Real Estate Capital Gains in Israel (Mas Shevach): Non-Resident Resale Guide

Mas Shevach: Definition and Applicable Rates

Mas Shevach (מס שבח) is the capital gains tax on real estate in Israel. It applies when reselling a property and is levied on the difference between the sale price and the adjusted purchase price (indexed and increased by deductible expenses).

The base rate for Mas Shevach is 25% of the net capital gain. This rate is applied uniformly, without a progressive scale. For properties acquired before November 7, 2001, a special so-called "linear" calculation may apply, combining the old marginal rates with the current 25% rate, which can significantly reduce the tax burden.

Mas Shevach must be declared and paid within 30 days following the signing of the sales contract, through your lawyer, who prepares the tax declaration (Shomah) and negotiates with the authorities if necessary.

Calculation of Taxable Capital Gain

The taxable capital gain is not simply the gross difference between the sale price and the purchase price. The calculation includes several adjustments in favor of the taxpayer:

The purchase price is indexed to the consumer price index between the date of purchase and the date of sale. If you bought a property for 1,500,000₪ ten years ago and the index has increased by 25%, your adjusted purchase price is 1,875,000₪. If you sell for 2,500,000₪, the taxable capital gain is 625,000₪ (and not the gross 1,000,000₪).

Deductible expenses further reduce the taxable base. Deductible items include: the Mas Rechisha paid at purchase, attorney fees (for purchase and sale), real estate agent commissions, documented improvement works (not regular maintenance), and mashkanta interest under certain conditions. Your lawyer will optimize these deductions to minimize the Mas Shevach.

Possible Exemptions: Sole Residence, Olim

The most significant exemption concerns the sale of your sole residence in Israel (Dira Yehida). If you live in Israel, own only one property, and use it as your main residence, the capital gain is fully exempt (once every 18 months).

For non-residents, this exemption is difficult to apply because you must prove that the property is your main residence and that you do not own any other property worldwide. In practice, most non-residents pay the Mas Shevach.

Olim Hadashim benefit from temporary advantages during the first 7 years after Aliyah, which in some cases can be similar to those granted to first-time resident buyers for the exemption.

Tax Rate 2026: Detailed Scale

For recently acquired properties (which concerns the majority of IsraelStart buyers), the calculation is simple: 25% of the net capital gain after indexation and deductions.

Allowances for Holding Period

Unlike the French system, where holding period allowances lead to full exemption after 22 years, the Israeli system does not provide for a progressive allowance linked to the holding period for properties acquired after 2014. The 25% rate applies regardless of the holding period.

However, the mechanism of indexing the purchase price to inflation mechanically reduces the taxable capital gain over time, especially during periods of moderate inflation. If cumulative inflation is 30% over 10 years, your adjusted purchase price increases by 30%, thus reducing the taxable base accordingly.

Impact of the France-Israel Convention

The tax treaty stipulates that capital gains on real estate located in Israel are taxable in Israel. France grants a tax credit that neutralizes double taxation. In practice, you only pay the Mas Shevach once, in Israel, and France does not tax you a second time.

Legal Optimization Strategies

Several legal strategies can reduce your capital gains tax burden. Maximize deductions by documenting all acquisition, holding, and selling costs. Keep invoices for improvement works. Plan the timing of your resale according to your personal situation — a change in residency status (Alyah) can radically alter your tax regime. Consult a tax advisor before selling to prepare the optimal declaration.

For a personalized tax analysis, IsraelStart connects you with tax experts familiar with both the French and Israeli systems.

IsraelStart offers turnkey support for buyers from abroad. Every step is managed by our team in your language.

Planning Your Resale: The Right Timing

The timing of your resale is a tax optimization lever that is often underestimated. Several factors influence the optimal moment to sell. Indexing the purchase price to the price index mechanically reduces the taxable capital gain each year—the longer you hold, the more the indexation effect works in your favor. The market context is also decisive: selling during periods of high demand allows you to maximize the sale price and offset the fiscal impact of the Mas Shevach.

For buyers from abroad considering Alyah in the future, a change of tax residency before resale can entitle you to the Dira Yehida (single residence) exemption, potentially saving you tens of thousands of shekels. This planning should be anticipated with your lawyer and tax advisor, ideally 12 to 18 months before putting the property on the market.