Quick answer: Israel offers residents a flat 15% on foreign rental income under section 122A, and it comes with no expense deductions and no foreign tax credit. On an Italian property, where cedolare secca has already taken 21% or 26% at source, giving up the credit costs more than the low rate saves. The apparently cheaper election is the more expensive one, and the arithmetic is not close.
There is a piece of Israeli tax planning that works well in most of the world and fails specifically in Italy. It is offered by default, it sounds like a concession, and applying it to an Italian apartment can double the tax on the rent.
What does section 122A actually trade away?
The election is a bargain with three terms. The taxpayer gets a flat 15% rate on gross foreign rental income instead of marginal rates. In exchange they give up deductions for expenses, other than depreciation, and they give up the credit for tax paid to the country where the property is located.
For a property in a jurisdiction that taxes rental income lightly, that is a good trade. The credit surrendered is worth little because little foreign tax was paid, and 15% flat beats a marginal rate that can run far higher.
Italy inverts every term of it. Italian rental tax is not light: the flat cedolare secca regime charges 21% on the first residential unit let short-term in a year and 26% on the second and beyond, and it is applied before the money leaves Italy. Italian running costs on a holiday apartment, the condominio charges, IMU, management and cleaning, are real and would be deductible under the ordinary route. The election gives up a large credit and a real deduction to obtain a rate reduction on gross income that was already taxed.
| Route | Israeli rate | Italian tax credited | Expenses | Rough total on the same rent |
|---|---|---|---|---|
| Section 122A election | 15% of gross | None | None but depreciation | About 36% |
| Ordinary marginal route | Marginal on net | Yes, Italian tax credited | Yes | Frequently the Italian tax alone |
How does the arithmetic run on a real apartment?
Take an apartment in Florence let short-term for €18,000 in a year, with €4,500 of documented running costs, held by an Israeli resident as their only Italian property.
Under the Italian flat regime the owner pays 21% of gross, so €3,780 goes to Italy. Nothing about the Israeli choice changes that number: Italy taxes first and taxes the same way either way.
Electing section 122A adds 15% of the gross €18,000, another €2,700, with no credit for the €3,780 already paid. Total tax €6,480 on €18,000 of rent, or 36% of gross, against a net profit before tax of €13,500.
Taking the ordinary route instead, the Israeli charge is computed on net profit after expenses and reduced by a credit for the Italian tax. With €3,780 of Italian tax available as a credit against a charge on €13,500 of net profit, the credit absorbs a substantial part and in many cases all of the Israeli liability.
- The gap is largest where the property has real costs, because the election ignores them entirely
- The gap narrows where the property is cheap to run and the owner’s marginal rate is high
- The gap does not close on an Italian property, because the credit surrendered is always meaningful at 21% or 26%
- Insider tip: run both routes on the actual Italian filing before choosing, not on an estimate, since the Italian number is known precisely and is the largest term in the calculation
Which Italian election should come first?
Because the Israeli decision depends on the Italian tax paid, the Italian election is the one to settle first, and it is a genuine choice rather than a formality.
Italy offers the flat cedolare secca regime or ordinary IRPEF with expenses deductible against a 95% base on long lets. Our cedolare secca guide works the comparison, and for an Israeli owner there is a second-order effect worth noting: a higher Italian tax bill produces a larger Israeli credit under the ordinary route, so the two decisions interact rather than stacking independently.
The sequence that produces the right answer is to model the Italian regimes first, then take the resulting Italian tax figure into both Israeli routes, and only then choose. Reversing the order, which is what happens when an Israeli adviser recommends the 15% election before the Italian position exists, guarantees the wrong result on any property with meaningful Italian tax.
- Settle the Italian regime, then the Israeli route, in that order
- Long lets and short lets produce different Italian rates and therefore different Israeli answers on the same apartment
- Where the property is held jointly, each owner makes their own Israeli election on their share
There is a reporting layer underneath both routes. Israeli residents are required to report foreign assets and income once the relevant thresholds are met, and the obligation exists independently of whether tax is due. An owner inside the new immigrant window, or one whose Italian tax credit reduces the Israeli charge to nothing, still has a filing position to establish rather than a blank return to submit. Getting that wrong is a compliance failure rather than an underpayment, and it is the failure most likely to surface years later when the property is sold.
What does letting require on the Italian side?
None of the tax discussion matters if the letting itself is not permitted, and the Italian requirements have tightened.
A short-term let needs the national CIN code displayed on every listing and at the property entrance, regional registration, and a SCIA filed with the comune once the activity becomes professional in scale. Several historic centres now cap new registrations, and the condominium regolamento can prohibit tourist use outright regardless of what the comune allows. Our holiday let licensing guide sets out the layers in order.
The practical decision framework for an Israeli buyer is to establish the letting permission before the offer, not after the deed, because the Israeli tax planning on this page is worth nothing on a property that cannot legally be let.
- Verify the regolamento condominiale allows tourist use before the compromesso
- Confirm the comune is still issuing registrations in that zone
- Where the plan is long lets to residents rather than tourists, both the Italian rate and the licensing burden change
What else changes for an Israeli owner specifically?
Two things sit outside the tax question and both are procedural rather than difficult.
Israel is outside the EU, so the reciprocity condition in article 16 applies and the notary verifies it against the Foreign Ministry tables. For Israeli buyers this is a check rather than an obstacle, and it happens well before the deed as part of the notary’s file. Our reciprocity guide explains how the tables read and where entries are partial rather than absolute.
Stay is limited. An Israeli passport holder is a third-country national for Schengen purposes and may spend 90 days in any 180-day period in the area, with the Entry/Exit System recording movements automatically from 2026. Ownership adds nothing to that allowance, which is a common misunderstanding among buyers who assume a house implies a right to occupy it. The 90/180 guide covers how the rolling window is counted and what the visa routes are for owners who want longer.
Does the new immigrant exemption change the answer entirely?
For one group it removes the question rather than answering it, and that group is large enough that it belongs before the scenarios.
Israel grants new immigrants and senior returning residents a 10 year exemption on foreign-source income and on gains from foreign assets, introduced by the 2008 amendment to the Income Tax Ordinance. An oleh chadash who owns an Italian apartment during that window pays Italian tax on the rent and nothing in Israel, because there is no Israeli charge for the section 122A election to reduce or for a credit to offset.
Three consequences follow and each affects timing rather than the property itself.
During the exemption the Italian election is the entire decision, exactly as it is for a German owner. The comparison on this page between 15% and the ordinary route is moot, because both produce zero. What matters is whether cedolare secca or ordinary IRPEF gives the better Italian outcome.
At the end of the window everything on this page switches on. An owner approaching year 10 should model the Israeli position before the exemption lapses rather than discovering it in the first taxable year, because the choice of route then has to be made with a property already let and a pattern already established.
And the acquisition date matters for the gains side. Where the exemption covers gains on foreign assets, the treatment can depend on when the asset was acquired relative to the change of residence, which is a question for an Israeli adviser on the specific dates rather than a general rule. It is worth asking before buying if aliyah is planned or recent.
| Position | Italian tax | Israeli tax on the rent |
|---|---|---|
| Israeli resident, ordinary route | 21% or 26% flat, or IRPEF | Marginal on net, less Italian credit |
| Israeli resident, s.122A election | 21% or 26% flat, or IRPEF | A further 15% of gross, no credit |
| New immigrant inside the 10 year window | 21% or 26% flat, or IRPEF | None |
- Insider tip: where a purchase and an aliyah are both planned, the order and the dates are worth setting deliberately rather than by convenience
- The exemption covers foreign-source income, so Italian rent qualifies while Israeli-source income does not
- Reporting relief and tax relief are not identical, and the reporting position should be confirmed separately
Which Israeli buyer scenarios does this change?
The investor letting year-round. The profile where the 15% election does the most damage, because Italian tax is at its highest and running costs are at their largest. This buyer should assume the ordinary route until the modelling says otherwise.
The family holiday home, let for a few weeks. Small numbers on both sides, and the administrative simplicity of the election has genuine value against a modest arithmetic loss. This is the one profile where the election can reasonably win on grounds other than tax.
The investor holding property in several countries. The most likely to apply one answer across a portfolio and the most likely to be wrong doing it. A property in a low-tax jurisdiction and an Italian apartment sit at opposite ends of the section 122A calculation.
The buyer intending to relocate to Italy. Israeli residence ends and with it every rule on this page. Italian residence brings worldwide taxation and the Italian regimes for incoming residents, and the Israeli exit position needs its own advice before the move rather than after.
For the purchase itself, see the step-by-step sequence. For the Italian rates an Israeli owner keeping their residence in Israel will pay throughout, the prima casa comparison explains the second-home position, and the selling guide walks through the paperwork a departing owner faces.
Frequently Asked Questions
Section 122A of the Israeli Income Tax Ordinance offers residents a flat 15% charge on rental income from property abroad. It is deliberately simple: no deduction for expenses other than depreciation, and no credit for tax paid in the country where the property sits. The simplicity is the whole product, and for an Italian property it is usually the more expensive of the two routes.
Because Italy has already taxed the same rent. Under the flat Italian regime a short let is charged at 21% on the first unit and 26% beyond it, and cedolare secca is withheld before the money reaches Israel. Electing 15% in Israel surrenders the credit for that Italian tax, so the owner pays roughly 21% in Italy and a further 15% in Israel on the same euro: about 36% in total.
Marginal rates on the net rental profit, with expenses deductible and a credit for the Italian tax paid. Because Italian tax on a let apartment is already substantial, the credit frequently covers most or all of the Israeli charge. The route is more work and produces a lower total in most Italian cases, which is the opposite of how the two options are usually presented.
Where the foreign country's tax is low or nil and the property has few deductible costs. That describes several markets Israeli investors buy in, which is why the election has a good reputation. Italy is not one of them: it taxes rental income at 21% or 26% under the flat regime, so the credit being surrendered is worth more than the rate being saved.
The election is a route for foreign rental income and the practical work is deciding it property by property in the modelling, then applying the Israeli rules consistently on the return. An investor holding property in a low-tax jurisdiction and an Italian apartment should not assume one answer serves both, since the arithmetic depends entirely on what the source country has taken.
No, subject to the standard check. Israel is outside the EU, so article 16 reciprocity applies and the notary verifies it against the Foreign Ministry tables before the deed. The check is procedural for Israeli buyers rather than an obstacle, and it happens weeks ahead of completion as part of the notary's file.
Three months in any rolling six, applied across the Schengen area as a whole, with automated logging from 2026 under the Entry/Exit System. A deed confers no right of residence and no extension of that allowance. Where an owner wants a full season, the elective residence visa is the route most non-working owners take.
Italy exempts a private seller's gain after 5 years of ownership under article 67 TUIR. Israel taxes capital gains on worldwide assets for its residents, and where Italy has charged nothing there is no Italian tax to credit. As with the rental question, the Italian relief does not carry across, and the Israeli position should be modelled independently rather than assumed to follow the Italian one.
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