Israel charges VAT (called Ma’am) at 18% on real estate when the seller is a business. A new home bought from a developer has 18% VAT baked into the price. A second-hand home bought from a private person has no VAT at all. Commercial property from a business is VAT-able. Long-term residential rent is exempt.
By the Semerenko Group research desk.
The fast version: who pays VAT and who does not
- VAT rate: 18% on real estate sold by a business, in force since 1 January 2025 (VATupdate, Dec 2024).
- New build from a developer: VAT-able. The 18% is already inside the price the developer quotes you.
- Resale home from a private seller: no VAT. A private person is not a business, so no VAT line exists.
- Commercial property from a business: VAT-able at 18% (see our commercial property guide).
- Renting out a home long-term: exempt from VAT. Rent under a lease shorter than 25 years carries no VAT.
- Short-term and hotel-style rentals: can become VAT-able once you cross the business threshold and register.
- Watch out: agent fees, lawyer fees and developer extras carry their own 18% VAT on top, even on a resale deal.
VAT is separate from purchase tax. You may owe both on a new-build deal. See Israel purchase tax (Mas Rechisha) brackets for that second tax.
Always confirm current rates with a licensed Israeli tax lawyer before you sign. Tax rules and figures change.
What is VAT on Israeli property, in plain words?
VAT (Value Added Tax, Ma’am in Hebrew) is a 18% tax added to most goods and services sold by a business in Israel. Real estate counts. The simple test is who is selling: if the seller runs a business (a developer, a company, a commercial landlord), the sale is VAT-able. If the seller is a private individual selling their own home, there is no VAT.
That one rule explains almost everything below. A developer is a business, so a brand-new apartment carries VAT. Your neighbour selling their flat is not a business, so the same flat sold second-hand carries no VAT.
New build vs resale: how does the VAT differ?
A new home from a developer includes 18% VAT in the price. A resale home from a private owner includes none. That is the single biggest tax gap between the two routes, and it changes the real cost of the same square meters.
On a new build the developer is registered for VAT and must charge it, so the price you see on the brochure already contains the tax. You do not add 18% on top yourself. On a resale between two private people there is no VAT to add or remove.
| Deal type | Seller | VAT applies? | Rate | Where it sits |
|---|---|---|---|---|
| New apartment | Developer (business) | Yes | 18% | Inside the quoted price |
| Resale home | Private individual | No | 0% | No VAT line |
| Commercial unit | Business / company | Yes | 18% | Added to the price |
| Long-term residential rent | Landlord | No | 0% | Exempt |
| Short-term / hotel rental | Operator (business) | Often yes | 18% | Above the threshold |
| Agent / lawyer fees | Service provider | Yes | 18% | On top of the fee |
My worked example: the VAT slice inside a new-build price
This is my own worked example. Say a developer quotes 2,360,000 NIS for a new apartment, VAT included. To pull out the VAT slice, divide by 1.18 to get the pre-VAT price, then subtract.
- Pre-VAT price: 2,360,000 / 1.18 = 2,000,000 NIS.
- VAT inside the price: 2,360,000 – 2,000,000 = 360,000 NIS (which is 18% of 2,000,000).
So on that headline number, 360,000 NIS is tax going to the state, not bricks. A resale home at the same 2,360,000 NIS sticker carries zero VAT, so all of it pays for the property and the seller’s gain. That is why a new build and a resale at the same price are not the same deal.
When exactly do I pay the VAT on a new build?
You pay the VAT in stages, as you pay the developer. New apartments are usually paid in instalments tied to construction milestones, and each instalment is charged at the VAT rate in force on the date that payment is made, not the rate on the signing date.
This staged rule matters when rates move. The jump to 18% on 1 January 2025 meant buyers mid-contract paid the old rate on payments made before the change and the new rate on payments made after it. If another rate change is announced, the date of each payment decides which rate applies to that slice.
My worked example: a rate change mid-contract
This is my own worked example. Imagine a 2,000,000 NIS (pre-VAT) new build, paid half before a rate rise from 17% to 18% and half after.
- First 1,000,000 NIS at 17% VAT: 170,000 NIS tax.
- Second 1,000,000 NIS at 18% VAT: 180,000 NIS tax.
- Total VAT paid: 350,000 NIS, versus 360,000 NIS if the whole thing had been at 18%.
The 10,000 NIS gap is the value of the payments you locked in before the rise. The lesson: on a long off-plan build, the timing of your payments has a real cash effect when VAT rates change.
Does VAT apply to commercial property?
Yes. A commercial property sold by a business carries 18% VAT, the same as a new home from a developer. The difference is that a registered business buyer can often reclaim that VAT as an input credit, so the tax becomes a cash-flow item rather than a permanent cost.
A private buyer of residential property cannot reclaim VAT, so for them it is a real cost. This is one reason commercial deals are quoted “plus VAT” while new homes are quoted “VAT included”. For how commercial deals are structured, see our guide to commercial real estate in Israel.
Do I pay VAT on rent?
No, not on a normal long-term residential lease. Renting a home to a tenant under a lease shorter than 25 years is exempt from VAT, so a private landlord does not add 18% to the monthly rent. Hotels and tourist-style accommodation are the exception.
Short-term rentals can change this. If you run holiday lets as a business and cross the registration threshold, the tax authority may treat you like a hotel operator: VAT on the nightly rate, plus a business licence and commercial property tax (arnona). VAT is a separate question from income tax on the rent itself. Your rent is also taxed under one of three income tracks, which we cover in the selling and gains family of pages and the rental income guide.
How does VAT fit with the other taxes I owe?
VAT is only one of several taxes on an Israeli deal, and it does not replace any of them. On a new build you can owe VAT (inside the price) and purchase tax (on top). Here is the short map so you do not double-count.
- VAT (Ma’am): 18%, paid by the buyer, only when the seller is a business. Inside the new-build price.
- Purchase tax (Mas Rechisha): paid by every buyer, new or resale. Investors and most foreign residents start at 8%. See the purchase tax brackets and the foreign-buyer 8% reality.
- Capital gains (Mas Shevach): 25% on the real gain, paid by the seller. See capital gains tax on Israeli property.
For context, Israel’s investor purchase tax sits at 8% up to 6,055,070 NIS and 10% above (frozen to 31 December 2026, per Kol Zchut), and capital gains run at 25% on the inflation-adjusted gain (PwC Tax Summaries). None of those touch the VAT question; they stack alongside it. This whole stack lives inside our wider Israel real estate tax hub and the main investment opportunities hub.
A quick VAT checklist before you sign
- Ask the seller one question first: are you a registered business? That answer tells you if VAT applies at all.
- On a new build, confirm in writing that the quoted price is “VAT included” so there are no surprises.
- Get the payment schedule and note the rate on each instalment date, in case rates move during the build.
- Remember VAT is not your only tax. Budget purchase tax (and capital gains tax when you later sell) separately.
- On a resale, expect no VAT on the home itself, but still 18% VAT on agent and lawyer fees.
- If you plan short-term lets, check whether your activity crosses the VAT registration threshold before you start.
- Confirm everything with a licensed Israeli tax lawyer. Rates and freezes change, and your case may differ.
Your next step
Decide which route you are taking, new build or resale, then price the same property both ways with VAT in mind. If you want a clean side-by-side of the all-in tax on a specific deal, the brokerage can run the numbers with you. Contact the Semerenko Group to map your VAT, purchase tax and gains exposure before you commit.
Reviewed by the Semerenko Group brokerage team. Last updated 15 June 2026. This page is general information, not tax or legal advice. Confirm current figures and your own position with a licensed Israeli tax lawyer or mortgage advisor before you act.
Sources
- VATupdate: Israel VAT rate to 18% from January 2025
- Kol Zchut: purchase tax calculation
- PwC Tax Summaries: Israel individual income determination
Common questions
Is there VAT on a resale apartment in Israel?
No. A resale home sold by a private individual carries no VAT, because a private person is not a business. VAT only applies when the seller is a registered business, such as a developer or a company. You will still pay 18% VAT on agent and lawyer fees, and you still owe purchase tax.
What is the VAT rate on a new apartment in Israel in 2026?
18%. Israel’s VAT rate rose to 18% on 1 January 2025 and applies to new homes bought from developers. The 18% is already included in the developer’s quoted price, so you do not add it on top yourself.
Do I pay VAT and purchase tax on the same new-build deal?
Yes, they are separate taxes. VAT (18%) sits inside the developer’s price, while purchase tax (Mas Rechisha) is paid on top by every buyer, new or resale. Investors and most foreign residents start at 8% purchase tax. Confirm both with a tax lawyer.
Is rental income subject to VAT in Israel?
No, not for a normal long-term residential lease. Renting a home under a lease shorter than 25 years is exempt from VAT. Short-term and hotel-style rentals can become VAT-able if you run them as a business and cross the registration threshold.
When is the VAT charged on an off-plan apartment?
In stages, as you pay the developer. Each instalment is charged at the VAT rate in force on the date that payment is made, not the rate on the signing date. So if rates change during construction, payments before and after the change can carry different VAT rates.
