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Betterment Levy in Israel: Who Pays and When

Q: Who normally pays the betterment levy in an Israeli sale?

The seller, for plans approved during their ownership, because they are the owner who was enriched by the planning decision; the contract should confirm this.

Q: Can the levy be disputed?

Yes. The Planning and Building Law provides procedures for challenging the assessment, including a decisive appraiser and an appeals committee. Timelines and costs vary.

Q: Is betterment levy the same as land appreciation tax?

No. Betterment levy goes to the local planning committee under the Planning and Building Law; land appreciation tax goes to the Tax Authority under the Real Estate Taxation Law.

Planning map with a highlighted parcel and a levy notice from the local committee

The betterment levy (hetel hashbacha) is a payment to the local planning committee under the Planning and Building Law 5725-1965. It is charged on the increase in a property's value caused by a planning decision: approval of a plan that adds rights, grant of a relief (hakala) from the plan, or permission for a non-conforming use. The levy becomes payable when the owner realises the betterment, most commonly by selling the property or by applying for a permit that uses the new rights. Because sale is a realisation event, the levy surfaces in almost every transaction where a plan has been approved since the owner acquired the property, and a buyer needs to know who is paying it.

What triggers the levy

Approval of a plan under the Planning and Building Law that increases the permitted use, floors or area of the property.
Approval of a relief from the provisions of a plan.
Approval of a non-conforming use permit.

The levy is assessed by an appraiser on behalf of the local committee, comparing the property's value before and after the planning decision. The amount depends on the specific plan and property, and the law sets the share of the betterment that is charged. The owner can dispute the assessment through the procedures in the law, which include an appraiser appointed to decide and an appeals committee.

Who is liable

The person liable is the owner, or long-term lessee, of the property at the time the planning decision took effect. Payment is deferred until realisation. In a sale, this means the seller is usually the party liable for betterment arising from plans approved during their ownership, and standard Israeli sale contracts allocate it that way. The contract can, however, shift the levy to the buyer, and sellers of properties with large unused rights sometimes try to do so.

Read the clause on betterment levy in the draft contract and make sure it places the levy on the seller for all plans approved up to the signing date.
Understand that plans approved after you buy will be your responsibility when you later sell or build.
Note that the Land Registry will not register the transfer without the local committee's confirmation that the levy was paid or that none is due.

When it appears in a sale

The levy becomes concrete when the seller asks the local committee for a confirmation for the Land Registry. If a plan has added rights, the committee issues an assessment. Disputes over the assessment can delay registration, so the contract should say who handles the dispute, who pays while it is pending, and whether part of the price is held in trust until the confirmation is obtained.

Betterment levy in urban-renewal projects

Pinui-binui and TAMA 38 projects exist because a plan adds rights, so betterment is built into them. Who pays depends on the specific plan, on exemptions and reductions that the law and government decisions provide for particular urban-renewal tracks, and on the agreement between the owners and the developer, which usually places the levy on the developer. The exemptions change over time and differ between municipalities. If you buy into such a project, get the allocation in writing and ask the developer's lawyer which exemption is relied on and whether it is secured.

How a foreign buyer checks the position

Ask the seller's lawyer for the local committee's betterment status or a preliminary confirmation before signing.
Have your lawyer review the planning history of the parcel for plans, reliefs and non-conforming uses approved during the seller's ownership.
Agree a trust retention from the price to cover any levy the committee assesses after signing.
Do not confuse betterment levy with purchase tax or land appreciation tax under the Real Estate Taxation Law 5723-1963; they are separate payments to separate authorities.

Common mistakes

Signing a contract that silently shifts the levy to the buyer.
Assuming no levy is due because the seller never built anything.
Releasing the full price before the committee's confirmation is in hand.
Mixing up betterment levy with purchase tax.
Relying on an urban-renewal exemption without checking that it still applies.

FAQ

Who normally pays the betterment levy in an Israeli sale?