VAT on Apartment from Developer 2026

Contrary to the common perception that every real estate transaction is exempt from VAT, it entirely depends on who the seller is. Here’s when VAT actually applies to the purchase of an apartment, and when it does not.

The Basic Rule — Depends on the Seller's Status

VAT (17%) applies when the seller is a "registered dealer" — a contractor, real estate developer, or construction company selling apartments as part of its regular business activity. When the seller is a private individual who is not a dealer (most second-hand transactions), the transaction is completely exempt from VAT.

Apartment from a Developer — VAT Included in the Price

When purchasing a new apartment from a developer, the displayed price already includes VAT — you do not pay it as a separate component, but it is embedded in the final price you saw in the advertisement and the contract. It is important to ensure that the invoice you receive specifies the VAT component for documentation and sometimes for financing purposes.

Second-Hand Apartment — Completely Exempt

The sale of a residential apartment by a private individual who is not a dealer is fully exempt from VAT — this is why second-hand apartments, given the same price, can be "more advantageous" in terms of VAT than a new apartment from a developer, even if the difference is already reflected in market prices.

Other Cases Where VAT Does Apply

Construction Services: Construction work, renovations, architectural planning — all of these are subject to VAT, even if purchasing a second-hand apartment and renovating it.
Sale of Land by a Dealer: Sale of land by a developer or contractor, even if not intended for immediate construction, is subject to VAT.
Rent for Commercial Property: Renting a property for business purposes is subject to VAT, unless the landlord is a "exempt dealer."

Cases Where There Is No VAT

Renting a residential apartment (even if the landlord is a dealer) is exempt from VAT. Likewise, the sale of commercial property or land by a private individual who is not a dealer — the distinction always revolves around the seller's status, not the type of property.

What Happens If You Buy a Second-Hand Apartment from an Appraiser or Broker Who Are Dealers

It is important to distinguish: the dealer (the broker, the appraiser) is selling a service, not the apartment itself — the brokerage fee is subject to VAT, but the sale of the apartment itself by the private seller remains exempt from VAT even if done through a broker who is a registered dealer.

How This Is Reflected in Price Comparisons

When comparing a new apartment from a developer to a second-hand apartment in the same area, it is important to remember that the price of the new apartment already includes VAT — the "net to net" comparison requires understanding that the displayed price from the developer is not "an additional 17%" that will be added later, but a final amount that already incorporates the tax.

Frequently Asked Questions

Is purchase tax calculated on the price including VAT or before it?
On the total price, as stated in the sales contract — VAT and purchase tax are two separate taxes, each calculated separately.

Can the VAT paid as a private buyer be deducted?
No — VAT deduction is relevant only to dealers in the course of their business, not to private residential property buyers.

What happens if someone buys an apartment from a developer who has only sold a few units and is not officially considered a "dealer"?
The test is actual business activity, not a declaration — if the seller operates as a registered dealer in the course of their business, VAT applies even if it is a single transaction.

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View properties for sale in Ma'ale Adumim and Jerusalem, and contact the Merkaz HaNekhasim team for personal advice.