Tax on Purchasing A New Car
Purchasing a car in Israel is quite expensive, due to very high taxation on automobile purchases. Permanent residents pay close to 100% tax on their cars. Olim and non-permanent residents with an A/2 student visa are eligible for reduced tax rates on new vehicles.
Reduced Tax for Olim
Olim are eligible for a reduced tax rate when buying a new car within three years of making Aliyah. After five years, no payback on taxes is required. However, if the car is sold before then, the amount saved through the reduction must be repaid.
Reduced Tax for Non-Permanent Residents
Olim and anyone with an A/2 student visa are entitled to bypass import tax at the time of purchase. Instead, they are entitled to pay tax on the car at any later point — before reselling it, or even years down the line when junking it.
Selling the car at a later date means significant savings on import taxes. Import tax is determined by the car’s current value, so paying it later, when the car has depreciated in value, yields significant savings.
To qualify for this exemption, the buyer must have been out of the country at some point within the past three months. It only applies to buying a new car directly from a dealer. One can only qualify for this exemption once.
It is important to note that some of this allowance only applies to a car purchased in Israel. For an imported car, taxes must be paid within four years or the car must be exported from the country.
Research in Person
Experience has shown that rather than researching cars online or from afar, spending some time at the actual dealerships can be very fruitful: some can offer additional discounts. Also, by negotiating with the dealer directly, you may receive some free upgrades or extras. Most car companies have storefronts in the Talpiot neighborhood near Misrad Harishui (Bureau of Motor Vehicles), which is located at Rechov HaUman 10.
What You Need
This list is an overview of the procedure. Read below for a detailed explanation.
- 89 number/Israeli license number
- Down payment
- Paperwork from your dealer
- Passport with visa valid for over one year
- Proof of arvut (escrow)
- Meches certification
If the potential owner does not hold an Israeli license, he needs to have an 89 number in order to place an order (hazmanah) for the car. The 89 number is a temporary ID number that can be obtained at the Misrad Harishui and can be used later to obtain an Israeli license. An Israeli license will be required to continue driving after living in Israel for a year.
Buying a car requires a sizeable down payment. After this is paid, the dealer will prepare documents detailing the value of the car and the amount of taxes.
Paperwork and Passport
Bring this paperwork and your passport (with a visa valid for over a year, as noted above) to the Meches (Customs) office in Givat Shaul at Kanfei Nesharim 66, Jerusalem. The Meches agent, Nagib, who deals with tax exemption for vehicles, is located at the back left of the office. He files all documents and calculates how much money is needed in arvut (escrow), which is equal to 30% of the tax value.
In order to “redeem” the car from Meches’s hold, you must finalize with Nagib all tax payments that remain. Additionally, the registration on the car will note that only the car owner and his/her spouse may drive the vehicle, with towing and repossessing mentioned as a consequence. (This stipulation happens to lower the price of car insurance by several hundred shekel per year.)
Arvut Bankait (Bank Guarantee)
Arvut bankait is required to assure the authorities that your car will not be taken out of the country or sold without paying outstanding taxes. After meeting with the Meches agent, you need to arrange the arvut. Bring the papers to the bank to arrange the arvut. It will then be sent back to Meches. Beyond the initial meeting, Meches can usually be contacted via phone/email correspondence. Nagib is generally at the office Sunday through Thursday, 8:30 am–12:00 pm. Verify these hours online to make sure they have not changed before you go. His email address is : firstname.lastname@example.org.
Arvut costs several hundred shekel per year, as will car registration (on any car, not just a tax-exempt vehicle).
Once you finish with Meches, you must bring proof of the arvut and Meches certification to the auto dealer to complete the car purchase. It is important to note that they will send all original documents, including passport and foreign/Israeli license, to the border to retrieve the car from Meches, and these documents will not be returned until about two weeks later, along with the car.
The arvut and Meches certification need to be renewed yearly. However, if your visa is valid for more than one year, you can try asking for a longer bank guarantee.
Purchasing A Used Car
If both the buyer and seller are Israeli
Ownership can be transferred at some large car dealerships or at the post office. All you will need is the car registration and both parties’ teudot zehut and driver’s licenses. There is a small fee to make the transfer.
If one or both parties are not Israeli
Both parties must go to the Misrad Harishui and then to the post office in order to transfer ownership. Bring both parties’ teudot zehut/passports, driver’s licenses, and the car registration.
A non-Israeli purchasing a car must provide an ish kesher, a guarantor who holds Israeli citizenship. The ish kesher must accompany the non-Israeli buyer to the Misrad Harishui with his teudat zehut. The ish kesher must be physically present to provide his name, contact information, and signature on the ownership transfer form.
If you are not Israeli, note that many secondhand car dealerships will not sell cars to foreigners because they prefer not to deal with Misrad Harishui. If this applies to you, clarify with the dealership beforehand whether they will be willing to sell you a car.
There are two branches of Misrad Harishui in Jerusalem:
HaUman 10, Binyan Kaduri, Talpiot
Hours: Sun–Thurs 8:00 am–1:00 pm;
Sun also 3:30 pm–5:30 pm
Binyan Klal, Yaffo 97
Hours: Sun–Thurs 8:00 am–12:00 pm; Sun also 3:30 pm–5:30 pm
Car Registration and Inspection
Vehicles registered in Israel must always have a valid rishayon rechev (vehicle license). The license must be renewed yearly. To renew the license, car owners must pay a license fee and have their cars inspected.
If a new car was purchased tax free, one must first obtain permission from the Tax Authority in order to renew the car registration.
To do so, send an email to Nagiv at email@example.com. Include the following documents:
- a copy of your passport
- a copy of your valid student visa
- the original arvut from the bank
- your current car registration
Include a short explanation, requesting that they release your car from Meches.
When you receive a response that your car has been released, you may pay your car registration fee.
Please note: you will be able to pay for the renewed registration online only with an Israeli credit card. If you do not have one, you can pay for the renewal at the nearest post office.
Vehicles registered in Israel are required to undergo a yearly inspection, referred to in Hebrew as “test,” in order to renew their rishayon rechev. The inspection must be performed after you pay the license fee and before your previous license expires. At all times, your car must sport a sticker, attesting that you have a valid vehicle license.
The inspection checks that various parts of the car are functioning properly and that the vehicle is roadworthy. The owner of the car does not have to be present at the inspection. He can send someone else, such as a mechanic, for example, by filling out the yipoi koach (power of attorney) attachment to the new vehicle’s license.
Many foreigners prefer this option as the inspection is issued in Hebrew and one is liable to fail the inspection simply because they misunderstood the directions.
If a vehicle fails inspection, the owner is usually given seven days to repair the defect found and return to the Vehicle Inspection Station for a repeat test.
Please note: A new car is exempt from inspection for up to three years from the date of purchase.