Double Taxation in the Anglosphere for Israeli Real Estate: What You Need to Know
A common worry when buying or selling a property in Israel is whether as foreigners you’ll be taxed twice. A guide for Americans, Brits, Australians, and Canadians.
Imagine doing the full due diligence on real estate transactions in Israel, taking out a mortgage, paying taxes, calculating commissions – only to find out that you’ve overlooked a double taxation in your home country. Few things are more frustrating than a surprise tax. Here’s a look at how English-speaking countries approach the subject.
There are three major taxes to consider:
- Purchase Tax (Mas Rekhisha) – paid at the time of acquisition.
- Capital Gains Tax (Mas Shevach) – paid when selling a property at a profit.
- Rental Income Tax
So how does double taxation – once in Israel and again at home – work, what international treaties do they cover, and how do you stay compliant while avoiding surprises down the line.
Double Taxation on Purchase Tax
The Purchase tax is a one-time tax paid by buyers when acquiring property in Israel. The tax is tier-based and rates vary depending on whether you are an Israeli or foreign resident, or a new immigrant – and exemptions might apply. For the full breakdown of rates, read our dedicated article on the purchase tax here.
Because the purchase tax is treated as transactional cost, none of the four countries – USA, UK, Canada, and Australia – impose another tax on their citizens buying an apartment or house in Israel. However, they vary on whether you can deduct or offset the purchase tax from future gains. While not directly deductible, the purchase tax does increase the property’s cost base, and consequently reduces any taxable gain when the property is sold.
Country | Effect of Israeli Purchase Tax |
USA | Increases cost basis; reduces future capital gains. |
UK | Added to allowable costs; reduces CGT on sale. |
Canada | Included in adjusted cost base; reduces taxable gain. |
Australia | Increases cost base; reduces capital gains later. |
Double Taxation on Capital Gains Tax
The capital gains tax (CGT) in Israel applies when you sell property at a profit. The tax is calculated based on the difference between the sale price and your adjusted purchase price, which includes purchase tax and other qualifying costs (major renovation, legal fees, etc.). While the capital gains tax is usually the same for local and foreign residents, many exceptions may apply, especially for new immigrants who might be exempt altogether within a certain period of their Aliyah. To learn more about the CGT, read our article here.
All four countries tax their residents on worldwide income, including on foreign capital gains. However, Israel has double taxation treaties with the USA, UK, Canada, and Australia that prevent paying tax twice on the same gain.
How It Works:
If you sell a property in Israel and pay a 25% capital gains tax there:
- You report the gain in your home country.
- You receive a credit for the tax already paid in Israel.
- If your home country’s tax rate is higher, you must pay the difference there.
To illustrate, if an American resident sells an apartment in Tel Aviv, earning a $100,000 profit, they normally pay a $25,000 capital gains tax in Israel.
The US CGT is usually lower than 25%, meaning no additional US tax is due.
If the US CGT were higher (e.g., 30%), they would pay the 5% difference to the IRS.
Double Taxation on Rental Income
If you own a property in Israel and rent it out, whether long-term or short-term, you are legally obligated to report and pay taxes on the rental income in Israel. The Israeli Tax Authority offers several options for how this income is taxed, each with different advantages. Read our article on rental income tax to understand the different options. Additionally, you may have to report this income in your home country – but here again double taxation treaties often help reduce or eliminate overlapping taxes.
Reporting Obligations in Home Countries
In all four countries, foreign property must be reported – even if no tax is due immediately.
Country | Must Report Foreign Property? | Notes |
USA | ✅ Yes (FATCA, Form 8938) | Required if value exceeds thresholds |
UK | ✅ Yes (CGT and income) | Declare at time of sale or if rented |
Canada | ✅ Yes (T1135, CRA forms) | Even for personal-use property |
Australia | ✅ Yes | Declare gains and foreign income |
Failure to report can lead to penalties, even when no extra tax is owed.
Conclusion
Foreign nationals from the US, UK, Canada, and Australia who invest in Israeli real estate should understand that:
- Purchase tax is only payable in Israel and not taxed again at home.
- Capital gains may be taxed in both countries, but only once, thanks to tax treaties.
- Proper reporting is key to avoiding fines or double taxation.
- Experienced advisors in both jurisdictions can help you optimize the financial and legal aspects of your investment.
Considering buying or selling property in Israel as a foreign resident?
Contact Re-Israel to connect with vetted real estate and tax professionals who specialize in cross-border transactions.
