Similar to activities in other fields, the establishment of infrastructure or energy projects, as well as the operation of such projects after their establishment, are exposed to the imposition of various mandatory payments by the local authority in whose jurisdiction the infrastructure or energy project is being established or is operating. Such charges may be, for example - building fees, development levies, Arnona (municipal property tax), fees pursuant to the bylaws of the local authority or of a municipal association operating within its jurisdiction, and more.
These and other charges may apply to anyone who establishes or operates an infrastructure or energy project, whether due to direct liability under the relevant legislation, or due to a contractual obligation towards the landowner or the party commissioning the work.
During the project establishment phase, various payments incidental to the construction are expected to apply, the main ones being - a building fee for obtaining a building permit and various development levies with respect to the land area and building area:
Building fees are calculated according to national tariffs set in regulations, corresponding to the type of construction or work.
Development levies are charges that vary from one local authority to another, and are intended to finance infrastructure that the local authority itself carries out within its jurisdiction, such as roads and sidewalks, drainage, and open public areas (such as parks and squares). The charge for a specific type of levy is a one-time charge in the life of a property with respect to a given area of land and construction.
A local authority may also demand development levies from one who operates a project after its establishment, if it carries out municipal infrastructure in proximity to the property or intended for its use, provided that the relevant levy has not been previously paid for the charged areas.
During the project operation period, the main municipal charge to be expected is an annual Arnona (municipal property tax), imposed on the holders of properties according to tariffs set in the Arnona ordinance of the relevant local authority, with respect to the various uses of the buildings and lands in each property. Each local authority has a different tax ordinance, different charge classifications, and the charge tariffs are determined at its discretion.
With respect to the aforementioned charges, there are also various exemption provisions in the relevant legislation. For example, areas or properties that constitute a “street” may be exempted from Arnona and development levies on certain occasions. Properties defined as “infrastructure pipeline and connection facilities may be exempted from Arnona, but this exemption does not apply to production facility or transformation facility nor to storage facilities attached to the ground, or to other property located on the same plot, that is not an infrastructure pipeline. In addition, there is a legal limitation on the Arnona tariff that can be imposed on the safety margins alongside an infrastructure pipeline. These are naturally only examples.
The Preparation and Planning Stage
When preparing estimates of the project’s establishment cost, it is highly advisable to also include in the estimate an assessment of the expected municipal charges, such as building fees and development levies.
For a project that includes the operation of a site or infrastructure upon completion of establishment, it is advisable to perform an advance assessment of the expected ongoing municipal charges.
Handling Received Charges
Municipal charges of their various types are often challenged by taxpayers on various grounds, i.e the authority to impose the charge; the sum of the charge; the applicability of an exemption; the type of use or work according to which the charge was imposed; the calculation of the charged area; the question of whether a charge that is one-time by its nature (a development levy) has already been paid in the past, and so on.
Upon receipt of a charge - it is recommended to seek assistance without delay from a professional for its review, and to appeal such charge if necessary. In most cases, the law provides for legal challenge procedures, which are time-bound, and must be implemented within a relatively short period from receipt of the charge, therefore it is very important not to delay the review and action.
The Municipal Taxation Department at our firm deals, inter alia, with preparing estimates for possible municipal charges, as well as reviewing charges after their receipt and appealing them, and would be happy to assist.
