Landowners May Be Subject to Property Tax in Israel!

The recently published memorandum of law seeking to reinstate property tax could have a significant impact on dozens to hundreds of thousands of landowners in Israel. Although it is only  a memorandum of law at this stage, it is advisable to understand the potential changes, whether they affect you, and how to prepare in advance to reduce exposures and avoid surprises.

Proposed Main Changes

• Expansion of the tax base – The tax charge is expected to apply to any owner of vacant land, including agricultural land above a certain value and land with a non-building asset attached to it. Furthermore, even when a building exists on the land, it may still be considered “land” for property tax purposes, if the building’s area is less than 10% of the area permitted for construction according to a detailed plan.
• Fewer exemptions – Tax-exempt land is only one of the following: land designated in a nature reserve plan or land used entirely for agriculture, by law, provided the land’s value does not exceed ILS 100,000 per dunam. An additional exemption applies for landowners if the market value of their land does not exceed ILS 50,000 per dunam and the value of all land they own does not exceed ILS 250,000 per dunam. The memorandum of law also includes a list of tax-exempt entities, such as the State, the Development Authority, and more.
• Tax rate – The tax rate is at the uniform rate of 1.5%.
• Land value for charging property tax – This is equivalent to the market value of the land. If there is a building on the land and it is still taxable, the property tax will not apply to the value of the building itself.
• Taxpayers bear reporting obligation – Landowners must proactively file online reports on taxable land to the tax authorities, including self-assessments, and report changes in ownership under particular circumstances.
• Inception – As of the law’s promulgation, which is expected in March 2026. Considering the relatively short preparation window and the obligation to pay property tax by the end of 2026, we recommend that landowners begin preparing immediately for the possible tax implications.  

We are monitoring progress and will issue an update regarding any developments. If you own land (or are considering buying or selling land), now is the time to perform a preliminary assessment and understand the implications for you.

***

Adv. Harel Perlmutter is a partner and head of our firm’s Tax Department.

Adv. Maya Carmi Lubartovski  is a partner and heads our firm’s real estate taxation practice.

Barnea Jaffa Lande’s Tax Department has extensive experience advising multinational companies on acquisition and sale transactions and various corporate restructurings. The department’s team provides comprehensive legal advice on all tax aspects relating to both commercial activities in Israel and international transactions, including strategic planning and the creation of optimal tax structures tailored to each client’s unique needs, in compliance with relevant tax laws (including international tax treaties), as well as handling VAT and other indirect tax matters.