Moving to Israel? Useful Information Regarding Cars – Tax Benefits, Maintenance & Insurance (Part I)

Philip, a new Oleh from the U.S., recently purchased a new car taking advantage of his “Oleh benefits”. However, after purchasing the car, he felt “lost”, as he did not know what he should do and how things work in Israel.

For the benefit of Philip and others in his shoes, we summed up the important points to know regarding Oleh tax benefits, routine car maintenance and car insurance issues.

In our next article, we will discuss driving license and the essential issues to be aware of when buying or selling a car in Israel.


New Olim enjoy certain financial benefits including favorable terms when buying a new vehicle: cars, motorcycles or small truck weighing up to 4,500 K.G. These rights may be exercised up to 3 years after the “Aliya” date.

An Oleh importing a car from abroad or purchasing a new car from an authorized dealer in Israel, is exempt from paying the purchase tax but must pay customs and VAT, provided he can show the following:

1) A Valid driver’s license from the country of origin (must be valid prior to the Aliya date).

2) An Israeli driver’s license.

The right extends to one vehicle per one single person or per one married couple.

A vehicle purchased when exercising such rights may be driven only by the new Oleh, hence the car license specifically restricts in writing, the identity of the persons permitted to drive it. That is, no one else is permitted to drive the vehicle (boyfriends / girlfriends / friends etc.).

In case of siblings wanting to use “the family car”, a specific application to the Ministry of Transportation (“MOT”) must be made to include them as authorized drivers in the car’s license.

Police doing regular license check stops, are likely to check the identity of the driver and ensure she/he is authorized to drive the car. If not, this may result in a high fine.

Also, there is no insurance coverage if an unauthorized driver makes use of the car in contradiction to the car license specifications.

In order to avoid paying the full taxes, an Oleh cannot sell the new car for 4 years. If he does so, he will be liable to pay the remaining balance of the taxes that were due and waived when the car was purchased and, in any event, he must own the car for a minimum of 1 year. However, if he sells to another new Oleh who can enjoy the tax reduction benefit, he is exempt from this requirement.

In Israel, you are obligated to do a mechanical MOT test (the “Test”) annually. The “test” is performed in authorized car inspection stations, where your car is mechanically checked. This inspection can take up to 30 min. (no need to leave your car there for the day).

Shortly before the date of your Test you will receive by mail the new car license with the licensing fee you need to pay. Payment of the fee can be paid in the bank or in the post office bank (the licensing fee is determined by the Ministry of Transportation based on the car’s age and price list of a new car of that type).

Once you paid the license fee, you can perform the Test in the car inspection station where you will be required to pay an additional NIS 62 for the mechanical test + NIS 24 air pollution test (mandatory).

The prices for the Test to private cars are “fixed” by the Ministry of transportation and can be viewed on the Ministry’s website.

A new car bought from the importer is exempt from the “test” for the first 2 years on the road, but after the first year you are obligated to pay the licensing fee in order to renew your car license.

When doing Test, you should provide the following at the car inspection station:

1) A valid car license stating the license fee was paid.

2) An I.D. card evidencing you as the owner of the car.

If you are not the owner (as stated in the car license), you should present a signed power of attorney, signed by the owner, stating you are permitted to do the Test on the owner’s behalf (there is a written power of attorney on the backside of the car license, the owner only needs to fill in the details and sign) AND an I.D. /driver’s license or passport of the car’s owner.

3) An insurance certificate evidencing you have a valid mandatory insurance policy.

After successful completion of the MOT annual test, your car license will be “stamped” and you will receive a sticker you are to place on the inside of your front windshield in your car, in a visible angle (usually upper left or right side of the front windshield). 


Mandatory insurance (Bituach Hova) – this insurance is required by law and is a way for the State to ensure the rights for potential car accident victims. This type of insurance covers bodily harm to victims that were hurt by your vehicle. The “trigger” is the fact your car was involved in an accident, therefore it will cover the victims even if your car was stolen and the accident occurred while the car was in the thieves’ possession and due to their negligence. If your vehicle hit and hurt someone, the mandatory insurance will cover the costs, including rehabilitation or compensation due to death of the victims.

Consequently, if you do not have a mandatory insurance, your car is prohibited from being driven. Moreover, if you get caught driving without this insurance, you will be liable to pay a high monetary fine.

The prices for the mandatory insurance vary between insurance companies, and depend on various factors such as your age, “driving record”, car model and year.

  • The most expensive insurance is for a “new driver” (“Nehag Hadash”) which is typically 17- 21 years old. However, if you are older and just received your license, the insurance will still be relatively expensive.  
  • Women are regarded “low risk” by insurance companies, and so a single female driver will be offered an insurance policy at a relatively low price.
  • If you are a new Oleh or resident with a clean driving record, it is highly recommended you bring a letter from your insurance company back home, confirming your clean driving record, as this may help reduce the insurance prices.

Problematic drivers who were denied insurance coverage or motorcyclists – If you are a “problematic” driver with a bad record, or drive a motorcycle, insurance companies may refuse to insure you claiming you are “high risk”. However, in this instance, you may insure with the “Pool”, an insurance body established by the insurers, acknowledged by the government. The Pool was founded in order to avoid the possibility of drivers who were denied insurance coverage by “regular” insurance companies, driving anyway without insurance and against the law. According to the legislation, the Pool is obligated to insure all applicants no matter their records, but insurance prices are at least 20% more expensive than the average insurance price offered in the market.

Comprehensive Insurance (Bituach Makif) – this is an optional insurance meant to cover damage caused to your car i.e. theft, accident etc. Some types of comprehensive insurances cover items inside the car provided you declared their presence when making the insurance and there is a relevant clause regarding these items in the policy.

It should be noted that the older the car, the less worthwhile it will be to get a comprehensive insurance policy.

Third Party Insurance (Bituach Tzad Gimel) – another optional insurance that covers damages and losses caused by your vehicle to third parties, including equipment or possession of a 3rd party that was damaged by your car. In some cases, this type of insurance is covered by the Karnit Fund – Karnit is a public incorporation which is funded by a sum allocated from the Mandatory Insurance premium. Its purpose is to handle and compensate accident victims suffering from bodily injuries, who have no one to sue for their suffering. That is, victims of a “hit and run” accident, an uninsured vehicle, a driver without a valid license etc. 


  • Like everything in Israel, insurance prices are also negotiable. Shop around before you decide on an insurance company, compare the different terms and the deductable fee (the sum you will be expected to pay in case of an insurance event).
  • You can get a mandatory insurance policy in one insurance company, and the comprehensive or third party (or both) in another company, but carefully check the terms and prices. Insurance companies tend to offer “special prices” if you take out both mandatory and comprehensive insurance policies with them, but surprisingly, despite the discount offered, it may still be cheaper to “divide” the different policies between insurance companies. Carefully read the policy coverage prior to deciding.
  • Insurance companies often require specific alarms and lock systems to be installed in the cars as a pre-requisite for insurance coverage. If you already have a security system in your vehicle, let the insurance company know, this may reduce the price of the comprehensive insurance policy. Absence of a security mean specified in your policy means that in case of an insurance event, the insurance company may deny coverage.
  • If you do not drive on Shabbat and religious holidays make sure to mention this to the insurance because you are entitled to a discount.
  • Some insurance companies offer a discount to a “second car” in the household– if you have 2 cars and one of them is through work (expenses and insurance paid by your work place), you may be entitled to a discount on your insurance on your second (private) car. If this status applies to you, make sure to ask your insurance company whether they provide this discount.
  • Make sure you understand the terms of the coverage as there are situations which entitle the insurance company to deny your claim – i.e. an accident you caused while driving under the influence of drugs or alcohol, damage caused to your car while you visited the Palestinian Territories (policies often do not cover insurance events in the Palestinian Authority area), car stolen while keys were left inside etc.
  • Read the policy carefully, it is important to note whether in case of an accident, the insurance allows you to fix the car in the authorized garage of your choice, or obligates you to fix your car in a garage of their choice. Additionally, whether you deserve full compensation (surveyor costs and garage costs), and what happens if you disagree with the surveyor’s findings (how can you appeal). However, note that the deductable will be lower if you agree to fix your car with a garage working with the insurance company.
  • Insurance is for a full year. Prior to getting a policy, inquire what the “penalty” is if you want to terminate your policy earlier (if you are selling your car for example). You may sell the car with the insurance, however you should notify the insurance company beforehand and ensure, together with the buyer, that the insurance company accepts the potential buyer as the new insured and changes the names on the policy accordingly.
  • In case of an accident, you must provide your personal and policy’s details to the other party but avoid any statement of possible guilt. If you claim you are guilty, the insurance company may deny your claim for coverage and you will be required to pay for the damage and any additional expenses yourself.
  • In case of an accident involving pedestrians, you are obligated to involve the police.  

                                                                               Yael Harari, Adv., Esq.

                                                                          Co-Founder of TransHomation

**Next article – practical information about driving in Israel and buying and selling a car in Israel.



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