Purchasing Real Estate Abroad

Real estate transactions, particularly purchasing properties abroad, are often seen as highly attractive investment opportunities for Israelis, especially due to the current security and political situation in the country. This has heightened the motivation for Israelis to buy apartments and invest in real estate outside of Israel, exploring new and diverse options.

Such real estate investments can include direct investments in real estate – such as buying a private apartment, a private house, or commercial properties. Alternatively, there are indirect investments, such as, real estate investment trusts (REITs), shares in real estate companies, and more.

However, it is important to consider the tax implications in Israel as well as the target country, and all other relevant factors in order to ensure the investment is as informed and profitable as possible.

Ways to Hold Property Abroad

Deciding how to hold the property should be done according to the country and type of property being purchased.  This decision could involve holding the property through direct ownership in the buyer’s name or ownership through a company. If through a company, which type of company should be established? The choice of how to the hold the property is very important as there are various goals which buyers may wish to achieve, for example:

1. Protecting property owners from lawsuits (in some countries, such lawsuits can result in astronomical sums.) This protection is typically achieved by holding property through a company that is considered a separate legal entity.
2. Protection against inheritance tax- it is important to verify whether the target country imposes inheritance tax. Inheritance tax can be relatively high, increasing the cost of transferring property through inheritance within the country. There are various ways to mitigate inheritance tax, each way with its advantages and disadvantages.
3. Reporting costs over the years.
4. Utilization of profits in an Israeli company owned by the investors.
5. What is the purpose of the investment? Is it passive rental income or active resale following the purchase, renovation, and improvement of the property?
6. Is the primary goal of purchasing the property capital gains or preserving the value of the purchase in line with the local currency index?

Based on responses to the previous questions, one of the available options in the target country will be selected, and a professional should be consultedto determine the best approach for registering the property in the purchase transaction.

To read more about the process of establishing a company abroad, click here.

Key Points to Clarify before Purchasing Abroad  

• Currency conversion prior to transferring funds to the target country- The costs of transferring and converting money into foreign currency can be high, therefore, it is important to work with reliable non-banking companies approved by the Ministry of Finance to minimize conversion fees.
• Approval from the Tax Authority for the transfer- If the target country has a tax treaty to prevent double taxation, there is no need for an approval from the Tax Authority to preform the transfer. However, if the target country does not have a tax treaty with Israel, it is necessary to coordinate with the Tax Authority.
• Opening a bank account abroad- it is important to check what is required in the bureaucratic process to open a bank account in the target country before making the investment. In some cases, it is possible to open an online bank account instead of a physical one. Our firm collaborates with entities in both Israel and abroad to facilitate swift and efficient openings of foreign bank accounts.
• Tax rates- It is important to examine the applicable tax rates in the both target country and Israel regarding the whole process of purchasing real estate.
• Reporting to the Israeli Tax Authority- Israeli law requires the submission of an annual tax report to the Tax Authority for transfers abroad exceeding 500 000 NIS and for purchased property exceeding the value of approximately 2.1 million NIS.

Buying Real Estate Abroad- How to Maximize your Profits 

If you are considering purchasing a property abroad and want to maximize your profits to ensure a worthwhile investment, it is recommended to consult with an international tax expert before making the purchase. Our firm specializes in international taxation and consultation services to help you get started. As part of this process, we hold an initial meeting with clients to understand their needs.

Then, following this meeting, you will receive a detailed document explaining the relevant options, advantages and disadvantages of each option, with recommendations on how to proceed. You will then be referred to the appropriate professional(s) who will accompany you throughout the entire process.

If you’re interested in maximizing your profits through investments in real estate abroad, you can contact us and schedule an introductory call.