Can a Non-Resident Buy Israeli Property Through a Company Instead of Personally?

Non-residents regularly ask whether a company structure — Israeli or foreign — offers tax advantages when acquiring Israeli real estate. The short answer is that it rarely does. Israeli law is neutral on who the buyer is: a company may purchase property just as an individual can, but the tax framework under the Real Estate Taxation Law 1963 does not favour corporate buyers. What actually happens in practice is that a company purchase can create more complexity at the exit stage, not less — particularly around capital gains and dividend withholding, which effectively produce a double layer of tax that personal ownership avoids.

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Detailed Explanation

Purchase tax (mas rechisha) is the first consideration. Non-resident individuals pay 8% on the full purchase price when buying a property that is not their single residential apartment in Israel. Israeli companies and foreign companies buying real estate in Israel are generally assessed at the same 8% rate for residential property — there is no corporate discount under the Real Estate Taxation Law 1963 for this type of buyer. For commercial or income-producing property, purchase tax is 6% regardless of whether the buyer is an individual or a company.

The exit tax picture is where the structure tends to backfire. When an individual non-resident sells Israeli property, their capital gain is taxed at 25% (for a "linear" gain) or at the effective rate reflecting pre-2014 portions. The gain is taxed once, at the seller level, and the proceeds may be repatriated. When a company holds the property and later sells it, the company pays corporate income tax (23% for Israeli resident companies) on the capital gain. To get the money out of the company and into the hands of the non-resident shareholder, a dividend must be declared — which triggers an additional 25% withholding tax at source. The combined effect is a tax burden that can exceed the individual rate significantly.

In Practice: Under the Real Estate Taxation Law 1963 and the Income Tax Ordinance 1961, a non-resident individual selling Israeli residential property pays capital gains tax at a flat rate of 25% on the real gain (after indexing and applicable deductions). A company selling the same property pays 23% corporate tax on the gain, and then distributing the net proceeds as a dividend to a non-resident shareholder attracts 25% withholding tax on the dividend. The combined effective rate can approach 42% — significantly higher than direct personal ownership. The Israel Tax Authority (Rashut HaMasim) is the assessing authority for both; tax clearance certificates (ishur nikui) from the ITA are required before transfer of either the property or the dividend.

Estate planning is the main reason non-residents consider a company structure. If the non-resident dies while personally holding Israeli property, the property is subject to Israeli probate — a succession order or probate order is required to transfer title, which is a slow process for heirs abroad. Property held in a company does not pass through Israeli probate: the company shares pass under the deceased's home-country succession law. This can simplify Israeli administration, but it introduces shareholder succession complexity in the home country and does not eliminate all Israeli legal exposure — an Israeli attorney will still need to deal with corporate formalities on death.

Foreign company structures raise additional complications. A foreign company holding Israeli property is subject to the same Israeli tax as an Israeli company on Israeli-source income. However, the foreign company must also comply with its home-country corporate obligations, and depending on the jurisdiction, the structure may attract controlled foreign corporation (CFC) or passive foreign investment company (PFIC) reporting in the shareholder's home country — creating reporting costs that can exceed any structuring benefit.

For most non-residents buying Israeli residential investment property, personal ownership is the most straightforward structure. For commercial investors acquiring large-scale or income-producing assets — or for those with specific estate planning needs — a company structure merits analysis specific to their circumstances. The guide on how non-residents buy property in Israel covers the full acquisition process including tax planning considerations.

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Key Considerations

• Purchase tax is the same rate for company buyers as for non-resident individuals — 8% on residential property, 6% on commercial
• The double-tax problem on exit (corporate tax then dividend withholding) typically makes company ownership more expensive than direct personal ownership
• Estate planning benefits are real but require careful analysis: a company structure avoids Israeli probate for the property, but creates corporate succession issues in the home jurisdiction
• A foreign company holding Israeli property is taxed in Israel as an Israeli company — there is no tax advantage from using an offshore vehicle
• Annual corporate compliance costs in Israel (financial statements, annual filing at the Companies Registrar) add ongoing administrative overhead

When to Consult a Lawyer

• You are considering a company structure specifically for estate planning purposes and need a cross-border analysis of Israeli and home-country implications
• You are purchasing commercial or multi-unit residential property where the income and exit tax comparison between individual and company ownership is genuinely close
• An existing company you control already holds Israeli property and you are planning a sale or restructuring — the exit tax analysis needs to be done before any transaction is executed
• You have already purchased through a company and want to assess whether a restructuring to personal ownership is worth the transfer costs

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Speak With an Israeli Attorney

Whether you are structuring a first purchase or reviewing an existing holding structure, the interaction between Israeli purchase tax, capital gains, corporate tax, and home-country reporting obligations needs a concrete analysis for your specific facts.

Contact us for a confidential initial consultation.