A new court ruling expands the eligibility of new immigrants and returning residents to benefit from purchase tax relief when buying a home in Israel.
For new immigrants (olim chadashim) planning to purchase residential property in Israel, the Israeli legal framework offers two distinct avenues for obtaining a purchase tax reduction.
In light of a recent court ruling (Eisler case, issued May 27, 2025), these benefits may apply more broadly than previously understood.
This article outlines both options, explains the implications of the court’s decision, and provides practical guidance for maximizing your entitlements under Israeli tax law.
Option 1: Purchase Tax Relief under Section 9 of the Real Estate Taxation Law
Under Section 9(c1c)(4)(b) of the Real Estate Taxation Law, an individual who becomes an Israeli resident within two years of purchasing their sole residential property is eligible for reduced purchase tax rates. This provision explicitly includes new immigrants and veteran returning residents who meet the residency condition.
Key Legal Update: The Eisler Case
In Eisler v. Israel Tax Authority (Administrative Appeal 22899-10-22), the Tax Appeals Committee ruled that the two-year period should begin upon completion of the property's construction, not the date the purchase agreement was signed.
This interpretation aligns with the broader approach adopted by the Tax Authority in other contexts (such as capital gains tax under Section 49G) and aims to address the situation where the property was purchased off-plan ("on paper") and construction was delayed.
Option 2: Discounted Purchase Tax under Regulation 12
Under Regulation 12 of the Real Estate Taxation Regulations, new immigrants benefit from significantly reduced purchase tax rates:
- 0.5% on the amount up to the first tax bracket;
- 5% on the remaining amount (compared to standard rates of 6% or 8%).
To qualify, the immigrant must have purchased the property between one year before and up to seven years after their first entry into Israel, excluding mandatory military or national service.
Interpretation and COVID-19 Exception
While the regulation had been interpreted by the Tax Authority to allow for exclusion of the period during which the property was not yet constructed, it also imposed a three-year limit between purchase and immigration. However, in the Eisler case, the court held that:
- The three-year limit did not apply retroactively to transactions preceding the August 2024 amendment to the regulation.
- In any event, due to COVID-19-related extensions, the taxpayer was eligible for relief.
Notably, although the court had already ruled in favor of the taxpayer under Section 9, it went further to state that even under Regulation 12, the taxpayer met the requirements.
Extension of Deadlines: Authority under Section 107
The court also addressed the discretionary power of the Director of the Israel Tax Authority under Section 107 of the law to extend various periods. The ruling emphasized that when an individual:
- Intends to immigrate genuinely,
- They have sold their only property abroad,
- Purchased a residential apartment in Israel,
- And was delayed in occupancy for reasons beyond their control
There is a valid legal basis to request an extension and obtain tax relief.
Key Takeaways for New Immigrants
- If you purchased a property “on paper,” you may still qualify for tax relief, even if the two-year window has passed, based on the completion date of the construction.
- You may be eligible for benefits under both legal routes, particularly if you were affected by construction delays or COVID-related disruptions.
- Applying the correct interpretation can save tens of thousands of shekels in purchase tax.
Need Legal Advice?
Our law firm specializes in Israeli real estate taxation and advises clients on maximizing their entitlements under purchase tax law, immigration-related benefits, and cross-border tax strategy. Whether you are planning to make Aliyah or are already acquiring property in Israel, we are here to guide you.
📞 Contact us today for a consultation and secure the benefits you deserve.