Tax
Rent collected in Israel, and tax
Letting a property in Israel while living elsewhere raises two questions: what is owed in Israel, and what has to be declared where you live. Here is the framework, and where our role stops.
The framework
Three possible regimes for rental income
In Israel, residential rent can fall under three different regimes. The first exempts rent below a ceiling that is revised every year. The second applies a flat rate to the gross rent, with no deductions. The third follows the ordinary scale, and then allows charges and depreciation to be deducted.
The choice matters and it is not made at random: depending on the level of rent and of charges, one is clearly better than the others. Your accountant or tax lawyer works that out, not us.
What changes
Resident or non-resident
Residence status changes several things, and it is the first question to settle.
- How the rent is taxed. The regimes do not apply in the same way depending on whether you are an Israeli tax resident.
- Purchase tax. Mas rechisha is calculated differently for a non-resident, and status is assessed at the time of the acquisition.
- Capital gains tax. Mas shevach on a resale, and the exemptions that may apply, also depend on status.
- Declaring at home. Rent collected in Israel generally has to be declared in your country of residence too, even where it is not taxed twice.
- The tax treaty. A treaty organises taxation so that the same income is not taxed twice. It does not remove the duty to declare.
Our place
What we do, and what we do not do
We are neither accountants nor tax lawyers. We do not choose your regime and we do not file your return. Saying otherwise would do you a disservice.
What we do produce is what your adviser needs: the detail of the rent collected, the charges paid on the property’s behalf, the repair invoices and the supporting documents. A tax file is rarely lost on the substance, it is lost on missing paperwork.
In practice
What we hand you
A statement of the rent collected over the period, line by line. The charges paid for the property: arnona during vacancy, vaad bayit, insurance, call-outs. The trades’ invoices, in the owner’s name wherever possible.
If you do not yet have tax advice in Israel, the firm that works with us also handles these matters, and we make the introduction.
Further reading
The specific points
Good to know
Frequently asked questions about tax
Is rent collected in Israel taxed in Israel?
Yes, under one of the three regimes provided for residential rent. Which one applies depends on the level of rent, the charges, and your residence status.
Does it have to be declared at home as well?
As a rule yes, even where a tax treaty prevents it being taxed twice. Declaring and paying are not the same thing.
Can charges and repairs be deducted?
Only under the scale regime. The flat rate applies to gross rent with no deductions. That is precisely what makes the choice of regime important.
What if the property earns nothing?
An empty property generates no rent, but reporting obligations may remain. That is a question for your adviser rather than something to assume.
Do you provide the supporting documents?
Yes. Rent statement, charges paid, repair invoices. That is our job, and it is what is most often missing in the files we take over.
Let us talk about your situation
Tell us where the property is and from which country you hold it. We will tell you what we produce and what belongs to your adviser.