Capital Gains Tax (Mas Shevach) When Selling an Apartment in Israel

Capital Gains Tax on Israeli real estate (mas shevach) is generally 25% of the real gain, meaning the increase in value after adjusting for inflation. The inflationary part of the gain is not taxed. Where a property was held for many years, the gain is divided over the holding period, and older periods may be taxed at lower historic rates. Certain expenses, such as improvements and the costs of buying and selling, may be deducted from the gain, for example the purchase tax you paid when you bought, documented improvements, and lawyer's, broker's and appraiser's fees. We check which ones apply.

Key Figures for Sellers (October 2026)

The Single-Apartment Exemption

A seller of a single residential apartment may be fully exempt under Section 49B(2) of the Land Taxation Law if three conditions are met: the apartment was held for at least 18 months from the time it became a residential apartment, the seller (together with a spouse and minor children) owns no other apartment, and the seller did not sell another apartment with this exemption in the previous 18 months. The exemption covers a price of up to ₪5,008,000, a ceiling frozen through 2027. Above the ceiling, the part of the gain that matches the excess price is taxed, and the rest stays exempt: if a fifth of the price is above the ceiling, about a fifth of the real gain is taxed. A seller who is buying a replacement apartment in Israel may still qualify within the period the law allows, so we check the order of the two deals before either contract is signed.

Foreign Residents and Non-Resident Sellers

A foreign resident can also receive the single-apartment exemption, but only if they own no residential apartment in their country of residence. Under Section 49A of the law, they are treated as owning one there until they present a certificate from that country's tax authority saying otherwise. Where no such certificate is available, Tax Authority directive 5/2013 accepts other evidence, such as a lease, local tax notices and tax returns, together with a sworn declaration. Tax residency is generally based on where your center of life is, not on your passport. An Israeli citizen who lives abroad may be a foreign resident, and a foreign citizen who lives in Israel may be an Israeli resident.

The Linear Calculation for Apartments Bought Before 2014

When the full exemption does not apply, a residential apartment bought before January 1, 2014 may qualify for the linear calculation under Section 48A(b2). The real gain is spread evenly over the holding period: the part that relates to the years before January 1, 2014 is generally exempt, and only the part from that date onward is taxed at 25%. Whether an apartment qualifies, and what the tax will be, depends on the dates and documents. The conditions, including how they apply to owners of several apartments and to foreign residents, are checked for each sale.

This example only explains the method, for an apartment that does not qualify for the full exemption and meets the conditions of the linear calculation. In practice the split is by days of ownership, and the actual tax depends on the exact dates, indexation, deductible expenses and the seller's status, which we check for each sale.

Reporting, Payment and the Buyer's Advance

Under Section 73 of the Land Taxation (Capital Gain and Purchase) Law, 5723-1963, the seller and the buyer each report the sale to the Israel Tax Authority within 30 days, and any exemption is claimed in that report. The tax is due within 60 days of the sale. Under Section 15, the buyer pays an advance on account of the seller's tax, generally 7.5% of the price, or 15% if the seller bought before November 7, 2001. No advance is due when an exemption is claimed for a qualifying apartment, and an advance above the final tax is credited or refunded through the assessment. The contract should say who pays the advance, when, and how it is set against the price.

How to Sell an Apartment in Israel, Step by Step

A resale of an apartment that is already registered at the Tabu often takes about 3 to 6 months from signing to registration in the buyer's name. Most of that time goes to the buyer's payments, the release of the seller's mortgage and the tax and municipal approvals. These are the seven stages, in the order they happen.

1. Before You List or Sign Anything

   A broker is entitled to a fee only if you signed a written order and the broker was the effective cause of the deal. Read the order before you sign it. Do not sign a memorandum of understanding with a buyer before a lawyer has seen it, because it may already bind you. Many sellers check comparable sales or ask an appraiser before setting a price.

2. Title and Tax Review

   We order the Land Registry extract (or a confirmation from the Israel Land Authority or the management company). We ask your bank for the mortgage balance, check for building violations and any betterment levy, and work out whether the sale is exempt or how much tax it will carry. Where an old purchase was never registered, we first complete the registration at the Tabu.

3. Negotiating and Signing the Agreement

   The contract ties each payment to a concrete step, so you do not hand over the keys or sign the transfer before the money is secured: typically a payment on signing, payments against the mortgage release and the approvals, and the balance at handover. The contract also sets agreed compensation and the right to cancel if the buyer pays late. Once both sides sign, the agreement binds them, and the buyer usually registers a warning note in their favor.

4. Reporting the Sale to the Tax Authority

   The sale is reported within 30 days under Section 73 of the Land Taxation Law, with any exemption claim. The tax, if any, is paid within 60 days, and the buyer's advance is handled as the contract says.

5. Payments and Mortgage Release

   The buyer pays according to the schedule. Where there is a mortgage, the buyer pays the balance directly to your bank against its letter of intent, and the bank removes the mortgage from the register after full repayment.

6. Tax and Municipal Certificates

   The Land Registry will not register the sale without the Tax Authority's certificates (Section 16 of the Land Taxation Law) and the municipal certificate under Section 324 of the Municipalities Ordinance, which confirms that the property's debts, including any betterment levy, are paid.

7. Handover, Transfer and Final Payment

   The keys are handed over against the agreed payment, meter readings are recorded and the arnona, water and electricity accounts move to the buyer, the deed of transfer is filed, and the buyer is registered as the owner. Any part of the price held in trust until the approvals are issued is then released to you.

What a Seller Pays: Taxes, Levies and Fees

The price in the contract is not what reaches your account. These are the costs a seller should plan for, and who sets each one:

Our legal fees for a sale

Legal fees are set by the nature of the work and agreed in writing in advance. You receive a written quote after we review the matter and before you commit.

Why Sellers Choose Eliyahu & Co.

Real estate is one of the office's primary areas of practice, across sales, purchases, registration, co-ownership and disputes. For a seller, that range matters most before the contract is signed, when the tax and the payment terms can still be shaped.

Who We Act For in a Sale

Frequently Asked Questions

Answers to the questions we hear most often from sellers in Israel and abroad.

This page is general information about Israeli law as of October 2026, not legal advice for your specific matter. Tax rates, ceilings and exemptions change, and we confirm the current figures for each sale.
Legislation cited on this page: Land Law, 5729-1969 (Sections 8, 33, 34, 37(a) and 40) · Land Taxation (Capital Gain and Purchase) Law, 5723-1963 (Sections 15, 16, 48A(b2), 49A, 49B(2), 49B(5) and 73) · Succession Law, 5725-1965 · Planning and Building Law, 5725-1965 (Third Schedule) · Municipalities Ordinance (Section 324) · Real Estate Brokers Law, 5756-1996 (Sections 9 and 14).