The Israeli Ministry of Finance has published a proposal to amend the Israeli Real Estate Taxation Law, which is expected to come into effect in January 2025. The amendment includes two main components:

• Gradual elimination of the tax exemption on capital gains for apartments purchased before 2014. Currently, these apartments benefit from a full exemption from capital gains tax on the profit up to 1.1.2014. The exemption will be phased out over 5 years, starting in 2025.
• Establishment of a higher purchase tax rate as a permanent rule for a second and subsequent apartments. The higher tax rate will be 8% for a second apartment and 10% for a third or more apartment.

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It appears that the proposed amendment is likely to encourage apartment owners to sell their apartments, which would increase the supply of apartments for sale. The increase in the supply of apartments in the market is expected to lead to a decrease in housing prices, making it easier for young families to purchase an apartment.

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It is important to prepare in advance and consider selling the apartment before the exemption from capital gains tax is eliminated, in light of the expected changes to the Israeli Real Estate Taxation Law.

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To view the draft law, click here.