Property Tax Overview in Israel

What is Arnona and how is it calculated?

Arnona (Arnona Klalit, or General Municipal Tax) is the annual property levy that funds each Israeli municipality. It is administered under the Municipalities Ordinance and applies to occupiers of both residential and commercial property. Crucially, Arnona is calculated on the occupied area in square metres and the zone and use classification of the property -- not on market value -- so the same apartment may carry a vastly different bill depending on which city and neighbourhood zone it sits in. [1] Municipalities divide their territory into zones (typically A through D, with Zone A carrying the highest rates), and they publish updated rate schedules annually. Residential rates in Tel Aviv ranged from approximately ILS 39 to ILS 111 per sq m per year in 2020 data, with the 2025 weighted average sitting near ILS 71.4 per sq m per year; Jerusalem averaged roughly ILS 50.5 per sq m per year in 2025. [2] In smaller cities such as Modi'in the rate is around ILS 48 per sq m per year. For 2026, the Interior Ministry applied a baseline index uplift of 1.626% across the country. [3] Commercial and office properties carry rates several times higher than residential. The legal obligation for Arnona falls on the occupant (tenant), not necessarily the registered owner, unless the property is vacant, in which case the owner pays. Payment is split into six bi-monthly instalments. Discount programmes exist for senior citizens, single parents, low-income households, and new immigrants (up to 90% relief in year one). Owners of genuinely vacant properties may apply for a one-time exemption of up to six months. A qualified tax professional with Israeli municipal practice can assess applicable discounts before billing.

What is Mas Rechisha (Purchase Tax) and what are the current brackets?

Mas Rechisha (Purchase Tax) is levied on the buyer at the time of completing a property transaction and is calculated on the full declared contract price. [4] The rate structure as of January 2025 -- and frozen through 2026 under a government decree to preserve fiscal revenue without annual bracket indexation -- is as follows for Israeli residents buying their sole residential property:

For buyers purchasing an additional or investment residential property -- that is, anyone who already owns any share greater than one-third of another Israeli residential property -- the zero and 3.5% bands do not apply. The entire purchase price is taxed at 8% up to ILS 6,055,070, and at 10% on any amount above that threshold. [5] This two-tier investment-property regime was temporarily enacted to cool speculative demand and has been extended through 31 December 2026. Foreign residents (non-Israeli-citizen buyers) are treated similarly to the additional-property track, generally facing 8-10% from the first shekel. New immigrants (Olim Chadashim) within their first seven years of Aliyah are eligible for a substantially reduced flat rate of 0.5% on a primary residence purchase -- a meaningful cost saving on a mid-market property. Mas Rechisha must be paid within 60 days of signing the purchase contract. The Israel Tax Authority operates a free online purchase-tax simulator at taxes.gov.il for buyers to calculate their liability before contract. [4]

How does Mas Shevach (Land Appreciation Tax) work for sellers?

Mas Shevach is the Israeli equivalent of a capital gains tax on real property and falls on the seller. [4] The standard rate is 25% of the real (inflation-adjusted) gain for individuals; shareholders holding 10% or more of a real-estate association pay 30%. Israel adjusts the cost basis using the Consumer Price Index between the date of purchase and the date of sale, so only the gain above inflation is taxed -- a significant relief on properties held for many years. Deductible costs include the original purchase price, Mas Rechisha paid on acquisition, legal and agent fees on both the purchase and the sale, and documented improvement costs. The seller must report the transaction to the Israel Tax Authority within 40 days of signing the contract and pay any tax due within 60 days. [4]

For Israeli residents selling their sole residential property, a full exemption from Mas Shevach may apply if: the property is the seller's only Israeli residential home; the seller has not used this exemption within the preceding four years; and the seller has owned the property for at least 18 months. A partial exemption applies where the sale price exceeds ILS 5,008,000 (the 2025 cap) -- gains attributable to value above that threshold remain taxable at 25%. Foreign residents are not eligible for the primary-residence exemption even if they own only one Israeli property. For properties purchased before 1 January 2014, a linear relief mechanism splits the total gain proportionally: the fraction of the appreciation accrued during the pre-2014 holding period is exempt; only the post-2014 portion is taxable. This can significantly reduce the effective rate on long-held assets. Mas Shevach is cross-linked to the broader capital-gains framework covered in the Israel country overview.

What is the Hetel Hashbacha (Betterment Levy)?

The Betterment Levy (Hetel Hashbacha) is a municipally-administered charge that arises when a planning authority decision -- such as a rezoning, approval of additional building rights, or a new urban plan -- increases the value of a privately-owned property. [6] Under Israeli planning law, municipalities are entitled to capture 50% of the unearned value uplift created by the planning decision. If, for example, a rezoning raises a plot's market value by ILS 600,000, the owner owes ILS 300,000 in Hetel Hashbacha to the local authority, regardless of whether they proceed to build or sell. Payment typically crystallises at whichever comes first: obtaining a building permit to exercise the new rights, or selling the property. The levy is therefore often borne by the seller in a transaction, though the legal obligation attaches to whoever held the rights when the planning decision took effect. Hetel Hashbacha assessments are prepared by municipal appraisers. Owners may challenge the assessed value before the District Planning Appeals Committee within 45 days of receiving the assessment notice, and may request an independent valuation from the Real Estate Appraisers Council. Urban renewal projects under TAMA 38 receive full or reduced-rate exemptions (12.5-25%) to encourage participation; Pinui-Binui demolish-and-rebuild schemes similarly allow partial exemptions, typically assigned to developers.

Is there a national annual property ownership tax in Israel?

No. Israel does not impose a national recurring property tax based on asset value. [1] Arnona is a municipal occupancy charge, not a national ownership levy; when a property becomes vacant the obligation shifts from the tenant to the owner, but no separate national charge arises simply from holding real estate. Mas Rechisha and Mas Shevach are transaction-event taxes only. This distinguishes Israel from many OECD peers and is relevant context when comparing holding costs across jurisdictions.

All figures above are in New Israeli Shekels (ILS). Consult a qualified tax professional for current bracket verification before signing any property contract -- the 2025-2026 freeze means brackets are unchanged from January 2025 but prices in ILS continue to rise, affecting which bracket a transaction falls into.