Israeli VAT rates and compliance

Israeli VAT rates

There are two Israeli VAT rates - standard and nil rates.

The current rates are:

Israel VAT rates

Rate Type Which goods or services
17% Standard All other taxable goods and services
7.5% Reduced Payroll tax on wages in lieu of VAT for non-profit organisations
17%   Payroll tax on wages in lieu of VAT for financial institutions
0% Zero Exports; some tourism services; sale of fruit and vegetables
0% Exempt Financial services, certain real estate sales and leasings, diamonds and precious metals, not-for-profit organisations

Although VAT exempted, financial service companies and not-for-profit organisations are liable to a wage and profits tax.

Israeli VAT compliance

As a tax payer, a VAT registered business must comply with the rules and record keeping requirements of the VAT Act. This includes compliance of invoice format and records.  VAT invoices and records must be stored for at least seven years.  Records may be stored electronically, and must be updated quarterly.

Time of supply

The time the VAT is due – time of supply or tax point – is generally the time of delivery or cash payment of the goods.  For services, it is the time of cash settlement.  For installment payments, the VAT is due at the corresponding time of each payment.  VAT on advance payments is only liable once the delivery is performed.

Import VAT is due at the time of clearing the goods into Israel through customs.

VAT penalties

For the non-declaration or payment of VAT, there are a number of potential penalties:

  • NIS 217 fine for every two days a filing is late
  • Interest on late payments
  • Potential criminal charges for more serious offences, including non-disclosure

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