Buying an apartment in Israel can be a complex and costly process, with several taxes and fees involved. In this article, we’ll take a closer look at the taxes involved in the process of buying an apartment in Israel, so you can be prepared for the expenses that come with the purchase.
- Purchase Tax
The Purchase Tax is a tax imposed on the purchase price of the apartment, and it’s paid by the buyer. The tax rate varies based on the value of the apartment, and it ranges from 0% to 8% of the purchase price. The tax is progressive, which means that the higher the purchase price, the higher the tax rate.
For example, if the purchase price of the apartment is up to 5,000,000 ILS, the tax rate is 0%. If the purchase price is between 5,000,000 and 6,500,000 ILS, the tax rate is 3.5%. If the purchase price is above 6,500,000 ILS, the tax rate is 5%.
It’s important to note that if the apartment is purchased as a first property, the tax rate is reduced. In this case, the tax rate is 0% for apartments up to 1,760,000 ILS, and it increases gradually for higher-priced apartments.
- Betterment Tax
Betterment Tax is a tax that is levied by the municipality on the increase in the value of a property resulting from various improvements such as construction, renovation, or rezoning of the area. In other words, it is a tax on the added value that has been created on the property due to the improvements made by the owner or by the authorities.
The Betterment Tax is calculated as a percentage of the increase in the property value, and the rate varies depending on the location and the extent of the improvements. For example, if the value of a property increases by 100,000 ILS due to the construction of a new building in the area, the Betterment Tax rate may be 20%, resulting in a tax amount of 20,000 ILS.
It’s important to note that the Betterment Tax is usually paid by the property owner who benefited from the improvement, and not by the developer or the buyer of the property. However, in some cases, the buyer may be responsible for paying the Betterment Tax, especially if the seller has not paid it or if it has not yet been assessed by the municipality.
The Betterment Tax is a significant cost that should be taken into account when purchasing a property in Israel, especially in areas that are undergoing development or rezoning. It’s important to work with a qualified lawyer and real estate agent who can guide you through the process and help you understand the tax implications of the property you’re interested in.
- Legal Fees
Legal fees are fees paid to a lawyer for the legal work involved in the purchase of an apartment. The fees vary depending on the complexity of the transaction and the lawyer’s experience. The legal fees usually range between 1% and 2% of the purchase price.
- Agent’s Commission
The agent’s commission is a fee paid to the real estate agent who helps you find and purchase the apartment. The commission rate varies depending on the agent and the value of the apartment, but it’s usually around 1.5% to 2% of the purchase price.
- VAT
VAT is a tax imposed on new apartments purchased from a developer. The VAT rate is currently 17%, and it’s included in the purchase price. However, if the apartment is purchased for investment purposes, the VAT can be waived.
In conclusion, buying an apartment in Israel involves several taxes and fees, and it’s important to understand them before making a purchase. By knowing the taxes and fees involved, you can budget for the expenses and avoid any surprises down the line.