Israeli purchase tax on additional residential properties is one of the highest upfront costs for overseas buyers. One detail that often gets missed is the ownership threshold in Israeli tax law. If your share in a residential property is under 33 percent, it may not be treated as a second property for Mas Rechisha purposes. That can make a meaningful difference to the tax you pay at acquisition. Once ownership goes above that level, the property is generally treated as an additional home, and the higher purchase tax rates can apply.
Key takeaways
Mas Rechisha is the Israeli purchase tax paid by the buyer when acquiring property in Israel. The rate depends on how the property is classified, which has a big impact on the total upfront cost.
If the property is a first home for an Israeli resident, the tax is relatively low in the lower value bands. If the buyer already owns residential property anywhere in the world, it is usually treated as an additional property. In that case, the rate is much higher. At current levels, it is around 8 percent on the lower tier of value and increases above that. On a ₪3 million apartment, this can mean a tax bill of roughly ₪240,000 before legal fees and other costs are added.
For most overseas buyers, this higher rate applies automatically. Owning a home in London, Paris, or Montreal is enough for the property in Israel to be treated as an additional residence.
This is where ownership structure becomes important and where the 33 percent threshold can start to influence how the tax position is assessed.
Israeli tax law includes a rule that defines what counts as ownership of a residential property when determining the “additional property” purchase tax rate.
If an individual holds less than one-third of a property, the stake is generally not treated as full ownership for Mas Rechisha classification, which means a small minority share does not usually trigger the higher tax category when buying another home.
An example of this would be: a 30 percent share in a Tel Aviv apartment would not normally be treated the same as full ownership when assessing a later purchase. If that person then buys a property in Jerusalem, the tax treatment is based on their overall position at the time of purchase rather than the minority stake alone.
The same principle applies in reverse. Acquiring a sub 33 percent share in an Israeli property does not usually change the tax classification of a primary home abroad. It is treated as a limited interest below the ownership threshold used for Mas Rechisha purposes.
The 33% threshold is not a sliding scale. It is a binary classification: below 33% and the ownership may not count as a property for Mas Rechisha purposes; at or above 33% and it does, completely, from the first shekel. There is no partial relief for being just above the threshold.
This is one of the areas in Israeli tax law where a small difference in ownership percentage produces a very large difference in tax outcome, and where the structure of the acquisition must be confirmed with a Ro'eh Heshbon before any commitment is made.
A dirah mezakah (דירה מזכה) is a “qualifying residence” under Israeli tax law. It is the category that can allow a primary or sole residence in Israel to benefit from preferential treatment when it is eventually sold, including potential relief from capital gains tax if certain conditions are met.
The 33% ownership rule does not create this status, and it does not turn a partial stake into a qualifying residence. Instead, it relates to how additional property ownership is assessed for tax purposes.
A minority stake below 33% in a second property does not usually interfere with the tax status of an existing qualifying home. So if someone already holds a property in Israel that is treated as their main residence for tax purposes, taking a small share in another property does not typically affect that position.
Once ownership reaches 33% or more, the situation changes. The additional property is then more likely to be treated as a second home, and this can affect the tax treatment of the existing residence when it is eventually sold.
This is the detail that often separates early-stage buyers from more experienced investors. The 33% threshold is not really the tax on the new purchase itself, per se. It is about how that purchase affects the tax position of any property already owned.
The 33% threshold naturally creates a structure that lends itself to co-investment. When ownership is split between multiple parties below that level, each stake is generally assessed independently for Mas Rechisha purposes.
To give you an example, three investors could each hold 32 percent of a property, with a small remainder held by a fourth party. In that setup, none of the investors crosses the threshold that would reclassify the purchase as an additional property for tax purposes.
A more common scenario would be two investors might hold 30 percent each, with the remaining 40 percent held by another party, such as a developer or co-owner. Each investor retains exposure to rental income and capital appreciation in proportion to their share, which remains below the threshold.
Family co-investment Two siblings each acquire 30 percent of a Jerusalem apartment. A parent holds the remaining 40 percent. Each party remains below the 33 percent threshold and participates in rental income and future appreciation based on their share.
Business partner co-investment Two partners each acquire 25 percent of a Tel Aviv apartment. A third investor holds 50 percent. Both partners stay below the threshold while gaining exposure to a prime asset.
Diaspora investment group Four family members each acquire around 20 percent of a new build apartment in Hadera. No individual crosses 33 percent. Ownership and decision-making are governed through a co-ownership agreement.
Single investor entry position An investor acquires a 30 percent stake in a Tel Aviv development as an initial position. This provides market exposure without triggering the higher classification. A full acquisition may follow later, depending on performance and strategy.
Co-investment structures like these require a properly drafted co-ownership agreement under Israeli law, and this will usually cover decision-making rights, exit mechanisms, and even dispute resolution. When these details are not clearly documented, issues can arise later that outweigh the tax advantages.
The example below shows how Mas Rechisha changes depending on whether a buyer crosses the 33% ownership threshold. The figures are indicative and based on the rate structure at the time of writing. Tax rates may change, and final calculations should always be confirmed with a Ro'eh Heshbon before completion.
The point is that even a small change in ownership percentage can most certainly affect the total upfront tax cost on the same property.
The difference between 32% and 33% looks small on paper, but it can change the tax outcome quite a bit. That single percentage point is what separates two different classifications under Mas Rechisha. The figures in the example are simplified and do not reflect every rate band or personal circumstance, so each case still needs to be reviewed on its own.
This approach does not remove Israeli tax. It does not create an exemption. It relates only to how the purchase is classified at the point of acquisition.
Rental income from the property is still taxed in Israel based on the investor’s share. Capital gains tax also still applies when the asset is sold. The ownership percentage does not change those obligations.
The same applies to treaty rules with the investor’s home country. Those rules depend on the type of income rather than the size of the shareholding.
If ownership later increases above 33%, the position changes, and the property can be reclassified at that point. That can also affect how any existing Israeli property is treated for tax purposes.
The Hub sources properties where partial ownership can be used effectively as an entry strategy. This can include perks like pre-sale developments where multiple investors can participate from the outset and completed assets where ownership can be shared with a local or institutional co-investor.
The Hub brings the different parts of the process together across legal, tax, and administrative work. That includes checking the structure with a Ro’eh Heshbon for Mas Rechisha treatment, working with Israeli lawyers on the co ownership agreement, registering each share in the Tabu, and setting out in advance how rent and expenses are split between co owners.
Our goal is to always make sure the structure is clear from the beginning so that ownership percentage, tax classification and exit terms are all aligned before any purchase agreement is signed.
This content is for general information only. It does not provide legal, tax, or financial advice. Israeli tax treatment depends on individual circumstances, including residency status, global property ownership and the specific asset being purchased. Tax rules can also change over time.
All figures and examples are illustrative only and should not be treated as a guarantee of outcome. Any acquisition involving Israeli property should be reviewed by a qualified Israeli tax adviser and relevant advisers in the investor’s home country before any commitment is made.
Yes, it is part of Israeli tax law used to determine how residential property is classified for Mas Rechisha purposes. It is not a workaround or informal guideline. Its application still depends on the full details of each investor’s ownership position and must be confirmed by a Ro'eh Heshbon before purchase.
Yes, it can apply to diaspora investors and non-residents acquiring Israeli property. However, non residents may be subject to different Mas Rechisha rates/additional rules, so the interaction needs to be checked for each case individually.
Crossing the threshold can change the classification of the property for Mas Rechisha purposes. This affects how the purchase is taxed at that point. Once a transaction is completed, the classification cannot be reversed retroactively.
It may be possible, but it depends on the full ownership profile. Multiple partial holdings can still affect tax classification when viewed together. Each new acquisition should be assessed in context rather than in isolation.
Israel Tax Authority
https://www.gov.il/en/departments/Israel_Tax_Authority 2025
OECD Centre for Tax Policy and Administration
https://www.oecd.org/tax/ 2024
KPMG Israel Tax Guide
https://kpmg.com/il/en/home/insights.html 2025
Deloitte Israel Tax Insights
https://www2.deloitte.com/il/en.html 2025
PwC Worldwide Tax Summaries – Israel
https://taxsummaries.pwc.com/israel 2025
United Nations Treaty Collection
https://treaties.un.org 2024
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