Israeli VAT rates and VAT compliance

Israel’s VAT system sets a standard rate of 18% on most taxable goods and services. Zero‑rating applies to exports of goods and certain services supplied abroad. 

Certain transactions and entities are exempt from VAT, such as specific financial services, certain education and healthcare services, and leasing of residential property under specified conditions. 

A valid Israeli VAT number is required for any business (resident or non‑resident) making taxable supplies in Israel. While resident businesses may only need to register once they exceed a specified turnover threshold (e.g., around NIS 120,000), non‑resident businesses (especially those providing services into Israel) should confirm with the Israel Tax Authority (ITA) or an Israeli tax professional whether they need to register from the first supply. After registration, the business must apply the correct VAT treatment (charge VAT, issue invoices, maintain records, file returns).

Find out more about VAT registration in Israel. 

VAT‑registered businesses must file periodic VAT returns (typically monthly or bi‑monthly depending on size) and pay any VAT due. Returns are filed electronically via the Israel Tax Authority. 

Find out more about VAT returns in Israel. 

Israel has proposed legislation that would require non-resident digital service providers to register for VAT and collect tax on business-to-consumer (B2C) supplies in Israel. As of late 2025, this regime remains proposed, not yet fully enacted. However, foreign suppliers are encouraged to monitor developments closely. 

Affected services may include: 

• Streaming media 
• Apps 
• Ebooks 
• Cloud services 
• Online gaming 
• Other electronically supplied content

In the interim, where services are supplied to VAT-registered Israeli businesses, the reverse charge mechanism generally applies (the Israeli customer accounts for VAT). 

The ITA has indicated that it aims to align with OECD and global standards on taxation of the digital economy. 

When an Israeli VAT-registered business receives services from a foreign supplier not registered for Israeli VAT, the recipient is required to self-account for VAT under the reverse charge mechanism. Common scenarios include: 

• Legal advice 
• Software consulting 
• Marketing 
• Other intangible services provided by a non-resident

The Israeli business must declare the VAT on its return and may reclaim it if the expense relates to taxable activity. This mechanism ensures VAT neutrality for cross-border B2B services. 

Non-resident businesses with no fixed presence in Israel may be eligible to reclaim Israeli VAT incurred on business expenses (e.g., hotels, exhibitions, transportation) through a refund procedure. 

• Claims may be submitted annually and are subject to reciprocity agreements — only businesses from countries that offer similar refunds to Israeli companies may apply. 
• Refunds must be filed via a local Israeli tax representative, with supporting documentation (original tax invoices). 
• Application deadlines and eligible expense categories are governed by Israeli tax regulations. 

Businesses planning short-term activity or travel in Israel (e.g., trade shows, client meetings) should consider this process to recover input VAT. 

Goods imported into Israel are subject to import VAT, assessed at the time of customs clearance. 

• The standard VAT rate of 18% applies to most imports. 
• VAT is calculated on the CIF value of goods (Cost, Insurance, Freight), plus customs duties if applicable.
• Import VAT is recoverable for Israeli VAT-registered importers, provided the goods are used for taxable business purposes. 

Clearance procedures are handled by the Israeli Customs Authority in coordination with the ITA.