Investing in Israeli property as a non-resident brings specific legal considerations that require careful navigation. Understanding these elements early in your investment journey can save considerable time and complications.
Land Ownership Structure
Unlike many Western countries, most land in Israel (approximately 93%) is state-owned and leased rather than sold outright. The Israel Land Authority typically grants 49-year or 98-year leases that are renewable and transferable.
Key implications:
- Purchasing an apartment or house typically means you’re buying the structure and leasing the land
- This system rarely impacts day-to-day ownership rights but is important to understand conceptually
- New build developments will clearly specify the lease terms in their documentation
Purchase Process for Foreign Investors
Non-Israeli citizens can generally purchase property in Israel without special permits, but there are some procedural differences:
Step-by-step overview:
- Reservation agreement: Often used to secure a property while preparing formal contracts
- Contract signing: More comprehensive than in many countries, Israeli contracts typically require detailed specification of all aspects of the property
- Payment schedule: New builds typically involve staged payments linked to construction milestones
- Registration: Final registration in the Land Registry (Tabu) or with the Israel Land Authority
Tax Considerations
Foreign investors face several tax obligations when purchasing and owning Israeli property:
Purchase taxes:
- Acquisition tax ranges from 5-10% depending on whether you own other properties in Israel
- New immigrants (olim) and returning residents may qualify for reduced rates
Ongoing obligations:
- Annual municipal property tax (Arnona)
- Income tax on rental income, typically around 25% for non-residents
- Capital gains tax when selling, with various exemptions potentially available
Legal Representation
Unlike some countries where a single lawyer might represent both parties, Israeli property transactions typically require independent legal representation:
Recommended approach:
- Select an attorney with specific experience in new build purchases
- Ensure they have worked with foreign investors previously
- Legal fees typically range from 1-2% of the purchase price
Special Considerations for New Builds
Off-plan purchases involve additional legal protections under Israeli law:
Bank guarantees:
- Developers must provide bank guarantees for all payments made during construction
- These guarantees protect your investment if the developer fails to complete the project
- Always verify these guarantees are properly structured before making payments
