Investing in Israeli property from abroad: what changes for a non-resident

Non-residents can and do own Israeli property. What changes is not whether you may take part but which rules apply to you, and several of them depend on where you live and pay tax rather than on where the building stands.

Tax looks at two countries

Israel generally taxes income from Israeli real estate, and gains on its sale, whoever the owner is and wherever they live. Your country of residence may tax the same income as well. Israel has tax treaties with many countries that decide which side taxes first and how a credit is given, but a treaty does not remove the need to report in both places. Rates and thresholds are revised regularly: check the Israel Tax Authority and a tax adviser in your own country rather than relying on a figure from any article.

Purchase rules for a non-resident

Israel's purchase tax gives reduced rates to residents buying their only home. A non-resident, like a resident buying an additional apartment, is generally taxed on a different and higher scale. Holding through a company rather than directly changes which purchase and sale taxes apply, and Israeli law has specific rules for shares in companies that mainly hold real estate. That is a reason to read the structure section of any offering carefully, not a reason to assume one route is cheaper.

Moving money in and out

Money arriving from abroad passes through Israeli banks, which run anti-money-laundering checks and will ask where it came from. Expect to document the source of funds. Converting currency costs something in the rate and the fees, and the same applies when proceeds leave Israel.

Your own country may limit what you can join

Some countries restrict their residents from joining foreign private offerings, or require reporting of holdings in foreign companies. Habi's private beta is designed for Israeli residents, and residents or tax residents of the United States and Canada cannot send property requests.

Managing from a distance

Distance is where most overseas owners struggle: finding tenants, handling repairs, paying municipal tax (arnona) and building charges, and dealing with Hebrew paperwork. A managed structure takes that work off you, at a fee you should see written down.

Settle these before committing

• Where am I tax resident, and what must I report in each country?
• What documents will the bank need for the source of my funds?
• What will conversion cost on the way in and on the way out?
• Does my own country restrict or require reporting of this kind of holding?

This is general information, not tax or legal advice for your circumstances.