Inherited Property Tax Exemption Does Not Transfer, Appeals Committee Rules
An appeals committee in Tel Aviv has rejected a claim for an exemption from betterment tax (known as "Hit'al Hashbacha") on inherited land, establishing that such exemptions do not pass to heirs beyond the original entitlement. The case involved Doris Avraham, who inherited a plot of land in Or Yehuda from her late husband, David Avraham.
Avraham sought an exemption under Section 19(c)(1) of the Planning and Building Law, which allows for a tax exemption on building or expanding a residential unit up to 140 square meters. This exemption is typically applied when a building permit is issued for demolition and new construction. In this instance, a permit was approved in December 2023 to demolish an existing house and build two attached housing units on the plot.
A preliminary assessment determined a betterment of approximately NIS 310,000, resulting in a betterment tax of about NIS 155,000. Avraham argued that the exemption should be based on the scope of the new construction, not the previous owner's rights, and that a subsequent subdivision of the plot into two separate lots (240 and 241) should grant each new lot an independent exemption. She also contended that the demolition of the existing house should reset the planning history.
The committee, however, ruled that the total rights available for the land must be assessed as of the date the betterment plan took effect in May 2006. At that time, her late husband held rights for a single residential unit of 200 square meters, already exceeding the 140-square-meter exemption limit. Therefore, the potential exemption was already consumed by the existing rights, regardless of whether they were utilized.
The committee also dismissed the arguments regarding the plot subdivision and the demolition of the existing structure, stating that these actions do not create new exemption entitlements or erase the planning history relevant to the betterment tax assessment. Citing previous court and committee rulings, the decision emphasized that the 140-square-meter limit applies to the total area available to the family on the property. Consequently, the appeal was fully denied, the tax assessment upheld, and Avraham was ordered to pay NIS 5,000 in legal costs.
