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  • Writer's pictureAdv. Michael Levine

Taxes in Judea and Samaria (Over the "Green Line")

Updated: 20 hours ago




Purchase / Capital Gains Tax


When one buys a residential property, there is a beneficial purchase tax rate if the buyer is (1) a resident of Israel and (2) does not own other residential properties in Israel.


There is a similar benefit regarding capital gains tax when one sells a property. If the seller is an Israeli resident and is selling his/her only residential property in Israel, there is an exemption from capital gains tax on the value of the property beneath ILS 4,603,000 (as of 2022 – the threshold changes every year).


The above is true for Israeli residents even if they do not hold Israeli citizenship.

As foreign residents do not fulfill the above criteria, they are not entitled to the beneficial purchase tax rate or the capital gains tax exemption. So, they must pay 8-10% when purchasing a residential property and full capital gains tax when they sell a property.

However, this is not necessarily the case when it comes to real estate transactions in Judea and Samaria, also known as the "territories over the Green Line".

The legal status of Judea/Samaria is complex and beyond the scope of this article, but it is important to know that not every law passed by the Knesset applies in Judea/Samaria as it does in the rest of the country.

When the Real Estate Tax Law was amended so it would apply in Judea and Samaria under certain circumstances, there was a strange consequence.


According to the amendment, the Real Estate Tax Law applies to transactions in Judea/Samaria if the buyers or sellers meet any one of the following conditions:

(1) They are Israeli residents

(2) They are Israeli citizens

(3) They are entitled to Israeli citizenship according to the Law of Return and they live in Judea/Samaria


Based on the above, an individual that is not a resident or citizen of Israel is only subject to the Real Estate Tax Law on a transaction in Judea/Samaria if he/she lives in that area.

Therefore, one who lives outside of Israel (and does not have Israeli citizenship) is not required to pay purchase tax when buying in Judea/Samaria or capital gains tax when selling there.


In contrast to Israeli residents who pay purchase rate at a beneficial when buying their first residential property, foreign residents (who do not hold Israeli citizenship) buying in Judea/Samaria are entirely excluded from the Real Estate Tax Law and are, therefore, not required to pay any taxes.


It should be noted that foreign nationals cannot purchase properties in all areas of Judea/Samaria due to acceptance committees in smaller communities.


More importantly, the definition of an "Israeli resident" is ambiguous (and beyond the scope of this article). This can often result in a difference of opinion between the buyer/seller and the Tax Authority as to whether the law applies. There have been many scenarios in which the buyers/sellers claim that they are excluded from the tax law, but the Tax Authority contests this and asserts that residency has been established and therefore the buyers/sellers must pay taxes.



Appreciation Levy


Appreciation levy (known as "hetel hashbachah") is a municipal tax imposed on the value of building rights. If the planning committees approve a plan that grants additional building rights, a tax of 50% of the added value must be paid when selling the property.

For example, if one sells a property that includes building rights that allow an extra floor to be added, and the value of these rights is ILS 500,000, the seller will have to pay a tax of ILS 250,000 upon the sale. As this can significantly impact the seller's ultimate profit, it is important to verify whether there are any unutilized building rights that will expose the seller to this levy.


As previously mentioned, the laws passed by the Knesset do not immediately apply in Judea/Samaria as they do in other parts of Israel. Israeli laws are individually (and sometimes only partially) applied there through a military order issued by the Major-General charged with managing civilian affairs in that area.


As the law governing appreciation levy was not fully applied in Judea/Samaria, this does not have to be considered when selling a property there. This presents another tax advantage when investing in a property in Judea/Samaria.


There are exceptions and other points of consideration when applying the information in the above summary. As with any real estate transaction, each case should be analyzed by an expert on an individual basis to avoid unnecessary and expensive mistakes.










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