Israeli Knesset Approves One-Year Tax Exemption for Agro-Voltaic Solar Panels Over Farmland

The Israeli Knesset approved in its second and third readings a law granting a one-year exemption from betterment tax for agro-voltaic solar installations placed over agricultural land. The legislation, promoted by the Ministry of Energy and Infrastructure, aims to encourage the development of solar projects that combine energy production with farming. During the upcoming year, government ministries will study a permanent, uniform tax rate for such projects. Meanwhile, local authorities will receive compensation from the Israel Land Authority to offset lost betterment tax revenues. The law also exempts these projects from drainage and paving levies, provided the original land use remains unchanged.

Agro-voltaic projects offer dual benefits by protecting crops from increasingly extreme weather and pests, reducing pesticide use, and providing farmers with a stable income amid declining profitability. However, without regulation, betterment tax rates can reach up to 50% of the land value increase, often set arbitrarily by municipalities. For example, if farmland rents for 100 shekels per dunam and agro-voltaic use raises it to 1,000 shekels, the tax could be 450 shekels per dunam annually, multiplied by lease years, making projects financially unviable.

The new law seeks to provide regulatory and economic certainty to support the growth of agro-voltaic solar coverage in Israel until a permanent tax framework is established by an inter-ministerial team in the coming months. The Ministry of Energy and Infrastructure estimates that by 2035, Israel could develop approximately 5,000 megawatts of agro-voltaic capacity, enhancing energy security, advancing renewable energy goals, preserving agricultural land, and strengthening rural communities.

Ron Eifer, head of the Sustainable Energy Division at the Ministry, stated, "Today we took another step toward realizing our vision of making Israel a global leader in agro-voltaics. Israel leads in both agriculture and solar energy production, and we expect a significant portion of renewable energy built in the next decade to integrate with farming. This will help us meet renewable energy targets while bolstering food and energy security for Israel."