Capital Gains Tax : When You Have to Pay and When You Don’t (704)

Selling an apartment in Israel involves tax obligations, and the most important one for a seller is מס שבח (capital gains tax).
Many sellers worry about unexpected amounts, so understanding the rules and exemption conditions allows you to plan the sale without surprises.

This article answers the most common questions sellers ask attorneys and accountants before a transaction.

What is מס שבח

מס שבח is a tax on the difference between the selling price of an apartment and its purchase price, adjusted for inflation and investments that increase the property’s value.
In other words, it is a tax on the profit you gained from the property’s appreciation.

The tax rate depends on the type of property and whether it qualifies for exemption.

When You Must Pay the Tax

You are required to pay מס שבח if:

• You sell an apartment that is not your primary residence
• The apartment was purchased as an investment
• The apartment was owned for less than a specified period (rare, but affects exemptions)

In these cases, the tax is calculated based on the difference between the sale price and the purchase price with adjustments, and is paid by the seller before the transaction is completed.

Exemption from Tax

There are situations where you do not have to pay the tax:

1. Primary Residence
   • If the apartment is your only home in Israel and you haven’t sold another property in the last 4 years, the tax may be fully exempt.
2. Moving to a New Home
   • If you sell an apartment and purchase a new home for yourself, partial exemption may apply.
3. Inherited or Gifted Apartment
   • Sometimes exemption is granted when selling an inherited apartment, provided legal conditions are met.

Each situation is unique, so an attorney always reviews your documents to calculate the exact tax amount or confirm the exemption.

How to Prepare for Tax Calculation

To avoid surprises:

• Gather documents regarding the apartment purchase and any investments in improvements
• Verify whether the property was your primary residence
• Check if any exceptions or exemptions apply to you
• Consult an attorney or certified accountant for a preliminary calculation

A prepared calculation allows you to factor the tax into your sales plan and avoid unexpected expenses.

Common Seller Mistakes

1. Missing Documents
   • Without proof of purchase price and investments, the tax calculation is impossible.
2. Ignoring Exemptions
   • Sellers sometimes pay tax even though they are entitled to full or partial exemption.
3. Incorrect Ownership Periods
   • Miscalculating the ownership period can lead to overpayment.

Tips from Unehasim

We recommend not waiting until the transaction to deal with מס שבח.
Our specialists help:

• Verify eligibility for full or partial exemption
• Gather all required documents
• Prepare an accurate tax calculation before listing the property

This saves time, reduces the risk of financial errors, and ensures peace of mind when selling an apartment in Haifa.

Contact Unehasim Specialists

If you plan to sell an apartment and want to understand how much tax you will actually need to pay, Unehasim specialists can help you do this in advance.
We work with experienced attorneys and accountants, review your documents, calculate the tax, and provide strategic guidance — so your sale proceeds without surprises or financial risks.