Betterment Tax, development, and building fees

• Checking Betterment Tax liability and charges when “exercising rights” or requesting information in advance of “exercising rights.”
• Calculation of building fees and development taxes.

In accordance with the provisions of Section 196A and the third addendum to the Planning and Building Law, 5725-1965 (hereinafter: “the Law”), the local planning and building committee is required to impose and collect betterment levies from landowners, including long-term lessees, upon “realization of rights” (sale, issuance of a building permit, commencement of actual use as first permitted in the plan).

1. Approval of a city building plan.
2. Granting of “relief” (additional building percentages, additional housing units, additional floors, reduction of building lines, etc.).
3. Approval of “exempt use” (such as changing the designation from agricultural to commercial, etc.).
4. Payment of the Betterment Tax to the local committee is a condition for granting municipal approval for registration in the Land Registry, even if the rights have not yet been exercised.

The amount of the Betterment Tax is determined by a real estate appraiser appointed by the local committee who assesses the property.

The amount of the tax is calculated according to the planning, physical, and legal status of the property, and in accordance with the provisions of the Third Addendum to the Planning and Construction Law, 1965.

An appeal against the Betterment Tax assessment may be lodged within 45 days of the date on which the assessment was received by the taxpayer, by submitting an appeal to the Appeals Committee for Compensation and Betterment Levies or by applying to the Appraisers Council for the appointment of a decisive appraiser.

Receipt of the permit / municipal approval for registration in the Land Registry is subject to the decision of the Arbitrator/Appeals Committee, and payment of the betterment levy is subject to the determination of the Arbitrator/Appeals Committee.

However, it is possible to obtain a permit/municipal approval for registration in the Land Registry prior to the decision of the arbitrator/Appeals Committee.

The condition for this is payment of 70% of the Betterment Tax determined by the committee appraiser and the balance by means of a bank guarantee.

At the same time, the assessment process will continue.

 

• Transfer of land rights requiring registration, except for transfer by operation of law (inheritance) or gift from a person (“close relative” - spouse, parent, descendant (son/daughter), or descendant (son/daughter) of a spouse, sibling and their spouses)
• Receipt of a building permit.
• Actual use of the land in accordance with the betterment plan.

Please note

You must report the transfer of property rights (e.g., through a sales agreement) within 30 days of signing the contract in order to avoid additional interest charges. To report the exercise of rights (such as: sale of an apartment, dissolution of a company, division of apartments in a shared building, dissolution of joint ownership), you must attach all the documents required according to the type of transaction.

Requests for exemption must be submitted within 45 days of receiving the local committee's assessment.

Checking betterment tax liability before “exercising rights”:

To receive information regarding betterment tax liability, submit the completed and signed application form to the Betterment Tax Department by email talp@lod.muni.il or by submitting the documents during the department's office hours, along with all the required documents listed on the application form.

An initial review of betterment tax liability is conducted after payment of an information fee.

If there is a betterment tax liability, the department will notify the applicant if they wish to order a full real estate appraisal.

Ordering an appraisal prior to realization involves payment of the appraiser's fee, which will be calculated as an advance payment of the betterment levy and offset when the “rights are realized.”

The appraisal and payment vouchers will be sent by mail/email upon completion of the process, or can be picked up in person from the department during office hours.

• Link to request a preliminary inquiry regarding betterment tax liability prior to “realization of rights”.
• Link to request a betterment tax appraisal when there is liability prior to “realization of rights”.

1. Full or partial sale transaction.

The following documents must be attached for the examination of betterment tax liability:

• Tabu extract/up-to-date certificate of rights.
• Property purchase contract/ Israel Land Authority lease agreement by the sellers/transaction report from the Tax Authority.
   
• Property sale agreement and inheritance orders (if applicable).
   
• Valid lease agreement.

2. Divorce agreement with or without compensation.

The following documents must be attached for the purpose of checking betterment tax liability:

• Tabu extract/up-to-date certificate of rights.
   
• Property purchase contract/lease agreement with the Israel Land Authority by the sellers/transaction report from the tax authorities.
   
• Divorce agreement.
   
• Valid rental agreement.

3. Purchase of property from a contractor (transfer of rights from the contractor to the buyer)

The following documents must be attached for the purpose of checking betterment tax liability:

• Tabu – land title deed extract / certificate of rights.
• Property purchase contract / Israel Land Authority lease agreement by the sellers / transaction report from the Tax Authority.
   
• Property sale agreement.

4. Transfer of rights from the Israel Land Authority to the Land Registry, with or without consideration.

The following documents must be attached for the purpose of checking betterment tax liability:

• Tabu / Israel Land Registry extract (always!)
   
• Deed of sale in Israel
   
• Property purchase contract/Israel Land Authority lease agreement by the sellers/transaction report from the Tax Authority.
   
• Valid rental agreement.

5. Transfer as a gift to a person who is not a relative.

(“Relative” - spouse, parent, child, or child of a spouse, sibling, and their spouses).

The following documents must be attached for review of betterment tax liability:

• Tabu – Israel Land Authority extract /  updated certificate of rights.
   
• Property purchase contract /  Israel Land Authority lease agreement by the donor.
   
• Affidavits of the donor and recipient.
   
• Valid rental agreement.
   
• For residential apartments only - affidavit for exemption up to 140 square meters if the conditions for exemption defined by law are met.

• Protected tenants - an affidavit regarding protected tenants must be attached (please specify: name, ID number, floor, apartment, direction).
   
• Non-profit organization - attach the association's bylaws with tax approvals and an affidavit regarding the intended use of the proceeds.
   
• Companies - if the property is registered as owned by a company, attach a certified signature and a copy of the signatory's ID card.

Additional documents may be required for the department to review the Betterment Tax liability.

The list of exemptions from Betterment Tax is found in Section 19 of the Third Addendum to the Planning and Construction Law.

Those who believe they are eligible for an exemption are required to submit the relevant documents to the Assessment and Betterment Department at the beginning of the process of determining the betterment levy liability.

Request for exemption - must be submitted no later than 45 days from the date of receipt of the local committee's assessment.

Please note! The transfer of property rights (e.g., through a sales agreement) must be reported within 30 days of the transfer to avoid additional interest charges.

• Link to the affidavit for exemption up to 140 square meters upon sale
• Link to the affidavit for exemption up to 140 square meters upon issuance of a building permit.

Indexation and interest - The Betterment Tax, as determined by the appraiser, is indexed to the consumer price index or the construction input index, whichever is lower, from the date of approval of the plan/relief/exempt use until the date of realization. From the date of realization, the debt bears indexation to the consumer price index and interest is added.