In July 2018, the Israeli Knesset approved a draft bill in a second and third reading that addresses the obligation of apartment owners seeking to sell a property as a result of a general outline plan to pay land betterment tax.
Up until now, when an apartment owner wanted to sell a property, he or she had to pay land betterment tax even when a general outline plan was in effect for the entire building (i.e., a general urban building plan, such as one that enables constructing a building addition on the roof, basements, etc.).
The draft bill updates the definition of the term “plan” and prescribes that a general outline plan will no longer be deemed as such. In other words, from now on, the obligation to pay land betterment tax when selling a property will apply only in instances when there is a detailed plan in place that enables building permits to be issued to exercise the rights.
The draft bill further prescribes that if a specific plan is approved that grants building rights to the condominium building, but in fact the exercise of the building rights is possible only by a particular apartment owner in the building, then only that particular apartment owner will be obligated to pay land betterment tax. Thus, for example, for an apartment with a plan that allows the construction of a rooftop room, the obligation to pay the betterment tax will apply solely to the owner of the rooftop apartment who is able to exercise the rights pursuant to the plan.
The draft bill also regulates the issue of the fee payment to the local authority for preparing the betterment tax assessment. If a fee is paid, it will be deducted from the sum of the betterment tax, plus linkage differentials and interest, from the date the fee was paid and until the date of the deduction. If an exemption from paying the betterment tax applies pursuant to the assessment, the fee paid will be refunded (except in a few instances).