Olim are entitled to buy cars in Israel at a reduced tax rate, within three years after making Aliyah. A file with the customs authority must be opened before an Oleh can apply for the car benefit. Click here for more information about opening a file.
There are two main restrictions when purchasing a new car using Oleh benefits:
- 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.
- 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.) Children of Olim who would like to drive a car purchased with rights must have the same address as their parents on the sefach of their Teudat Zehut.
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%) *17% 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 17% = $2,500
Total tax payment: 5,000 + 2,500 = $7,500
In order to buy a new car with your Oleh benefits, you need to:
- Find a car dealer and pick the car that suits your needs.
- Give the car dealer your
- A copy of your Teudat Oleh
- 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)
- A copy of your foreign passport with Aliyah visa
- A copy of your Teudat Zehut.
- 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.
NOTE: You can now purchase a vehicle without an Israeli driver’s license during your first year after Aliyah, as long as you commit to converting your license before the first year is up. If you do NOT convert your license within this time-frame you will be required to pay back the reduced taxes. You will be required to present your Israeli license to the customs authority.
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 can find a list here: Customs Authority ). 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 sellerand 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.
