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Transferring Funds to Buy Property in Jerusalem
Transferring Funds to Buy Property in Jerusalem

The Importance of a Money Transfer Specialist

People living outside of Israel or earning an income from abroad may want (or need) to use foreign funds when buying a property in Jerusalem. As a result, the need to transfer money from overseas to Israel and exchange it to shekels heads right to the top of the list of priorities in order for Buyer to purchase a home.

If the Buyer is new to Israel, or at least new to transferring money to Israel from overseas, the immediate questions arise of “What are the ways that I can transfer money internationally?”, “Are there any regulations that might affect me?”, “Where can I get the best exchange rates?”, and “how much will it cost me to send my money to Israel?”

Transfer Regulations

Transferring money into and out of Israel is an extremely common practice. The NIS is fully convertible, and the government imposes no restrictions on transfers into or out of the country. That said, banks are required by law to report ‘large-scale transfers’ of anything over $50,000 USD or 200,000 NIS to the Controller of Foreign Currency.

As money transfers for the purposes of buying a property in Israel are likely to exceed the $50,000 USD threshold, the Buyer should be prepared to inform the bank of the purpose of the transfer, as well as provide any documentation when asked. In the interests of anti-money laundering and fraud protection, the Buyer is almost certain to be asked for proof as to the source of the funds, which can be a major source of stress and hassle depending upon who at the bank will be doing the review.

It is also noteworthy to point out that other than in regulated sectors (such as banking and insurance), foreign direct investments, such as real estate purchases, do not require government approval. However, should a Buyer require a mortgage, he/she will be required to take out a Life and Property Insurance policy to be granted a mortgage loan.

Money Transfer Specialists

All these questions (and more) make the case crystal clear for the importance of finding a knowledgeable, experienced, and trustworthy money transfer specialist (a Specialist) to work with. A Specialist can make the process of moving money to Israel a safe, easy, and cost-effective experience. While it is certainly not a requirement for the Buyer to work with one to transfer foreign currency, working with one can certainly prove worthwhile (particularly, when the Buyer considers the less-than-helpful service that Israel’s banks are notorious for).

One such expert in the field of foreign currency exchange is Jerusalem resident and IsraTransfer Director of Business Development, Daniel Eisenberg (www.isratransfer.com). A seasoned veteran of the currency transfer industry, Daniel recommends taking advantage of the experience, resources, and relationships of a full-service currency exchange companies. They streamline the administrative process, find the best exchange rates, and help eliminate the often-unavoidable added stresses and hassles that go along with dealing with Israeli banks.

However, with that in mind, and with no shortage of money transfer specialists available to choose from, Daniel warns Buyers to always make sure the firm they choose to work with has a valid license to practice in Israel. He also considers any company unwilling to produce it upon request a giant red flag, and strongly cautions against doing business with any of them.

Ways for Buyers to Transfer Money to Israel

The process of transferring money to Israel to buy a property is typically handled by an international wire transfer. In Israel the banks require proof from the Buyer that taxes have already been paid on the money being transferred, before they will accept it.

 Accordingly, Buyers should be prepared to provide documentation, including in some cases an affidavit written by either a lawyer or accountant, confirming that all taxable obligations on the sum have been fulfilled. Furthermore, in the interests of avoiding hassle later on, Buyers (other than in the United States) may also want to take the additional step of obtaining a document from their originating country’s tax authority to prove that there is no tax liability on the amount they’re looking to transfer.

Open A Personal Israeli Bank Account Or Trust Account?

Next, the Buyer will need a place for the money to be transferred to, in order to make the purchase. The two options available are either a personal Israeli bank account, or an Israeli trust account.

1) A Personal Bank Account

In theory, for an Israeli citizen, opening a personal bank account in Israel should be a very standard and simple procedure. While sometimes a bit more inconvenient, foreign citizens also have the right to open an account at an Israeli bank, which usually requires them to set up an appointment in advance and deposit a minimum of 50 NIS into the account upon its opening.

 

Many bank branches, though, are not equipped to handle accounts by foreigners, and will often send the customer to a central branch in a large city.

For a foreigner, opening a personal bank account may prove cheaper than a trust account. Yet, despite being entitled to do so, it may not always be an available option. In some cases the banks may require the Buyer to use a money transfer company in Jerusalem, if the he/she isn’t already doing so.

 

 2) A Trust Account

In cases when a personal bank account is not an option, a Buyer’s lawyer may need to open an Israeli trust account, so that the Buyer can purchase a property. A trust account is not all too dissimilar from a personal account, with the exception of its management and administration responsibilities being handled by a third party trustee who is typically a lawyer. This is one of the contributing factors that goes into the higher costs of having a trust account, as often a trustee will charge the Buyer a fee in exchange for these services.

 Another challenge for a Buyer, when using a trust account, is the risk of a less lucrative exchange due to having no say in when funds are converted into shekels. These decisions are made at the trustee’s discretion, meaning that there is potential for currency conversions to be made at a time of unfavorable exchange rates for the Buyer.

Transfer Regulations

Transferring money into and out of Israel is an extremely common practice. The NIS is fully convertible, and the government imposes no restrictions on transfers into or out of the country. That said, banks are required by law to report ‘large-scale transfers’ of anything over $50,000 USD or 200,000 NIS to the Controller of Foreign Currency.

As money transfers for the purposes of buying a property in Israel are likely to exceed the $50,000 USD threshold, the Buyer should be prepared to inform the bank of the purpose of the transfer, as well as provide any documentation when asked. In the interests of anti-money laundering and fraud protection, the Buyer is almost certain to be asked for proof as to the source of the funds, which can be a major source of stress and hassle depending upon who at the bank will be doing the review.

It is also noteworthy to point out that other than in regulated sectors (such as banking and insurance), foreign direct investments, such as real estate purchases, do not require government approval. However, should a Buyer require a mortgage, he/she will be required to take out a Life and Property Insurance policy to be granted a mortgage loan.

Charges

Like everything else that goes into purchasing a property in Jerusalem, there are expenses incurred along the way. Converting a Buyer’s foreign currency is no exception and these costs manifest themselves in four different forms. Knowing what they are and where they come from, can help minimize their impact.

1) Transfer Fees

The first of these costs is the transfer fee often imposed on the Buyer by the sending bank, in order to transfer the money to Israel. The cost of this fee can range anywhere from $25 to $50 US Dollars (USD).

This expense is typically a necessary evil. However, a Buyer can potentially save more than 50% on this charge by utilizing a Specialist to facilitate the transfer, who in some cases charge as little as $10 USD! Furthermore, some foreign banks do not impose fees on transfers made within Israel, so it is absolutely recommended to find out if a Specialist offers domestic receiving options that could potentially save the Buyer a transfer fee altogether.

2) Receiving Fees

The next cost a Buyer will encounter when transferring money to Israel is the receiving fee imposed by the Israeli bank, just to receive the money. This sneaky charge usually works out to approximately 0.2% on the total amount of the funds received. This is not a cost that Specialists always charge, so it is worthwhile investigating. After-all, every shekel counts.

For example, if a Buyer transfers to an Israeli bank an amount in a foreign currency equivalent to 5,000,000 NIS, the receiving Israeli bank will charge the Buyer 10,000 NIS (5,000,000 x 0.2/100).

3) Conversion Fees

Once a Buyer’s money has been sent and received (not to mention charged for each service respectively), the Buyer will typically be charged once again in the form of a conversion fee before being able to exchange the funds.

Just like the receiving fee, the cost of this typically comes in at around 0.2% on the total of the funds received. This may not sound like a lot, but it’s another fee that some Specialists may not charge for, so again it is worthwhile investigating.

For example, again, if a Buyer transfers to an Israeli bank an amount in a foreign currency equivalent to 5,000,000 NIS, the receiving Israeli bank will charge the Buyer a further 10,000 NIS (5,000,000 x 0.2/100) to convert the money.

4) The Mid-Market Rate

Finally, after navigating the entire journey of transferring the funds to Israel from abroad, waiting out the anti-money laundering review, and being chipped away by bank fees, the largest and most expensive part in the process has arrived – the actual currency exchange.

The most important part of this step is finding the most competitive exchange rate to ensure that the Buyer receives the most shekels for his/her foreign currency. The most common variable that comes into play at this time is the mid-market rate (sometimes called the interbank rate). In short, this is the rate that banks and other large financial institutions use to trade currency between themselves, and is a virtual impossibility for any individual to have access to. That said, the key to getting the most beneficial currency exchange is to get a rate as close to the mid-market rate at the time of the conversion.

The majority of times, a Specialist is where the Buyer will find the most competitive rate. While there is no harm in shopping around, experience has shown that in most cases the quest for the best exchange rate often leads back to Specialists, rather than banks.

Summary

Overall, the process of transferring money to Israel in order to pay for a property purchase in Jerusalem has the potential to be stressful and expensive. Some of these inconveniences are unavoidable, but it’s not the case for all of them.

The bottom line is knowing the right questions to ask, as this can go a long way to saving the Buyer valuable money, time, and hassle. All the Buyer needs is an easily accessible expert to ask, and in almost every case a money transfer specialist is exactly where the Buyer will find the answers.

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Michael Steinmetz

Jerusalem Real Estate

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