In brief
An Israeli resident is liable to tax in Israel on income from all over the world, so property abroad touches the Israel Tax Authority at four points: tax on the rent (15% under section 122A, or marginal tax with a credit for the foreign tax), capital gains tax on the sale with a report and an advance payment within 30 days, the obligation to file an annual return that arises from transfers of funds and from the value of foreign assets, and the choice of holding structure. Holding through a foreign company may be treated as an Israeli company if it is managed from here, or may fall within the controlled foreign company rules.
Key takeaways
- 1For rent from residential property abroad, you choose between 15% on the gross income with a deduction for depreciation only, and marginal tax on the net income with a credit for the tax paid in the country where the property is located.
- 2The sale of property abroad is taxed under the Income Tax Ordinance, not under the Real Estate Taxation Law, and is reported on Form 1399 within 30 days with an advance payment.
- 3The obligation to file an annual return arises even without profit: from a transfer of ILS 500,000 or more abroad within 12 months, or from family foreign assets above the threshold set in the regulations.
- 4A company incorporated abroad whose business is controlled and managed from Israel may be treated as resident in Israel for tax purposes.
- 5A foreign company holding rental property in a country with a low tax rate may be treated as a controlled foreign company, in which case the undistributed profit is taxed in Israel as if it had been distributed as a dividend.
What does the Israel Tax Authority see when an Israeli resident holds property abroad?
The Israel Tax Authority sees income, an asset and a movement of funds. An Israeli resident is liable to tax in Israel on income from anywhere in the world, so property in Romania, Greece, Cyprus or the USA is not “out of the picture” merely because it is recorded in a foreign registry and pays local tax.
In practice there are four points of contact: the tax on the rent, the tax on the sale, the reporting obligations (annual return, notice of sale and capital declaration), and the question of whether you hold the property as individuals or through a company. This guide brings all of them together in one place. For most of the topics, the site also has a detailed guide by country, including the guide on reporting property in Romania to the Israel Tax Authority, the guide on the capital declaration and property abroad, and the guides on tax treaties.
Everything described here applies to anyone who is an Israeli resident for tax purposes. If you have moved to live abroad, or are unsure whether you are still a resident, you need to clarify the question of residence before anything else, because it changes the entire calculation.
How is rent from property abroad taxed in Israel?
There are two routes, and you choose between them. The first route is a tax of 15% on rent from residential property abroad under section 122A of the Income Tax Ordinance: depreciation only is deducted, no other expenses are deducted, and no credit is given for the tax paid in the country where the property is located. The second route is tax at the marginal tax brackets on the net income, after deducting expenses and depreciation, with a credit for the foreign tax.
The credit under the second route is limited to the amount of Israeli tax on the same income, and is calculated by type of income. According to the PwC tax summary, unused foreign tax can be carried forward to the next five tax years. In countries where the local tax on rent is high, the credit may reduce the tax in Israel to almost nothing. In countries where the local tax is low, the difference is paid in Israel.
| 15% route (section 122A) | Marginal tax route | |
|---|---|---|
| Tax base | Gross rent less depreciation | Net rent, after expenses and depreciation |
| Deduction of expenses (management, repairs, interest) | No | Yes, according to the rules |
| Credit for the tax in the country of the property | No | Yes, up to the amount of Israeli tax on the same income |
| When it is considered | When expenses are low and the local tax is low | When there are high expenses, financing, or significant local tax |
| Reporting | In the annual return | In the annual return and Appendix 1324 |
The 15% route is not suitable when the letting is a business activity, for example managing several short-term rental units with services. The choice between the routes is best made with an accountant, based on the figures for the property and the tax actually paid in its country.
When does surtax also apply?
Surtax applies when annual taxable income exceeds the ceiling, and as of 2026 the ceiling is ILS 721,560. Above the ceiling you pay 3%, and according to the PwC tax summary, from 2025 a further 2% is added on the part of income from capital sources that is above the ceiling. Income from capital sources includes, among other things, capital gains and rent.
The practical meaning: the year in which property abroad is sold may push annual income above the ceiling even for someone who in ordinary years is far from it. When planning the timing of a sale, it is advisable to check in advance how the gain will combine with the other income of that year.
What happens in Israel when you sell property abroad?
The sale of property outside Israel is a capital gains event under the Income Tax Ordinance, not an event under the Real Estate Taxation Law. Therefore the exemptions for a single residential apartment in Israel do not apply to it. An individual generally pays up to 25% on the real gain, and receives a credit for the tax paid in the country of the property on the same gain, up to the amount of the Israeli tax.
The timing matters more than the rate. Section 91 of the Ordinance requires a notice of the sale to be filed within 30 days and an advance payment to be made on account of the tax. The notice is filed on Form 1399, and the obligation applies even when a loss arises. At the end of the year, the sale is also included in the annual return. Some tax treaties allocate the right to tax gains from real property differently, so the treaty with the country of the property is also checked.
- Before signing a sale: calculate the tax in the country of the property and the tax in Israel, including the effect of surtax.
- On the day of the sale: keep the contract, the confirmation of payment of the local tax and the confirmations of transfer of the proceeds.
- Within 30 days: file Form 1399 and pay an advance.
- At the end of the year: the sale is included in the annual return, where the final settlement takes place.
When must you file an annual return because of property abroad?
In most cases, anyone holding property abroad must file an annual return, even if they have not made a profit from it. The obligation arises from three separate mechanisms, each of which is sufficient on its own.
| What triggers the obligation | The threshold | Note |
|---|---|---|
| Transfer of funds abroad | ILS 500,000 or more within 12 months | Return for the year of the transfer and the following year. When buying in instalments, the transfers are aggregated |
| Value of foreign assets | ILS 2,086,000 or more on any day of the year (the amount for the years 2023 to 2026) | Tested together with your spouse and children under 18 |
| Income from abroad | The exemption applies only up to ILS 375,000 and provided an advance was paid in Israel | Anyone who rents out property and pays tax only in the country of the property usually does not meet the condition |
The statutory deadline for filing the annual return is 30 April, and in practice the Israel Tax Authority extends it every year, among others for online filers and represented taxpayers. The thresholds are updated from time to time, so they are checked against the Israel Tax Authority’s publications for the relevant tax year.
What is CRS, and why does it concern you too?
CRS is an international OECD standard for the automatic exchange of information on financial accounts, and Israel implements it. Financial institutions in participating countries identify account holders who are tax residents of another country and report on them, and the information is transferred every year to the tax authority of the country of residence.
The property itself is not reported through CRS, but the bank account in the country of the property, into which the rent or the sale proceeds are paid, usually is. You should therefore assume that the Israel Tax Authority can see the account, and make sure that the annual return is consistent with what passes through it.
When is a capital declaration required, and what does the property abroad change in it?
Buying property abroad does not in itself require a capital declaration. The assessing officer may demand a declaration of your capital, that of your spouse and that of your minor children, and the declaration also includes assets and accounts abroad. According to the Israel Tax Authority, it is filed within 120 days, and under the Ordinance, from 1 January 2027 filing will be online.
The question a capital declaration actually examines is the source of the money: whether the increase in capital between two declarations is explained by reported income, loans, gifts or inheritances. If you document the source of the money already at the stage of transferring the first payment for the property, you answer this question in advance.
Hold the property as individuals or through a company?
There is no single answer, but there are clear differences. Direct holding as individuals is simpler and allows the 15% route on rent. Holding through a foreign company adds a layer of tax: corporate tax in the country of the property, and then tax in Israel on a dividend distributed to the shareholders, with a credit for the foreign tax according to the rules. According to PwC, a dividend is generally taxed in Israel at 25%, or at 30% for a substantial shareholder.
| Topic | Individuals | Foreign company |
|---|---|---|
| Tax on rent in Israel | 15% or marginal tax with a credit | Corporate tax in the country of the property, and tax in Israel only on distribution, subject to the controlled foreign company rules |
| Ongoing costs | Relatively low | Bookkeeping, reports and filings in two countries |
| Risk of being an Israeli company in practice | Not relevant | Exists if management and control are exercised from Israel |
| Future sale | Capital gain for the individual | Sale of the property within the company or sale of the shares, with a different tax result for each |
When is a foreign company treated as an Israeli company?
When the control and management of its business are exercised from Israel. The Income Tax Ordinance defines a body of persons as an Israeli resident if it was incorporated in Israel, or if the control and management of its business are exercised in Israel. It is the second test that turns a Romanian, Cypriot or Bulgarian company into an Israeli company for tax purposes, even when it is duly registered abroad.
According to the PwC tax summary, neither the law nor the courts have defined “control and management”, so each case is examined on its facts. When a company is treated as resident in two countries, the tax treaty usually decides. In practical terms, a company all of whose decisions are made at meetings in Tel Aviv and in emails from Israel, without a manager or activity in the country of the property, is exposed to this argument. A local manager, board meetings in the country of the property and documentation of decision-making there are part of the planning, and should be built with a tax adviser before the company is set up.
What are the controlled foreign company rules, and do they apply to a real estate company?
They may apply. Section 75B of the Ordinance provides that an Israeli controlling shareholder in a controlled foreign company is taxed on his or her share of the undistributed profits, as if he or she had received them as a dividend. The conditions are cumulative, and the main ones are:
- Israeli control: according to professional sources, more than half of the means of control in the company are held by Israeli residents. According to PwC, a controlling shareholder for this purpose is anyone holding 10% or more of any of the means of control.
- Passive income: most of the company’s income or profits in the tax year are passive. Rent is usually counted as passive income, unless it is part of a genuine business activity.
- Low foreign tax: the tax rate that applies abroad to the passive income does not exceed 15%.
A company holding rental apartments in a country where the corporate tax rate is low, and whose shareholders are Israeli, may meet all three conditions. According to professional sources, in 2016 the Israel Tax Authority published a circular dealing with controlling shareholders in a controlled foreign company and with the question of when letting is a business activity. This is a check you do before choosing the structure, not after the company already holds assets.
And what about a US LLC and Income Tax Circular 5/2004?
Income Tax Circular 5/2004 deals with Israeli residents who hold an American LLC, and its purpose is to prevent double taxation arising from the fact that an LLC is transparent for tax purposes in the USA and is treated as a company in Israel. According to professional sources, the circular allows the holders of the rights to report the LLC’s income in Israel as it arises and to receive a credit for the American tax, under the conditions set out in it. Anyone who did not act in accordance with the circular may be treated in Israel as holding an ordinary company.
The circular is not a general rule for all property abroad and does not apply automatically to companies in other countries. The election must be made in advance, and in the case of losses it has further implications. You will find the details on LLCs and the American estate tax in the dedicated guides for the USA on the site.
What to do before the purchase, and how we assist
The right time to think about the Israeli side is before the first transfer: choose between holding as individuals and through a company, build a schedule of transfers and mark which tax year each transfer falls into, document the source of the money, and open a single file in which the contract, the transfer confirmations and the confirmations of tax payment in the country of the property are kept. We accompany the legal side of the transaction and coordinate the timeline of the reports with your accountant or tax adviser in Israel, and in the country of the property, notaries and lawyers holding a local licence work alongside us.
What is stated here is general information as of October 2026, and is not tax advice or legal advice for a specific case. Rates, thresholds and deadlines change, and any decision on a tax route or holding structure should be made with an accountant or tax adviser in Israel, based on your own facts.
Frequently asked questions
How much tax do you pay in Israel on rent from an apartment abroad?
You choose between two routes: 15% on the gross rent with a deduction for depreciation only and no credit for the foreign tax, or tax at the brackets on the net income with a credit for the tax paid in the country of the property. Which route is cheaper depends on the expenses and the local tax rate.
Do you need to report the sale of an apartment abroad to the Israel Tax Authority?
Yes. You file a notice of the sale on Form 1399 within 30 days and pay an advance, even if a loss arose. At the end of the year, the sale is also included in the annual return, where a credit is given for the tax paid in the country of the property.
Does the single-apartment exemption apply to an apartment abroad?
No. The sale of property outside Israel is taxed under the Income Tax Ordinance as a capital gain, and the exemptions of the Real Estate Taxation Law for a residential apartment in Israel do not apply to it.
Is it worth buying property abroad through a company?
It depends on the purpose, the country and the number of properties. A company adds a layer of tax and costs, and may be treated as an Israeli company if it is managed from Israel, or as a controlled foreign company if the income is passive and the local tax is low. The decision is made before the purchase, with a tax adviser.
Does the Israel Tax Authority know about my bank account abroad?
It probably does. Israel implements the CRS standard, under which financial institutions in participating countries report on accounts of foreign tax residents, and the information is transferred to the tax authority of the country of residence.
Read next · 7 min readWhy a Property Transaction Abroad Needs a Lawyer Who Knows Cross-Border Deals: What the Lawyer Checks, and What Happens Without OneBuying property abroad versus in Israel: local law, a neutral notary, limits on foreigners, Israeli tax and reporting, and what a cross-border lawyer checks.Read the guideSources
- Israel Tax Authority - annual return for individuals and accompanying forms
- Israel Tax Authority - notice of sale of an asset under section 91 (Form 1399)
- Israel Tax Authority - capital declaration (Form 1219)
- Income Tax Ordinance [New Version] - text on Wikisource
- PwC Worldwide Tax Summaries - Israel, Individual: Taxes on personal income
- PwC Worldwide Tax Summaries - Israel, Individual: Income determination
- PwC Worldwide Tax Summaries - Israel, Individual: Foreign tax relief and tax treaties
- PwC Worldwide Tax Summaries - Israel, Corporate: Corporate residence
- PwC Worldwide Tax Summaries - Israel, Corporate: Group taxation (CFC)
- OECD - International standards on tax transparency (CRS)
- Taxation of a controlled foreign company (CFC) - professional overview
- Real estate investment in the USA: direct holding or through an LLC - professional overview