Countdown to Israel’s Invoice Allocation Number mandate

Israel’s Invoice Allocation Number mandate effective May 2024

Israel has been rolling out its new electronic invoicing model and from May 5, 2024, an allocation (confirmation) number from the Israel Tax Authority (ITA) will be required to be shown on tax invoices above ILS 25,000, as a condition for deducting the Israeli VAT as input tax. VAT-registered suppliers can obtain allocation numbers by contacting the Invoice Number Allocation service via API, either direct from their ERP or through middleware or e-invoicing software provided by accredited providers.

“….the Tax Authority will operate a digital control system for transactions between dealers, by assigning confirmation numbers to invoices at the time they are issued.”

Israel Tax Authority

The mandate was originally slated to come into effect on January 1, 2024, but was postponed and the requirements now apply from May 5, 2024. The first year of the law’s implementation will be considered a pilot period. While a pilot in name, it will still be mandated for businesses. However, during this pilot period, each invoice will automatically receive an allocation number from the ITA’s service, except where there are technical errors. In the future, the ITA may review the data in each transaction before approving or rejecting it (an example of continuous transaction controls). The pilot period may be extended through 2025.

Scope of invoices requiring Invoice Allocation Number

Israeli businesses must obtain an Invoice Allocation Number from the ITA’s API service when the following four conditions apply:

Invoice amount meets the threshold (which will be reduced on a staggered basis each year)
VAT charged on invoice
Customer is a licensed dealer, i.e., B2B (B2G and B2C supplies are not specifically excluded)
Customer has requested an allocation number (remember the customer needs an allocation number on the invoice if it wants to deduct the VAT as input tax)

Notwithstanding the above, an allocation number may be voluntarily requested for any invoice, for any amount, and for any customer.

Phase	Year	Threshold (invoice value exclusive of VAT)	USD equivalent
Pilot	2024	ILS 25,000 (during the pilot period)	$6,600
Fully operational	2025	ILS 20,000	$5,270
2026	ILS 15,000	$3,950
2027	ILS 10,000	$2,600
2028	ILS 5,000	$1,300

Overview of invoicing process

For most businesses, the invoicing process will remain near identical to how it is today. However, before the invoice is finalised in the ERP or billing platform, the issuer needs to contact the ITA’s API service to request an invoice allocation number. Once an allocation number has been returned, the issuer must:

Save the allocation number in the invoice record
Print the allocation number on the invoice, highlighting the 9 right-most digits under “allocation number” (in addition to the internal reference number assigned by the ERP)
Include the 9 right-most digits in the designated field as part of the detailed report

API field name	Field description	Optional (O), conditional (C), or mandatory (M)
Invoice_ID	Internal ID/relationship	M
Invoice_Type	Document type	M
VAT_Number	Invoice issuer’s licensed dealer number	M
Union_VAT_Number	The document issuer’s VAT dealer number	CM
Invoice_Reference_Number	Document (reference) number	CM
Customer_VAT_Number	Customer’s licensed dealer number	CM
Customer_Name	Customer name	O
Invoice_Date	Document date YYYY-MM-DD	M
Invoice_Issuance_Date	Document issuance date YYYY-MM-DD	O
Branch_ID	Branch ID	O
Accounting_Software_Number	Software registration number	M
Client _Software_Key	Invoice issuer’s client key with the software publisher	O
Amount_Before_Discount	Amount before discount	M
Discount	Discount	M
Payment_Amount	Total amount excluding VAT	M
VAT_Amount	Total VAT amount	M
Payment_Amount_Including_VAT	Total amount including VAT	M
Invoice_Note	Notes on the invoice	O
Action	The action that was selected	CM

Line-item data, such as item category, quantity, price per unit, VAT rate, and VAT account, will initially be optional. It is anticipated that reporting will require even more data elements in a future phase to include logistical information, such as:

Vehicle licence number
Driver’s phone number
Arrival date
Estimated arrival time
Transition location
Delivery address
Additional information

Documents covered by mandate during pilot period

Tax invoice
Periodic tax invoice
Credit tax invoice (credit note)
Pro-forma invoice

We expect that additional document types will be covered in the future.

Validation of allocation number by customer

Customers can validate allocation numbers via a separate API call. The main purpose of the service is to enable customers to retrieve invoice details to help streamline the process of entering invoice details in their ERP or accounting system.

Emergency Notification Numbers service

In the event of an exceptional technical failure when generating an invoice and calling the ITA’s API service, a business can use an allocation number that was issued in advance through a previous call to the Emergency Notification Numbers service. However, the ITA must be notified of all emergency numbers used via a specific API service for transmitting invoices with emergency numbers. Each emergency allocation number can only be used once.

Time to act

As the mandate’s arrival nears, Israeli businesses are urged to ensure they can meet this new requirement on time – not only making sure their ERP has the required functionality or integrating with a service provider, but also ensuring they have the required content to support the submission. Businesses will also need to understand and follow the required process for registering to use the service including generating the required Client ID and secret credentials. A certified power of attorney may also need to be provided to the ITA.

Avalara is registered with the ITA as a software house to help individual businesses and ERPs connect to the ITA’s services and can support Israel’s Invoice Allocation mandate through its global E-Invoicing and Live Reporting SaaS solution. Please contact us to discuss Israeli or global e-invoicing and live reporting requirements.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.