What Is Hetel Hashbacha? When, Why, and How Much Do I Have to Pay?

In Israel, real estate owners may be required to pay Hetel Hashbacha, or betterment levy, when a municipal planning decision significantly increases the value of their property. While this often signals good news—added building rights, zoning changes, or development potential—it also comes with a tax obligation. This guide explains when the levy applies, how much you pay, when it’s due, and how to handle exemptions or appeals.

What Triggers the Betterment Levy?

You must pay Hetel Hashbacha when the value of your property increases due to one of the following:

• Approval of a city plan that grants additional building rights
• A permit, e.g., to build an extra room, balcony, or floor
• A change of use authorization

These decisions increase your property’s potential, and Israeli law requires that a part of the value increase be paid as tax to the local municipality.

Note: Broad master plans (such as Tel Aviv’s TAMA 5000) do not immediately trigger an obligation to pay. Under Amendment 126 to the Planning and Building Law, the levy only becomes payable after a detailed plan affecting your property is approved.

How is the Betterment Levy Calculated?

The betterment levy is 50 percent of the value increase caused by the planning decision. This is based on the difference between the property’s value before and after the approval.

For example, a planning decision increases your property’s value by ₪500,000. Your betterment levy is ₪250,000, regardless of the cost of using the new rights.

The levy is calculated when the plan is approved, though payment may happen later.

When is the Payment Due, and Who Pays it?

Payment is due at the first occurrence of one of these two events (marketing the realization of the enhanced rights):

• When you obtain a building permit to use the new rights
• When you sell the property, even if the rights weren’t used.

The levy is usually paid by the seller, but the legal obligation falls on whoever owns the rights at the time of realization. Thus, in certain cases, such as inheritance or gifting, the new owner may be liable for the payment.

Payment is made directly to the local municipality, which uses it to fund roads, parks, schools, and public services.

Are There Exemptions?

Certain cases allow for a full or partial exemption from Hetel Hashbacha, including:

• Public institutions: properties used for education, religion, charity, and similar purposes
• Accessibility improvements, such as adding elevators
• First-time construction of a Mamad (protected space), up to the legal minimum area
• Home additions up to 140 sqm, if you or a close family member live there for at least 4 years after completion
• Properties in designated renewal areas or those improved through government housing aid

Some exemptions are automatic, but for most—especially those related to home expansions or Mamad rooms—you must apply within 45 days of receiving the tax assessment and provide supporting documents.

Can I Appeal the Betterment Levy?

Yes. You have the right to challenge the Betterment Levy. There are two types of appeals:

• Dispute the levy: file with the District Appeals Committee if you believe it should not apply.
• Dispute the amount: request a review by an Appointed Appraiser through the Real Estate Appraisers Council for an independent valuation.

You must file the appeal within 45 days of receiving the notice. Costs are generally split between you and the municipality. Legal action may be costly, so consider whether the potential savings justify it.

How Does Hetel Hashbacha Work in Urban Renewal Projects?

In urban renewal projects, betterment levy policy plays a crucial role:

• TAMA 38 projects (strengthening old buildings) usually get a full exemption to encourage development. Municipalities may also choose to reduce the levy to 25 percent or 12.5 percent of the value increase, depending on the project type and local policy.
• Pinui-Binui projects (evacuation and rebuilding) may receive partial or full exemptions, depending on the municipality. Usually, in these projects, the developer—not the original homeowners—pays the levy.

Municipal policies vary by city, with each required to publish a 5-year policy outlining levy rates by area.