return. If you qualify as a returning resident, you get essentially the same massive tax benefits as new immigrants.
THE SINGLE APARTMENT EXEMPTION: FOR NON-FIRST-TIME BUYERS
What if you’ve owned property before but currently don’t own anything? You don’t qualify as a first-time buyer, but you’re not penalized as heavily as an investor.
THE “DIRA YECHIDA” (SINGLE APARTMENT) BENEFIT:
If you:
- Currently own only one apartment or no apartment
- Are buying a replacement apartment
- Will use it as your primary residence
You get rates somewhat between investor rates and first-time buyer rates:
| Purchase Price Range | Tax Rate |
|---|---|
| Up to 1,844,505 NIS | 3.5% |
| 1,844,505 – 1,982,535 NIS | 5% |
| 1,982,535 – 5,493,955 NIS | 6% |
| Above 5,493,955 NIS | 9% |
This is better than investor rates (which go up to 10%) but not as good as first-time buyer rates.
Special Consideration:
If you’re selling your current apartment and buying a new one, the timing matters:
- Sell first, then buy: You temporarily own zero apartments, may qualify for better rate
- Buy first, then sell: You temporarily own two apartments, may be taxed as investor
Your lawyer and tax advisor should help you structure the timing optimally.
INVESTMENT PROPERTY: THE HIGHEST RATES
If you’re buying property as an investment (you already own residential property and this is an additional one), you face the steepest rates.
INVESTMENT PROPERTY RATES:
| Purchase Price Range | Tax Rate |
|---|---|
| Up to 5,739,010 NIS | 10% |
| Above 5,739,010 NIS | 10% |
Flat 10% on the entire purchase price. No progressive rates.
Example:
Buying an investment apartment for 2.5 million shekels:
Purchase Tax: 250,000 shekels
This is massive. On a 2.5 million shekel property, you’re paying essentially a 10% surcharge just in purchase tax.
Strategies to Consider:
If buying with a partner who doesn’t own property:
Sometimes structuring ownership so the non-owner takes majority ownership can reduce overall tax, though this requires careful legal and tax planning.
Timing multiple purchases:
If planning to buy multiple properties, the order matters. Buy your primary residence first (get the best rates), then investment properties later.
Using a company:
In some cases, purchasing through a company might have tax advantages, though this is complex and requires professional advice.
Important: Never structure purchases artificially just to avoid tax. Tax fraud is serious. But legal tax planning within the rules is perfectly legitimate.
COMMERCIAL PROPERTY: DIFFERENT RULES
If you’re buying commercial property (office, retail, industrial), different rates apply.
COMMERCIAL PROPERTY RATES:
Typically 6% flat rate on the entire purchase price, though this can vary based on specific circumstances and property type.
Mixed-Use Property:
If property has both residential and commercial components, the tax is calculated proportionally based on the split.
Example:
- Property costs 3 million shekels
- 70% residential, 30% commercial
- Residential portion taxed at residential rates
- Commercial portion taxed at commercial rates
KEY FACTORS THAT AFFECT YOUR MAS RECHISHA
Beyond the basic categories, several factors influence your purchase tax:
1. PROPERTY SIZE
Extremely large properties (over certain square meter thresholds) may face additional tax or lose some benefits. The government doesn’t want to subsidize luxury through first-time buyer benefits.
2. PROPERTY VALUE
Higher-value properties face higher marginal rates. The progressive system means the more expensive the property, the higher your average tax rate becomes.
3. TIMING OF PURCHASE
- New immigrants: Must purchase within 7 years of aliyah
- Returning residents: Must purchase within 7 years of return
- Threshold amounts are updated periodically for inflation
4. USAGE COMMITMENT
For reduced rates, you typically must commit to using the property as your primary residence for a certain period (usually 4 years). If you sell or rent it out too soon, you may have to pay back the tax benefit.
5. MARITAL STATUS
Couples get better rates than individuals because there are two people using one residence.
If you marry after purchase:
You don’t retroactively get the couple rate, but your spouse’s first-time buyer status is preserved for future purchase.
If you divorce after purchase:
Complex rules apply regarding how this affects each party’s future first-time buyer status.
6. PREVIOUS OWNERSHIP
Even brief ownership years ago disqualifies you from first-time buyer benefits. The tax authority has records going back decades.
CALCULATING YOUR PURCHASE TAX: STEP-BY-STEP
Let’s walk through how to calculate your exact purchase tax:
STEP 1: DETERMINE YOUR BUYER CATEGORY
Answer these questions:
- Are you a first-time buyer? (Never owned property in Israel)
- Are you an oleh/olah? (Made aliyah within last 7 years)
- Are you a returning resident? (Lived abroad 2+ years, recently returned)
- Do you currently own zero or one apartments?
- Is this an investment property? (Already own residential property)
STEP 2: DETERMINE YOUR MARITAL STATUS FOR TAX PURPOSES
- Single/buying alone?
- Married couple both qualifying for the same benefit?
- Married couple with different qualification statuses?
STEP 3: IDENTIFY YOUR RATE SCHEDULE
Based on Steps 1 and 2, determine which rate schedule applies to you.
STEP 4: CALCULATE THE TAX
Apply the progressive rates to your purchase price:
For each bracket:
- Calculate how much of your purchase price falls in that bracket
- Multiply by the rate for that bracket
- Sum all the brackets
STEP 5: VERIFY ANY SPECIAL CIRCUMSTANCES
- Extremely large property? May affect rates.
- Mixed commercial/residential? Calculate portions separately.
- Any unusual factors? Consult tax professional.
WORKED EXAMPLE:
Profile: Married couple, both olim who made aliyah 2 years ago, buying first property for 2.8 million shekels
Applicable Rates (Olim Couple):
- 0% up to 2,023,070
- 0.5% from 2,023,070 to 2,466,615
- 5% from 2,466,615 to 8,246,605
Calculation:
- Bracket 1: 2,023,070 × 0% = 0
- Bracket 2: (2,466,615 – 2,023,070) = 443,545 × 0.5% = 2,218
- Bracket 3: (2,800,000 – 2,466,615) = 333,385 × 5% = 16,669
Total Purchase Tax: 18,887 shekels
Compare to:
- Standard rates (no benefits): ~175,000 shekels
- First-time buyer rates: ~50,000 shekels
The olim benefit saves them approximately 156,000 shekels compared to standard rates.
COMMON MISTAKES THAT COST THOUSANDS
MISTAKE 1: NOT CLAIMING BENEFITS YOU’RE ENTITLED TO
Many buyers don’t realize they qualify for benefits, or don’t properly document their eligibility.
Solution: Work with a knowledgeable tax advisor or lawyer who specializes in real estate tax.
MISTAKE 2: ASSUMING YOU QUALIFY WITHOUT VERIFICATION
Buyers sometimes assume they’re first-time buyers when they actually owned property in the past (inherited property, owned briefly decades ago, etc.).
Solution: Check your status with the tax authority before relying on first-time buyer rates.
MISTAKE 3: POOR TIMING OF PURCHASES
Buying a second property before selling your first can cost you first-time buyer rates on a future purchase, or force you into investor rates on the current purchase.
Solution: Plan the sequence carefully with professional advice.
MISTAKE 4: MISSING DEADLINES
Olim and returning residents have time limits (typically 7 years). Missing the deadline means losing hundreds of thousands in benefits.
Solution: Track your eligibility timeline carefully and prioritize purchasing within the window.
MISTAKE 5: INCORRECT DOCUMENTATION
Failing to provide proper documentation of oleh status, returning resident status, or other qualifying factors.
Solution: Gather all necessary documentation early and ensure it’s properly submitted.
MISTAKE 6: NOT UNDERSTANDING THE “PRIMARY RESIDENCE” REQUIREMENT
Claiming reduced rates but then renting out the property or not living in it as required can trigger penalties and repayment of tax benefits.
Solution: Understand and comply with all conditions of the tax benefit you’re claiming.
MISTAKE 7: ARITHMETIC ERRORS
Calculating the progressive rates incorrectly, leading to either underpayment (penalties) or overpayment (wasted money).
Solution: Use professional tax preparation services for large transactions.
THE PURCHASE TAX PAYMENT PROCESS
Understanding when and how to pay is crucial:
TIMING:
Purchase tax must be paid before or at closing. You cannot take possession of the property until purchase tax is paid and documented.
PROCESS:
- Calculate the tax (with professional help)
- Complete tax forms (Mas Rechisha declaration forms)
- Submit documentation proving your status and eligibility for benefits
- Pay the tax to the Tax Authority
- Receive confirmation (Ishur Tashloum Mas Rechisha)
- Provide confirmation to Tabu (Land Registry) as part of registration
WHO HANDLES THIS:
Typically your lawyer handles the purchase tax filing and payment as part of their services, though you provide the funds.
PAYMENT METHODS:
- Bank transfer
- Cashier’s check
- Through lawyer’s trust account
VERIFICATION:
The tax authority reviews your filing. If they question your benefit claims, they may request additional documentation or audit the transaction.
WHAT HAPPENS IF YOU GET IT WRONG
UNDERPAYMENT:
If you paid less than required:
- Tax authority issues assessment for additional tax owed
- Interest charged from original due date
- Penalties may be added (if determined you intentionally under-reported)
- Potential criminal charges for tax fraud (in severe cases)
OVERPAYMENT:
If you paid more than required:
- You can file for a refund
- Must be done within time limits (typically several years)
- Requires documentation showing you were entitled to better rates
- Refund process can take months
Late Payment:
- Interest accrues daily
- Penalties added
- Can hold up property registration
- May affect your ability to close the transaction
APPEALING TAX AUTHORITY DECISIONS
If the tax authority denies your claim for reduced rates or assesses additional tax:
PROCESS:
- Receive the tax assessment with explanation
- You have 30 days to file objection
- Submit objection with supporting documentation
- Tax authority reviews and issues decision
- If still unsatisfied, can appeal to Tax Tribunal
- If still unsatisfied, can appeal to court system
When to Appeal:
- You have documentation supporting your status
- Tax authority made factual error
- You believe you’re interpreting the law correctly
- Amount in dispute is significant enough to justify the effort and legal costs
Legal Representation:
For significant disputes (tens of thousands of shekels or more), hire a tax lawyer specializing in real estate.
SPECIAL SITUATIONS AND ADVANCED STRATEGIES
BUYING FROM FAMILY
Purchase tax is based on the higher of:
- Actual purchase price, or
- Fair market value
This prevents tax avoidance through artificially low family transfer prices.
BUYING THROUGH COMPANY
More complex tax treatment:
- Company may pay different tax rates
- Affects later sale tax implications
- Requires sophisticated tax planning
- Not appropriate for most individual buyers
PURCHASING PARTIAL OWNERSHIP
If buying a percentage of a property:
- Tax calculated on your portion
- Your status (first-time buyer, etc.) applies to your portion
INHERITING PROPERTY
Inheritance isn’t a “purchase” so no purchase tax is due. But:
- It affects your first-time buyer status (you now own property)
- Capital gains tax may apply when inherited property is sold
GIFT OF PROPERTY
Property received as gift:
- Gift tax may apply (separate from purchase tax)
- Affects first-time buyer status
- Complex rules depending on relationship to donor
COORDINATING WITH OTHER TAXES
Purchase tax is just one of several taxes relevant to real estate:
CAPITAL GAINS TAX (Mas Shevach):
- Paid by seller on profit from sale
- Buyer’s responsibility to withhold portion and remit to tax authority
- Seller must provide clearance before full payment released
BETTERMENT TAX (Mas Hashbacha):
- Charged when property value increases due to zoning changes or public improvements
- Can be buyer or seller responsibility depending on timing
- Check if any is owed as part of due diligence
PROPERTY TAX (Arnona):
- Annual municipal property tax
- Ongoing obligation after purchase
- Different from one-time purchase tax
Value Added TAX (VAT – Mas Arach Mosaf):
- Generally doesn’t apply to residential property resales
- May apply to new construction or commercial property
- 17% rate when it applies
DOCUMENTATION YOU’LL NEED
To claim benefits and file purchase tax, gather:
FOR ALL BUYERS:
- Teudat Zehut (Israeli ID) or passport
- Purchase agreement
- Property details (address, Tabu registration info)
- Payment documentation
FOR FIRST-TIME BUYERS:
- Declaration that you don’t own and have never owned property
- Tax authority may verify independently through their records
FOR OLIM:
- Teudat Oleh (immigrant certificate)
- Proof of aliyah date
- Declaration of first property purchase in Israel
FOR RETURNING RESIDENTS:
- Proof of Israeli citizenship
- Proof of living abroad (leases, utility bills, employment records)
- Proof of return date (entry stamps, etc.)
- Declaration of intent to stay permanently
FOR COUPLES:
- Marriage certificate
- Both spouses’ qualifying documents
- Declaration of both qualifying for claimed status
WORKING WITH PROFESSIONALS
Given the complexity and high stakes, professional help is essential:
YOUR LAWYER:
- Calculates your purchase tax
- Prepares and files tax forms
- Handles payment process
- Provides confirmation for Tabu registration
- Cost: Usually included in standard legal fee (10,000-20,000 shekels)
TAX ADVISOR (if needed):
- Complex situations may require specialized tax consultant
- Particularly for investment properties, companies, or disputes
- Cost: 3,000-10,000 shekels for consultation and planning
WHEN TO GET SPECIALIZED TAX HELP:
- Purchasing multiple properties simultaneously
- Complex ownership structures
- Disputes with tax authority
- Very high-value properties (millions of shekels)
- International tax implications
FUTURE CHANGES AND STAYING INFORMED
Purchase tax rates and rules change periodically:
Common Changes:
- Threshold amounts updated for inflation (annually)
- Rates adjusted (less frequently)
- New benefits introduced
- Eligibility rules modified
Staying Current:
- Check Israel Tax Authority website (www.taxes.gov.il)
- Consult current resources when actually purchasing (not years in advance)
- Use professionals who stay updated on changes
Why This Matters:
Planning based on old rates or rules can lead to nasty surprises. Always verify current rules when making actual purchase.
CONCLUSION: KNOWLEDGE IS SAVINGS
Let’s return to our opening example—the two couples paying vastly different purchase tax on identical purchases.
The difference wasn’t luck. It wasn’t favoritism. It was understanding the system and maximizing legal benefits.
Mas Rechisha is one of the largest costs of purchasing property in Israel, but it’s also one of the most variable. The same property can incur anywhere from zero to hundreds of thousands of shekels in tax depending on the buyer’s status and knowledge.
Understanding this tax system isn’t optional—it’s essential. The difference between knowing the rules and being ignorant of them can literally be the cost of a car, or a year’s salary, or the down payment on another property.
Key takeaways:
1. Know Your Status: Are you first-time buyer? Oleh? Investor? This determines everything.
2. Document Everything: Proving your eligibility requires proper documentation.
3. Time It Right: When you buy can dramatically affect your tax, especially for olim and returning residents.
4. Use Professionals: The complexity justifies paying for expert advice.
5. Plan Ahead: Understanding implications before you buy allows for optimal structuring.
6. Verify Current Rules: Tax laws change—always confirm current rates and rules.
7. Comply Fully: Trying to cheat the system isn’t worth the risk. Legal tax planning is smart; fraud is disastrous.
Mas Rechisha is significant, but it’s knowable and manageable. With proper understanding and planning, you can minimize this cost legally and use the savings toward your new home.
That’s money in your pocket where it belongs—not unnecessarily paid in taxes due to ignorance or poor planning.
Buy smart. Know the tax rules. Save accordingly.
For more information about Israeli real estate and purchase tax planning, visit israelproperty.tv
Ready to buy? Make sure you understand your purchase tax situation before you sign anything—the savings can be enormous.