How is property income taxed in Israel?

💼 Taxation of property income in Israel: What you need to know when renting a property
Investing in real estate in Israel is attracting more and more French, Swiss, Belgians or Canadians. But beyond the purchase, one question often comes up: how is rental income taxed in Israel?
Here’s a simplified guide to understanding the taxation of rental income received in Israel, whether you’re a resident or non-resident.

🔹 1. Long-term residential rental: several tax options
✅ Option 1: Partial exemption (revised annual threshold)
– If you rent a property for residential use, and the monthly rent does not exceed approximately 5,471 ILS (2024 figures), you are tax-exempt.
– If you exceed this threshold, only a portion remains exempt, and a progressive tax may apply to the excess.
✅ Option 2: 10% flat-rate tax
– You can opt for a flat-rate tax of 10% on gross rental income, with no deductions for expenses.
– This option is simple, fast and advantageous, especially for non-residents.
– It only applies to long-term residential rentals.

🔹 2. Short-term furnished rental (Airbnb, seasonal).
– This type of rental is considered a commercial activity.
– It is necessary to register as self-employed (“osek”) and declare VAT if income exceeds approximately 120,000 ILS/year.
– Net income is taxed according to the progressive scale (up to 50%).
– Actual expenses (depreciation, maintenance, loan interest, etc.) are deductible.

🔹 3. Non-residents: a few details
– As a foreign investor, you can benefit from the same tax regimes as Israelis.
– But beware: you do not benefit from personal allowances (such as the child tax credit).
– A tax treaty between your country of residence (e.g. France, Belgium, Canada) and Israel can avoid double taxation.

🔹 4. VAT: when does it apply?
– Residential rental: exempt from VAT.
– Tourist or commercial rental: subject to VAT (17%) as soon as your activity exceeds the regulatory threshold.

🧾 What do I need to know?
Type of rental Possible tax regime VAT?
Long-term residential Partial exemption OR 10% flat-rate No
Furnished short-term / Airbnb Progressive taxation + pro obligations Yes (17%)
Commercial Progressive taxation Yes

👩‍⚖️ Expert advice
Before choosing your tax regime, remember to :
– Check the thresholds, which are updated every year.
– Simulate both options (flat-rate vs. actual).
– Surround yourself with a certified public accountant in Israel, especially if you’re a non-resident.

📞 Are you an investor or future olé?
At Israel-Renovation, we put you in touch with trusted tax experts and accompany you every step of the way: purchase, renovation, rental, administrative management.