So you’ve bought your property, enjoyed it, and now it’s time to sell. Hopefully, it has increased in value. That profit you made—the difference between the price you bought it for and the price you’re selling it for—is called a capital gain. And in Israel, the government will want its share of that gain.
The tax on this profit is called Capital Gains Tax, or Mas Shevach in Hebrew. The standard rate is 25% of the real capital gain. What does “real” mean? It means you are only taxed on the profit after accounting for inflation. The tax authority calculates how much the shekel has devalued due to inflation during the time you owned the property and subtracts that from your gain.
But it gets better. You can also deduct a whole range of expenses you incurred while buying, holding, and selling the property. This reduces your taxable profit, and therefore your tax bill. These deductible expenses include:
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The purchase tax (Mas Rechisha) you paid when you bought it.
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Your lawyer’s fees from both the purchase and the sale.
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The real estate agent’s commission.
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The cost of any major renovations you did that increased the property’s value (you’ll need receipts!).
There are also certain exemptions available, though they have become much rarer in recent years and primarily apply to Israeli residents selling their only apartment. As a foreign resident or someone selling an investment property, you should generally expect to pay the tax.
Your lawyer is responsible for calculating and filing the Mas Shevach assessment with the tax authority. They will work to legally minimize your tax burden by ensuring every possible deduction is claimed. This calculation is a key part of the closing process when you sell.
Too Long; Didn’t Read
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When you sell a property for a profit in Israel, you pay Capital Gains Tax (Mas Shevach) on that profit.
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The tax rate is 25% of the “real” gain, meaning your profit is adjusted to remove the effects of inflation.
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You can deduct many expenses (like legal fees, agent commissions, and renovation costs) to reduce your taxable gain.
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Exemptions are limited, so most investors and foreign owners should plan on paying this tax when they sell.
Planning your exit strategy is just as important as your entry. Let’s talk numbers. DM me at Semerenko Group.
