Guide to Property Taxes in Israel
Tax Rate on Rental Income |
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| Monthly Income | US$1,500 | US$6,000 | US$12,000 |
| Tax Rate | 10% | 10% | 10% |
Non-resident individuals are generally subject to Israeli tax on income derived from Israeli sources, as well as taxable capital gains arising from assets situated in Israel, including Israeli real estate.
Rental Income Tax
Individuals deriving rental income from residential property in Israel may, subject to the applicable conditions, choose between several taxation methods.
Under the 10% flat-rate option, gross rental income from qualifying Israeli residential property is taxed at 10%. No deductions for expenses or depreciation are generally permitted under this method.
Alternatively, the landlord may elect to be taxed on net rental income. Under this method, qualifying expenses and depreciation may be deducted from gross rental income, with the remaining taxable profit subject to the individual's applicable marginal income tax rate.
Qualifying deductions may include expenses directly related to generating the rental income, such as maintenance, repairs, insurance, management costs and depreciation. Depreciation is generally available on the building component of the property, but not on the underlying land.
A separate exemption or partial exemption may also be available for qualifying residential rental income. For 2026, the monthly exemption threshold is ILS 5,654, subject to the relevant conditions.
For investment comparisons, the 10% gross-rental option provides the simplest calculation, as the tax liability is determined directly from gross rental income without deducting expenses.
Capital Gains and Real Estate Appreciation Tax
The sale of Israeli real estate is generally subject to Land Appreciation Tax (Mas Shevach) when a taxable gain arises.
For individuals, the taxable real gain attributable to the period from 1 January 2012 onward is generally subject to tax at 25%. Different rates and transitional calculations may apply to gains attributable to earlier ownership periods.
The gain is broadly determined by reference to the difference between the property's disposal value and its adjusted acquisition cost, taking into account qualifying expenses and applicable depreciation.
The gain may also be divided between a real component and an inflationary component. Inflationary gains accruing after 1 January 1994 are generally exempt, while certain inflationary gains attributable to earlier periods may be taxable at 10%.
Exemptions may be available for certain qualifying residential property transactions, but a sale by a non-resident investor should not automatically be treated as exempt. Eligibility depends on the nature of the property, the seller and the applicable statutory conditions.
Higher-income individuals may also be subject to additional surtaxes. For 2026, taxable annual income exceeding ILS 721,560 can be subject to a 3% surtax, while income from capital sources above the threshold can be subject to an additional 2% surtax.
Corporate Taxation
Companies are generally subject to Israeli corporate income tax at a flat rate of 23% in 2026.
Taxable business income is calculated after deducting qualifying expenses incurred in generating that income. Accordingly, companies holding rental property may generally deduct qualifying operating expenses and depreciation when calculating taxable profits.
Capital gains realized by companies are generally subject to the standard 23% corporate tax rate. Gains arising specifically from Israeli real estate are governed by the Land Appreciation Tax regime, with the real gain generally taxed at the applicable corporate tax rate.
Accordingly, the standard corporate tax burden on taxable rental profits and taxable real estate gains is generally 23%, subject to specific deductions, exemptions and other applicable rules.
Property Buying and Selling Taxes and Costs
| Transaction Costs | Rate |
| Property Transfer Tax | 0.00% - 10.00% |
| Agent Fee (Buyer) | 2.00% |
| Agent Fee (Seller) | 2.00% |
| Legal Fees | 0.50% - 1.00% |
| Notary Fee | 0.10% |
| Costs Paid By Buyer | 2.60% - 13.10% |
| Costs Paid By Seller | 2.00% |
| Roundtrip Cost | 4.60% - 15.10% |
| Source: Global Property Guide, PWC | |
Property Holding Tax
Municipal Property Tax (Arnona)
Israel imposes an annual municipal property tax known as Arnona on residential and commercial real estate.
Arnona is generally payable by the occupier of the property, which may be the owner or tenant. Where a property is unoccupied, liability generally falls on the property owner.
Unlike property taxes in many other countries, Arnona is not generally calculated as a percentage of the property's market value. Instead, the annual charge is typically determined according to the property's size in square metres, together with factors such as its location, classification and actual use.
Each municipality establishes its own Arnona tariffs within the applicable national regulatory framework. Consequently, the amount payable can vary considerably between municipalities and between residential, commercial and other types of property.
Commercial properties generally face different—and often higher—per-square-metre tariffs than residential properties. Special classifications and rules may also apply to vacant or unused properties.
For investment properties that are rented to tenants, the tenant or other registered occupier will generally be responsible for paying Arnona. However, the owner may become responsible during periods when the property is vacant or where no other occupier is registered for municipal tax purposes.
