— Pillar guide · Seller tax

Mas Shevach: Israel's capital gains tax on property

Mas Shevach (מס שבח) is Israel's capital gains tax on real estate, paid by the seller at every transfer. The standard rate is 25% on the net capital gain — frequently above 200,000 ₪ on a routine sale that was poorly prepared.

The system, however, provides generous exemptions — especially for the dira yechida (only home) — and a linear calculation mechanism that protects long-held properties. Properly prepared, a sale can be fully exempt; mishandled, it materially reduces net proceeds.

This guide covers rates, exemptions, the linear method, filing with Mas Shevach, deadlines and legal optimisation strategies for sellers in 2026.

Mas Shevach: definition and rate

Mas Shevach is governed by the same 1963 statute as Mas Rechisha. It applies to any individual or entity transferring a real estate right in Israel — resident, foreign resident or new immigrant included.

The rate is 25% of the net gain for individuals (up to 47% for commercial entities). Net gain = sale price − indexed acquisition cost − deductible costs (Mas Rechisha paid, lawyer fees, broker, documented capital improvements).

For foreign residents, the rate is identical and the relevant tax treaty allocates taxing rights to Israel for Israeli-situated property. No double taxation, but mandatory declaration in the country of residence.

The dira yechida exemption

An Israeli resident selling their only main residence benefits from a full Mas Shevach exemption with no cap on the gain, provided they have held it for at least 18 months and own no other property (or less than 33% of another).

The exemption is usable every 18 months — particularly valuable for households trading up over time. Foreign residents qualify only if they prove they own no residence in their home country — a proof rarely accepted in practice.

Olé hadash status does not open an additional Mas Shevach exemption (unlike Mas Rechisha). Resident status is the central qualifying factor.

Linear calculation and legacy properties

For properties acquired before 2014, the law introduced a linear calculation that fully exempts the share of gain attributable to the pre-2014 period. Only the post-2014 share is taxed at 25%.

A property bought in 2000 and sold in 2026 sees roughly 54% of the gain fully exempt — a major fiscal benefit for long-term owners.

This mechanism applies automatically but requires a certified calculation by an Israeli tax lawyer or accountant. An error leads to overpayment that is hard to recover.

Filing, deadlines and payment

The seller files (mahsav mas shevach) within 30 days of signing the Heskem Mekher. Late filings trigger penalties.

Payment is due within around 60 days. Without payment, the tax clearance (ishur misim) cannot be issued — and without it, no Tabu transfer is possible. The seller stays the legal owner and the buyer is locked.

Many sellers underestimate this calendar and cause months of delay. Best practice: have a forecast mahsav produced BEFORE listing — the result can change the pricing strategy.

Frequently asked questions — Mas Shevach

What is the Mas Shevach rate in Israel?+

25% on net capital gain for individuals. A company can be taxed up to 47% depending on its regime.

Is the dira yechida exemption automatic?+

No. It must be claimed in the filing with proof: main residence, only home, held at least 18 months, no other property above 33% ownership.

Can a foreign resident claim the exemption?+

Theoretically yes with proof of no residence in their home country — rarely accepted. Foreign residents typically pay the full Mas Shevach.

How does linear calculation work?+

For pre-2014 properties, the gain is allocated pro rata temporis. Only the share after 1 Jan 2014 is taxed at 25%.

Are improvement works deductible?+

Yes, provided documented with VAT invoices. Keep every renovation invoice.

Summary: master your Mas Shevach

Mas Shevach is rarely an absolute. With a well-managed dira yechida, a properly applied linear method and a full deductibles file, most residential sales can be very lightly taxed.

For a foreign resident or investor, the 25% almost always applies and optimisation comes from documentation and the initial acquisition structure. Preparation starts at purchase, not at sale.

— Before selling

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