Buying a Car in Israel

Buying a New Car from a Car Dealer
Olim are entitled to buy cars in Israel at a reduced tax rate, within three years after making Aliyah. There are two main restrictions:

  1. If the Oleh or Olah wishes to sell the car within four years of the date of purchase, he or she will be obligated to pay back the amount of the reduction received at the time of purchase.
  2. Only the Oleh or Olah who used his or her benefits to purchase the car, will be allowed to drive it. (If you would like to receive permission for additional drivers such as family members, friends, etc., you must get written permission from the Customs Authority.)

The cost of a new car for an Oleh is calculated as follows:

50% VAT on all vehicles: ([car value + (car value *50%)] + [(car value) + (car value *50%) *18% VAT]) irrespective of engine size or car's country of origin.  For example, if the car's worth is $10,000, it would be calculated as follows:

Tax on the car: 10,000 x 50% = $5,000
The car value + the tax = $15,000
VAT payment: 15,000 x 18% = $2,700
Total tax payment: 5,000 + 2,700 = $7,700  

 In order to buy a new car with your Oleh benefits, you need to:

  1. Find a car dealer and pick the car that suits your needs.
  2. Give the car dealer your Teudat Oleh, an Israeli driver's license (acquired via the conversion of a foreign driver's license), your driver's license from your country of origin (which was issued at least three months prior to your entry to Israel), foreign passport with Aliyah visa, and your Teudat Zehut.
  3. The car dealer will send all the documentation to Meches (the Customs Authority), and within 10 days to three weeks your car should be released to you, with the reduced tax benefit.

If you bought a car with Aliyah benefits and have a child who holds a valid driver's license:
Your child can only drive the car if he or she receives permission from the Customs Authority. To obtain permission, the child must go to the nearest Customs office with a request (which can also be emailed or faxed), a copy of his or her driver's license, a written request from you (i.e., the car's owner), his or her Teudat Zehut, and the car's license. The approval is granted for a year and can be extended.

Buying a Second Hand Car Passport to Passport
Olim who wish to sell their car within four years of the date of purchase and not incur a penalty may do so by selling their car to another Oleh, in a process called passport to passport. The seller and buyer have to go to the local office of the Customs Authority (you may find a list at the bottom of this webpage: http://www.mof.gov.il/customs/Oleh.htm ). The Customs Authority will determine the final value of the car and whether there are any additional taxes. The buyer has to present a valid Israeli driver's license and their Teudat Oleh. A new four-year restriction on selling the car will begin the day the car is listed on the buyer's name. 

Buying a Second Hand Car from a Non-Oleh
If you decide to buy a used car from an Israeli, you are not using your Oleh benefits, and therefore you are still eligible to buy a car (new or passport to passport) within 3 years after your Aliyah using your benefits.
The procedure for buying a used car is quite simple. After finding the car and deciding on the car's price with the seller, you have to go to any post office together with the seller and transfer the ownership to your name. This process costs 187 NIS, and the buyer is obligated to pay this fee in cash at the post office. 

Green Taxes
In the past few years the Finance Ministry has given green tax benefits for cars that have low דרגות זיהום (level of pollution). This benefit does not apply for Olim and therefore the 75% tax that Olim paid for new cars has become less significant for cars that had low levels of pollution.

As of August 1, 2013 the Customs Authority has decided to give Olim a 60% benefit on the amount of green tax benefit. For example:

Before new benefit

 

Car

Tax

Total

Green Benefit

New Total

Oleh

50,000 NIS *

75%  

87,500

N/A

87,500 NIS

Israeli

50,000 NIS *

92%

96,000

Example, Level  6 = 9,250 NIS

86,750 NIS

Oleh pays more than an Israeli.

 

As of August 1, 2013

 

Car

Tax

Total

Green Benefit

New Total

Oleh

50,000 NIS *

75%  

87,500

Level 6 = 9,250 – 60% = 5,550

81,950 NIS

Israeli

50,000 NIS *

92%

96,000

Example, Level  6 = 9,250 NIS

86,750 NIS

 

Important notes:

  1. On August 1, 2013 the Ministry of Finance will release a new chart of the green tax according to the level of pollution, meaning the amounts will change after August 1, 2013. 
  2. The new green tax benefit for Olim will only apply to Olim who buy a new car or import a car which was manufactured after January 1, 2007.

 

Level Of Pollution Sales Tax Tax rate after Green Tax Benefit
Green Indicator Tax rate Green Tax Benefit
1 0-50 (emission free vehicle) 10% 10%
2 51-130 (Hybrid) 30% 30%
51-130 92% 15,000 45%
3 131-150 92% 13,750 58%
4 151-170 92% 12,000 58%
5 171-175 92% 10,500 62%
6 176-180 92% 9,250 67%
7 181-185 92% 8,250 68%
8 186-190 92% 7,250 71%
9 191-195 92% 6,500 78%
10 196-200 92% 5,500 80%
11 201-205 92% 5,000 84%
12 206-210 92% 4,000 84%
13 211-220 92% 3,250 86%
14 221-250 92% 2,000 88%
15 251 - 92% 0 92%