New Purchase Tax Benefit for Olim Buying Their First Home in Israel

In August 2024, Israel amended its real estate purchase tax to ease the financial load on Olim Chadashim (new immigrants) purchasing their first home. They will pay significantly lower purchase tax rates than the tax payable according to the current benefit.

Key Points of the Amendment

The new purchase tax benefit offers significant reductions in purchase tax for Olim, provided they buy their first residence in Israel, with the home serving as their primary residence. The amendment details a simplified structure:

• 0% tax for properties valued up to approximately NIS.1.98 million

• 0.5% tax on property amounts between 1.98 million and NIS 6 million.

• 8% tax for values above NIS 6 million, with a maximum cap at NIS 20 million.

This new policy is specifically aimed at Olim purchasing a primary residence, so excludes properties purchased for investment purposes. To qualify, Olim must establish residency within a year, making this a unique incentive for those committed to living in Israel.

Comparison with the Previous Law

Prior to the amendment, Olim Chadashim who purchased a residential property paid a purchase tax rate of 0.5% for a property's value up to the first tax bracket (NIS 1.98 million in 2024) and 5% on any value above this threshold, whether it was for a single residence or an additional property.

Additional Benefits for Olim

Olim also have access to government-subsidized mortgages with fixed interest rates and no prepayment penalties. These mortgages provide a stable financial base, with up to 75% loan-to-value financing on primary residences, further enhancing the affordability of property ownership for new immigrants.

Government Goals and Support for Olim

The Ministry of Finance and the Ministry of Immigration and Integration championed this amendment as part of a broader initiative to ease the financial challenges for Olim. Both these Ministries emphasized that these tax reductions reflect Israel's commitment to making Aliyah accessible and affordable.

Practical Impact for Olim

The new purchase tax benefit is projected to save Olim significant sums in purchase tax reductions based on current property values. With simplified requirements and structured benefits, Israel aims to make homeownership for Olim more achievable, reaffirming its dedication to supporting their integration and long-term residence in the country.

Adv. Assaf Hasson is a Wealth Advisor, Tax and Private Client Lawyer.

He is a board member of the ESRA Executive and of the Financial Committee.

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