Key Takeaways

Short Answer

Mas Shevach is Israel's capital gains tax on real estate sales. The seller pays. Foreign non-residents owe 25 percent on the real (inflation-adjusted) gain from the original purchase price. Israeli residents may exempt their primary residence one time; foreign owners do not qualify. Heirs inherit the deceased's tax basis (no step-up at death), meaning embedded gains pass through to the next generation and become Mas Shevach liability when the heir later sells. Section 62 lifetime family transfers are exempt for the giver.

Full Definition

Mas Shevach is governed by the Real Estate Taxation Law (Chok Misui Mekarkein) and administered by the Israel Tax Authority. The seller files a self-assessment within 30 days of the sale and pays the tax. The taxable base is the real gain: sale price minus original purchase price (the seller's basis), adjusted for inflation using Israel's CPI (Madad Mechirim LeTzarchan) from purchase date to sale date. The basis includes the original Mas Rechisha paid, attorney fees, agent commissions, and qualifying improvements documented in writing. The current rate for foreign non-resident sellers is 25 percent of the real gain. Israeli residents may claim a one-time Petor Dira Yechida (primary residence exemption) on their qualifying primary home if they meet defined residence and ownership tests; this exemption is not available to foreign non-residents. Section 62 of the Real Estate Taxation Law fully exempts the giver from Mas Shevach on lifetime transfers between defined close family members, with the recipient inheriting the giver's basis (the gain is deferred, not eliminated). On death, heirs inherit the deceased's tax basis without step-up; embedded gains pass through and become Mas Shevach liability when the heir later sells. Foreign owners can typically credit Israeli Mas Shevach paid against home-country capital gains tax obligations under the relevant bilateral tax treaty.

Why It Matters for Foreign Buyers

Foreign buyers should plan Mas Shevach at purchase, not at sale. Three structural points. First, retain comprehensive documentation of the basis from the start: original purchase contract, Mas Rechisha receipt, attorney fees, agent commissions, and every qualifying improvement (renovations, upgrades, additions) with itemized invoices. The basis is the deduction against future Mas Shevach, and documentation gaps reduce the deduction. Second, consider Section 62 family transfer planning during ownership for multi-generational families; the giver's Mas Shevach exemption is the highest-leverage estate planning lever available to foreign owners of Israeli real estate. Third, before selling, coordinate with a dual-jurisdiction tax adviser to map Israeli Mas Shevach against home-country capital gains tax and determine the optimal sequencing. The Israeli tax is paid first; the home-country tax (US, UK, Canada, Australia) is offset by foreign tax credit under the relevant bilateral treaty. Net liability depends on rate differentials and timing.

Related Reading

Sources and References

Reviewed by Hershtik & Adoram, May 2026. This glossary entry is informational and does not constitute legal or tax advice for any specific transaction. Israeli real estate law evolves; verify current rules with qualified Israeli counsel before relying on any specific figure or rule.