Are there restrictions on co-ownership with Israelis to reduce taxes?

Co-ownership with Israelis to reduce purchase tax liability

• Co-buying with an Israeli first-time buyer does NOT give a foreign investor access to the Israeli’s lower Purchase Tax rates.
• The Israel Tax Authority (ITA) assesses each co-owner’s tax liability separately based on their individual status and their proportionate share.
• A foreign investor’s 50% share is taxed at 8% from the first shekel; the Israeli’s 50% share is taxed at their beneficial first-time-buyer rates.
• Tax benefits for Israeli residents and new immigrants are strictly personal and non-transferable.
• Using an Israeli as a nominee owner while providing the funds yourself is illegal tax evasion — not a loophole.
• Authorities use sophisticated investigation methods; penalties include back-taxes, fines, and criminal liability for both parties.
• Bottom line: There is no legal co-ownership structure that lets a foreign investor access an Israeli partner’s preferential tax rates — the ITA taxes each party’s share at their own applicable rate.

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This is a strategy people often ask about. The idea sounds clever: “If I, a foreign investor, buy a property with an Israeli resident who is a first-time buyer, can we use their lower tax status to save money on the purchase tax?” It seems like a neat loophole, but the Israel Tax Authority (ITA) is way ahead of you.

The short answer is no, this does not work the way people hope it will. The tax benefits for an Israeli first-time buyer or a new immigrant (Oleh Chadash) are strictly personal and non-transferable.

When a property is purchased by multiple people, the tax authority looks at each buyer’s individual status. Let’s say you buy a property 50/50 with an Israeli first-time buyer. The ITA will split the transaction in two. Your 50% share of the property will be taxed at the high rates for a foreign investor (starting at 8%). The Israeli buyer’s 50% share will be taxed according to their beneficial, lower first-time buyer rates.

You do not get to “average out” the tax status or have their good standing apply to the entire purchase. The ITA considers each co-owner’s liability separately.

Trying to hide the nature of the partnership—for instance, by having the Israeli buy the property entirely in their name with your money as a “silent partner”—is illegal and constitutes tax evasion. The authorities have sophisticated ways of investigating transactions, and if they discover such an arrangement, the penalties, back-taxes, and legal trouble will be severe for both parties.

There is no secret handshake or clever co-ownership structure that legally allows a foreign investor to piggyback on an Israeli’s preferential tax status. The rules are designed to give a benefit to residents who are buying a home to live in, not to create a tax shelter for investors.

Co-ownership with an Israeli to cut purchase tax: how it works and its limits

• No, you cannot use an Israeli co-owner’s beneficial tax status to reduce your own purchase tax liability.

• The Israel Tax Authority assesses purchase tax based on each individual buyer’s status for their share of the property.

• A foreign buyer’s share will be taxed at the higher investor rates, regardless of who they co-own with.

• Attempting to disguise the ownership structure to avoid tax is illegal and carries severe penalties.

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