Betterment tax is known as Mas Shevach in Hebrew, and is essentially a capital gains tax on real estate. The law sets forth the method for calculating the appreciation, the expenses which may be deducted, how to determine the date and value of sale, and how to determine the date and value of the purchase.
Clients sometimes ask me why they have to sign tax reporting documents (often at the Israeli consulate) as part of their Israeli property purchase/sale. Here’s the simple reason: The transfer of an Israeli property from the seller to the buyer at the Israel Land Registry is subject to presenting authorizations from the Israeli Tax Office that the taxes were paid, or that the transaction is exempt.
As a buyer, you can’t get title registered in your name without receiving an original copy of the seller’s Mas Shevach exemption (or a copy of the paid Mas Shevach bill). As a seller, you can’t transfer title and fulfill your obligations under the sale agreement, unless you pay Mas Shevach (or obtain an exemption), which you release to the buyer’s Israeli lawyer.
The law specifies certain exemptions from Mas Shevach, but much has changed due to the Israeli tax reform, which I address in a separate blog.