Foreign Real Estate & International Taxation
During 2025, one of the best preforming regions for investment was foreign developed international markets. This region has continued to preform strongly since the beginning of 2026 and Israel has been one of the foreign developed markets that has provided the most outstanding return on investment. This includes outstanding results in the Israeli Capital Markets and moreover for investors holding Israeli Shekel denominated reserves, the Shekel (vs, USD) appreciated by 15% to date since the beginning of 2025. With so much foreign investments fueling growth in the local market, people have continued to purchase local real estate.
Are you a foreign investor, individual contemplating Aliyah or planning a move and eyeing a home in Israel? Israeli property can be a powerful way to build roots and diversify your own asset base. Yet the rules may be very different than many expect. A few missteps can cause costly liquidity crunches and reporting headaches later.
Here’s a practical briefing to help you buy with eyes wide open.
1) Purchase Tax: the 8%–10% surprise for non‑residents
No “first home” relief if you’re still a foreign resident: In most cases, non‑residents are taxed like investors, not first‑time resident buyers.
Rates to budget: 8% on the first bracket (roughly up to ~6M ILS), then 10% above that.
Timing is critical: The tax is due within 60 days of signing. It’s a transaction tax—not an income tax—so it typically can’t be offset with losses or foreign tax credits.
Tip: If your status is changing (making Aliyah soon), coordinate timing, residency, and contract structure with counsel before you sign.
2) Renting it out? Choose your track wisely
Flat 10% track (on gross):
Pros: Simple, minimal paperwork.
Cons: No deductions (no mortgage interest, no depreciation).
Marginal track (regular filing):
Pros: Can deduct eligible expenses and depreciation; may lower tax if costs are high.
Cons: Full Israeli filing and documentation required.
Cross‑border note: If you file in another country (e.g., the US), understand how Israeli tax interacts with foreign tax credits before choosing your track.
3) Selling later: the “Sole Home” myth
To get Israel’s principal residence capital‑gains relief, you generally must show you don’t own a residence anywhere else globally.
If not eligible, expect around 25% real capital gains tax on appreciation (often calculated linearly from purchase date). Plan for this in your exit math.
4) Trusts, family LLCs, and gifts: handle with care
Transferring Israeli property into a trust (even revocable) can be treated by the Israel Tax Authority as a taxable event.
Since reforms in 2006, trust reporting is strict. Missed or late reporting can trigger penalties and look‑through taxation to beneficiaries.
If you plan to hold via a trust, family company, or gift interests to children, get Israeli legal/tax advice before you fund or transfer.
5) Cash flow, currency, and closing logistics
FX planning: If your savings are in USD and expenses in ILS, consider staged conversions and buffers.
Liquidity at closing: Between Purchase Tax (8%–10%), legal, appraisal, and potential renovations, ensure sufficient shekel liquidity.
If investing: Underwrite rent with conservative assumptions for vacancy, maintenance, and management fees—then stress‑test in both ILS and USD.
The best outcomes come from pre‑transaction coordination between your Israeli attorney, an Israeli tax specialist, and your home‑country CPA/Wealth Manager. Get the structure, timing, and filings right up front—so your “safe haven” remains just that.
Sakura Partners specialize in bridging multi jurisdictional rules (including Israel) with global wealth and tax planning. If you’re considering investing in Tel Aviv, Jerusalem, Herzliya or other parts of Israel, contact us to ensure the numbers and planning coordination interconnect before making a final decision.
Disclaimer: This is general education, not tax, legal, or investment advice. Rules and brackets change; confirm specifics with qualified professionals before acting.
