VATDIGITAL.COM
VATDIGITAL.COM
Demystifying VAT
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Israel - VAT
VAT in Israel is administered by the Israel Tax Authority which was established in 2004.
Sales
The standard VAT rate in Israel is 18% and is applicable and applied to most goods and services at bought and sold in Israel including the importation of goods from outside Israel and on services purchased from outside Israel where reverse charge VAT is applicable and payable by the customer.
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There is no VAT registration threshold in Israel and you are obliged to register as a dealer if you sell goods or provide services although you can be classified as an exempt dealer if annual turnover is lower than 120,000 NIS and you open an exempt dealer file online, via a local representative or physically visiting the local tax office with the appropriate documents.
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The export of Goods and Services is Zero Rate for VAT purposes.
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Non resident online vendors selling digital services to residents in Israel need to register for VAT locally by using a representative.
The basic tax point for goods is when the goods are delivered regardless of when consideration or cash is received for the goods. To alleviate cash flow for small businesses with a turnover that does not exceed 2M NIS, they will be required to pay VAT on receipt of the proceeds of sale. (However if an invoice is issued, then the VAT on the invoice must be included in the figures reported for VAT.
Purchases and VAT Recovery
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Input VAT (VAT incurred on purchases) and paid on imports is deductible from VAT owed on sales provided the input VAT is incurred for business purposes and is directly attributable to taxable sales. (standard and zero rated)
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Input VAT incurred in relation to supplies of exempt goods or services is not deductible.
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Input VAT incurred prior to VAT registration is deductible provided it is and can be proved that it was incurred and used for the establishment of the business.
For more information on how VAT is applied and the Tax Authority rules, please see the link below to the Israel Tax Authority website.
Link below for more information
Source ITA