Do I pay VAT when buying a second-hand apartment in Israel?

A foreign buyer comparing two Tel Aviv apartments at the same headline price often does not realise they are not comparing like with like. One is a resale from a family that has lived there for years. The other is a new unit from a developer. The tax that sits inside those two prices is completely different, and VAT is the reason.

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Detailed Explanation

Value added tax in Israel is charged on a supply made in the course of business by a registered dealer (osek). That is the whole point of Section 2 of the Value Added Tax Law 1976. A private person selling the apartment they have lived in is not carrying on a business and is not a registered dealer, so the sale falls outside VAT entirely. When you buy a second-hand apartment from an ordinary owner, there is no VAT line on the deal at all, whatever your residency status.

The picture changes when the seller is a developer, a contractor, or anyone selling property as a trade. Then the sale is a business supply, VAT applies, and the rate has been 18% since 1 January 2025. In practice developers quote the price of a new apartment as a single VAT-inclusive figure, so you do not add 18% on top. It is already baked in. This is one of the real cost differences between buying new off-plan and buying resale, and it sits alongside the other closing costs we set out for non-resident buyers.

Do not confuse VAT with purchase tax. They are separate taxes collected for different reasons. Purchase tax (mas rechisha) is paid by the buyer on almost every residential purchase, new or resale. For a foreign resident there is no 0% starter band: you pay 8% on the price up to NIS 6,055,070 and 10% above that, from the first shekel, under the Real Estate Taxation Law 1963. So a non-resident buying a resale apartment pays no VAT but still faces a substantial purchase-tax bill, and the two are often mixed up by buyers who assume "no VAT" means "no transaction tax."

One trap worth flagging. If you buy a resale apartment but the seller happens to be a company or someone who deals in property, the transaction can be inside the VAT net even though the unit is not brand new. The status of the seller, not the age of the building, decides it. Your lawyer checks the seller's VAT registration during due diligence precisely so this does not surprise you at signing.

In Practice: Under the Value Added Tax Law 1976, a resale apartment sold by a private individual carries no VAT, while a new home from a developer includes VAT at 18% in the quoted price. Purchase tax is separate and payable to the Israel Tax Authority (Rashut HaMisim) within 60 days of signing the contract; on an NIS 4M resale apartment a non-resident's purchase tax is roughly NIS 320,000 at the 8% rate, with zero VAT added.

Key Considerations

• VAT depends on whether the seller is a registered business, not on the age of the apartment.
• Resale purchases from private owners are VAT-free; new-build purchases from developers include 18% VAT in the price.
• Purchase tax applies to both resale and new homes and is not affected by the VAT position.
• A non-resident pays purchase tax from 8% with no exempt starting band.
• Always verify the seller's status during due diligence, because a corporate or dealer seller can bring VAT into a resale.

When to Consult a Lawyer

This question typically requires professional legal advice when:

• The seller is a company, an estate, or someone who appears to deal in property rather than a private homeowner.
• You are weighing a new-build off-plan purchase against a resale and need the true tax-inclusive comparison.
• The contract price is described as "plus VAT" and you need to know who bears it.

A qualified Israeli attorney should confirm the VAT status of the seller before you sign, because getting it wrong can add 18% to a deal you thought was VAT-free.

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Speak With an Israeli Attorney

We check the seller's VAT position, calculate the true all-in cost of a resale versus a new-build, and file your purchase-tax return with the Israel Tax Authority so the numbers hold no surprises.

Contact us for a confidential initial consultation.