A new or resale apartment in Israel? When comparing the two, people tend to look at the price of the apartment itself. But every purchase of a new apartment from a developer has a silent partner that takes a large share of the price: value added tax, which has stood at 18% since January 2025.
At RS Nadlan we meet quite a few buyers who are torn between a new apartment from a developer and a resale apartment. The common mistake is to compare price against price and forget that one side of the equation hides a tax of almost a fifth of the price.
New or resale apartment: where you pay VAT and where you do not
- A new apartment from a developer: subject to full VAT of 18%. The price on the billboards already includes VAT, but the tax is a significant part of it.
- A resale apartment: when a private individual sells an apartment to a private individual, there is no VAT on the transaction.
The calculation: how much of the price goes to tax
Suppose your budget is ₪2,500,000 (an example for illustration).
- A developer apartment at this price: of the total, about ₪381,000 is VAT, and only about ₪2,119,000 is the consideration to the developer for the apartment itself.
- A resale apartment at this price: the full ₪2,500,000 is the price of the property: location, square meters and condition. In this sense you buy more apartment for the same money.
So why does everyone want a new apartment?
There are good reasons: a safe room (mamad), underground parking, an elevator, no wear and tear and convenient payment terms such as 20/80 deals. A new apartment also saves years of repairs, and comes with the inspection and warranty periods set by the Sale Law. The question is not what is better in general, but what you actually receive in return for the gap.
New or resale apartment: the associated costs on each track
VAT is not the only difference. These should also go into the calculation:
- Purchase tax (mas rechisha): paid on both tracks, but on a new apartment it is calculated on the full price including VAT, so VAT increases it too. The brackets for a single apartment and for an additional apartment are set out in our guide to purchase tax in 2026.
- Construction input index linkage: on a new apartment, in contracts signed from June 2022 only part of the payments may be indexed, up to 40% of the price, but this is still a cost that can grow until handover.
- The developer’s legal fees: common with new apartments, and capped by regulations.
- On a resale apartment: brokerage fees, preliminary inspections and renovation. And note: renovation carried out by a licensed contractor also includes VAT, so not every shekel saved on VAT on the apartment stays in your pocket.
The opportunity in the resale market
With VAT at 18%, resale apartments in a good location often offer better value for money. Instead of paying hundreds of thousands of shekels in VAT on a new apartment, you can buy a resale apartment in an established neighborhood and invest part of the gap in renovation. The result can be an almost new apartment, finished to your own standard, and sometimes in a better location. What matters is to check the condition of the building and the rights thoroughly before signing.
Frequently asked questions
Is VAT expected to go down?
As of October 2026 no reduction has been announced, and the rate stands at 18%. It is not wise to build a purchase plan on a change in the VAT rate.
Can you get a VAT refund on a residential apartment?
No. For a private individual buying an apartment to live in, VAT is a final tax. Only businesses that acquire a property for business activity may, in certain circumstances, offset VAT, and this should be checked with an accountant.
Do not let the tax decide for you
Whether you choose a new apartment or spot the potential in a resale apartment, we would be happy to help you see the full picture, including the associated costs, before you decide. Tell us what you are looking for, leave your details on our contact page or call 077-500-4600 (from abroad, +972 77 500 4600).
The information in this article does not constitute tax or legal advice. Every transaction requires an individual review.
