The betterment levy (heitel hashbacha) is generally calculated at 50 percent of a qualifying rise in property value caused by an approved plan, relief or permitted non-conforming use. Liability can apply to an owner or long-term lessee, and payment can arise when rights are realized, including on a sale. Exemptions and special rules may apply. This page sits inside our full guide to selling property in Israel.
What is the betterment levy and who pays it?
It is a municipal charge, collected by the local planning and building committee (vaada mekomit), not by the Israel Tax Authority. An appraiser values the property before and after the relevant planning action; the general rate is half the qualifying uplift, subject to applicable exemptions and special rules. The legal basis is the Third Schedule (Tospat Shlishit) to the Planning and Building Law, in force since 1981.
Liability depends on the rights held when the relevant planning event arose and the statutory rules. It can fall on an owner or a long-term lessee, and payment can arise when rights are realized even if no additional building has been constructed. Ask your lawyer to check the assessment and transaction.
When is the levy triggered?
A qualifying approved plan, relief or permitted non-conforming use can create a levy when it increases property value. Liability depends on the planning history and assessment; a sale or permit can be a realization event that brings payment due. A sale alone does not establish that a levy is owed.
Three moments the levy can crystallise
- On a sale. A transfer can be a realization event. If a levy is due, address it with the local committee when seeking the clearance needed for registration (ishur le-tabu).
- On a building permit. Receiving a permit that realizes qualifying rights can bring payment due, subject to the applicable rules.
- On use. Starting a use permitted by an improving plan can be a realization event, subject to the applicable rules.
Payment can usually be deferred until a realization event. When a levy is due, confirm the payment or security arrangements required for the local clearance. For example, Tel Aviv describes a part-payment and guarantee arrangement for a registry certificate during certain challenges. Ask your local committee and lawyer what applies to your file.
How is the levy assessed, and what is the rate?
The general rate is 50 percent of the qualifying planning-driven rise; special rates or relief may apply. The committee’s appraiser (shamai) assesses the property before and after the relevant planning action. Check the calculation and applicable rules for your property.
What does a worked example look like?
This example is illustrative only. Assume the general 50 percent rate applies, with no special relief. Agricultural land worth NIS 1,000,000 is rezoned for residential use and becomes worth NIS 3,000,000. The betterment is NIS 2,000,000, so the assumed levy is NIS 1,000,000.
| Step | Figure |
|---|---|
| Value before the plan | NIS 1,000,000 |
| Value after the plan | NIS 3,000,000 |
| Betterment (the rise) | NIS 2,000,000 |
| Betterment levy at 50 percent | NIS 1,000,000 |
At the general 50 percent rate, every NIS 100,000 of qualifying uplift results in NIS 50,000 in levy. If an appraiser puts your uplift at NIS 600,000, budget NIS 300,000. This is our own arithmetic on the 50 percent rate, not a quoted figure. If your deal carries a real betterment, the levy is often the largest single cost of selling, so the appraisal behind it deserves a second look.
How does it differ from mas shevach and affect your net?
Both can appear on one closing statement, but they are different taxes with different collectors, triggers and appeal paths.
| Betterment levy (heitel hashbacha) | Capital gains tax (mas shevach) | |
|---|---|---|
| What it taxes | The rise in value created by a planning action | Your real gain between purchase price and sale price |
| Rate | Generally 50 percent of qualifying uplift; special rules may apply | 25 percent may apply to a taxable real gain; rates and relief depend on the transaction |
| Who collects | The local planning and building committee | The national Israel Tax Authority |
| What triggers it | An approved plan, permit, or relief | The sale itself |
| Appeal goes to | Appeals committee; a decisive appraiser is another possible route for an amount-only dispute | Tax Authority objection, then real estate tax appeals |
A betterment levy you pay can be deducted against the gain when mas shevach is calculated, which softens the double hit. For the full gains picture, see capital gains tax when selling in Israel. For how every selling charge fits together on one statement, see the guide to taxes when selling property in Israel.
Which exemptions and reductions exist?
A levy requires a qualifying planning action and an increase in value, subject to the applicable rules. The reductions below are items to verify with your lawyer, because their status is in flux. To plan around the levy before you sell or build, read how to reduce property improvement taxes before selling or building.
- Self-use enlargement (verify). Relief may apply under section 19(c) of the Third Schedule to building or expanding a dwelling for the holder or a relative, subject to statutory conditions including an area threshold of 140 sqm and a four-year residential-use condition after completion for a later transfer. Ask counsel and the local committee to check the detailed rules.
- Pinui-binui (verify). Special rates, including 25 percent in some cases, or an exemption may apply depending on the relevant plan, local designation and dates. Confirm the rules for your project.
- TAMA 38 (verify). Exemptions and charges can depend on the applicable plan, the rights involved and the realization event. Have counsel check the project documents and current rules.
- Safe room (mamad). The Planning Administration’s safe-room Q&A says no betterment levy is charged for building a standard residential safe room (ממ”ד, mamad) of up to 9 sqm net under the civil defence regulations, an enlarged mamad under Amendment 163 to the Planning and Building Law, or rights used under the national safe-room plan TAMA 40/A/1/1. Using that plan also gives neighbouring plots no right to claim compensation for loss of value under section 197. If the home you are selling has an added mamad, check that the committee’s assessment leaves it out.
How do you appeal a betterment levy assessment?
The appeals committee can consider challenges to liability or amount. If you accept liability but dispute the amount, a decisive appraiser is another possible route. Some assessments carry a 45-day deadline from when brought to your attention; other periods or extensions can apply. Ask a professional to check the deadline for your notice promptly.
- The amount is wrong. A decisive appraiser (shamai makria) is appointed through the Real Estate Appraisers Council. Your own appraiser can review the valuations.
- No levy is due at all. The District Appeals Committee can hear a liability challenge, for example if you argue that the planning action does not qualify or that you have an exemption.
An assessment correction or agreed assessment may be available in defined cases; ask your local committee and adviser about the conditions and timing. The Knesset describes one route. See also Jerusalem’s betterment levy fight.
What needs a professional before you accept the charge?
- A lawyer to identify the exact plan, permit or relief that triggered the levy, and its date. No trigger, no levy.
- Your own appraiser to produce a competing before-and-after valuation against the committee appraiser’s figures.
- A lawyer to say whether a self-use, pinui-binui or TAMA 38 exemption fits your facts, since these rules are being reformed.
- Written evidence of how any levy due is paid or secured, and confirmation from the committee about clearance. Keep proof of payment to support any allowable mas shevach deduction.
Frequently asked questions
What is the betterment levy in Israel?
It is generally a charge of 50 percent of a qualifying rise in property value caused by a planning action, assessed by the local committee under the Third Schedule to the Planning and Building Law. Exemptions and special rules may apply.
What does betterment levy mean for a seller?
A qualifying uplift can lead to a levy on an owner or long-term lessee even if no extra rights were built. Check who is liable, any exemption, and the clearance requirements for your sale with the local committee and your lawyer.
Can I make the buyer pay it?
Statutory liability generally concerns the owner or long-term lessee under the applicable rules. The contract can allocate the economic burden between the parties. Ask your lawyer and the local committee how the particular charge and clearance will be handled.
Is the levy negotiable?
The general rate is 50 percent of the qualifying uplift, although special rules may apply. You can challenge whether the levy is due or dispute the before-and-after valuation; ask a professional which route applies.
Does paying the levy reduce my mas shevach?
A paid levy may be deductible in calculating a taxable gain, subject to the applicable tax rules. To claim it, you fill in Form 7036, the seller’s notice that you paid permit fees (dmei heter) to the Israel Land Authority or paid a betterment levy, and attach it to your Form 7002 seller’s declaration with proof of payment. In that notice you undertake to report any later change in the amount you reported. If the Land Taxation (misui mekarkein) assessment has already been made, attach the form to a request to amend the assessment instead. Ask your tax adviser whether and how the deduction applies to your sale.
How long do I have to challenge it?
For some assessments, an appeal must generally be filed within 45 days after the assessment is brought to the liable person’s attention. Other periods or extensions may apply. Have a professional check the particular notice and deadline promptly.
Sources
- Third Schedule (Tospat Shlishit) to the Planning and Building Law, in force since 1981.
- City of Jerusalem, betterment taxes: jerusalem.muni.il
- Trustton, betterment levy explained and worked example: trustton.com
- Barlaw, changes to betterment levy appeal procedures: barlaw.co.il
- Jerusalem real estate, guide to heitel hashbacha: jerusalem-real-estate.co
- Justice Ministry legal submission: the levy and TAMA 38 rules.
- Tel Aviv-Yafo municipal auditor: self-use relief and appeals.
- Government Authority for Urban Renewal: pinui-binui levy rates.
- Planning Administration: questions and answers on building a mamad, including the betterment levy.
- Israel Tax Authority: seller’s notice of paying permit fees or betterment levy (Form 7036).
Related pages
- Guide to selling property in Israel
- Taxes when selling property in Israel
- Capital gains tax when selling in Israel
- Reducing improvement taxes before selling or building
- Jerusalem’s betterment levy fight
Your next step: pull the triggering plan and the committee’s before-and-after appraisal, then have a professional check the numbers and the applicable challenge deadline promptly. If you want a read on whether your sale carries a levy, tell us about your property and we will map the charges before you sign. This is general information, not legal or tax advice; confirm with a licensed professional.
