Can a non-resident gift Israeli property to their children, and what tax applies?

Transferring an Israeli apartment to your son or daughter while you are alive is a recognised and tax-favoured move. A gift of real estate between close relatives is exempt from betterment tax (mas shevach) under Section 62 of the Real Estate Taxation Law 1963, so you do not pay capital gains on the appreciation. The receiving child does owe purchase tax (mas rechisha), but only one-third of the rate that would apply to an arm's-length sale. None of this requires either of you to set foot in Israel: the deed and the registration can be handled by an Israeli lawyer under a notarised, apostilled power of attorney.

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Detailed Explanation

The starting point is what Israeli law calls a transfer "without consideration" (ll'lo tmura). When a parent gives property to a child and receives nothing in return, Section 62 of the Real Estate Taxation Law 1963 exempts the giver from betterment tax that would otherwise fall due on the difference between what they paid and the current value. For a parent who bought a Tel Aviv apartment decades ago, that exemption can be worth a great deal, because the appreciation would otherwise be taxed at up to 25 percent.

The exemption is not free of cost on the other side. The child, as recipient, pays purchase tax, but Regulation 20 of the Purchase Tax Regulations reduces the charge on a gift between relatives to one-third of the ordinary rate. The definition of "relative" matters and is specific: it covers a spouse, parent, child, grandchild, and a sibling in some cases. A gift to a cousin or a friend does not qualify and is taxed in full.

For non-residents, two cross-border points dominate. First, the child's own residency affects the purchase tax bracket, because a non-resident child does not get the reduced "single Israeli home" rates and is treated as buying an additional property. Second, the gift almost certainly has consequences in your home country that Israeli law does not address. A US parent must consider federal gift tax and the annual exclusion; a UK parent must weigh the seven-year inheritance tax rule on lifetime gifts. Israel imposes no gift tax as such, but your home tax authority very likely does.

In Practice: Under Section 62 of the Real Estate Taxation Law 1963, a parent transferring an apartment worth NIS 3M to a child pays NIS 0 in betterment tax. The child's purchase tax is one-third of the standard rate under Regulation 20: on that NIS 3M, the full purchase tax of roughly NIS 180,000 for an additional property drops to about NIS 60,000. Both filings go to the Israel Tax Authority (Rashut HaMisim) within 30 days of signing, and registration at the Land Registry (Tabu) typically completes 4 to 8 weeks after the tax assessments clear.

The mechanics from abroad are routine. The parent signs a gift deed and a power of attorney before a notary, has both apostilled, and couriers them to the Israeli lawyer, who files the tax declarations, pays the purchase tax on the child's behalf, and registers the transfer. If the property is held on a long-term lease from the Israel Land Authority rather than owned outright, the Authority's consent is also needed, which is why a non-resident should first confirm the title type, as explained in our guide to leasehold versus freehold property in Israel.

Key Considerations

• The betterment tax exemption under Section 62 applies only to genuine gifts without consideration to a defined "relative."
• The child still pays purchase tax, reduced to one-third of the normal rate for a qualifying relative.
• A non-resident child loses the reduced single-home purchase tax brackets and is taxed as buying an additional property.
• Israel has no gift tax, but your home country may tax or report the gift, so plan both sides together.
• Leasehold property requires Israel Land Authority consent before the gift can be registered.

When to Consult a Lawyer

This question typically requires professional legal advice when:

• The receiving child is a non-resident, which changes the purchase tax calculation significantly.
• You want to gift only a share of the property or retain a right to live in it.
• Your home country imposes gift or inheritance tax that must be coordinated with the Israeli transfer.

A qualified Israeli attorney should structure the gift and run the tax numbers on both sides before any deed is signed.

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Speak With an Israeli Attorney

We structure relative-to-relative property gifts to secure the Section 62 exemption, calculate the child's reduced purchase tax, and register the transfer at the Land Registry entirely from abroad.

Contact us for a confidential initial consultation.