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Israel court says no VAT on foreign e-retailers

  • Mar 13, 2014 | Richard Asquith

Israel court says no VAT on foreign e-retailers

Non-resident retailers of goods and digital services to Israeli consumers will remain outside of the Israeli VAT net.

Non-resident e-commerce sellers VAT exempt

The decision comes this week as the High Court struck down a petition from local online retailers that e-retailers based outside of Israeli were benefiting from the tax loop hole and not having to charge 18% VAT.  The Israeli VAT rate rose to 18% in 2013.  The companies also argued that the Israeli state was missing out on extra revenues – the EU non-resident e-retailers must charge VAT on goods and services to consumers.

The Israeli VAT office claimed that under current VAT code the foreign e-retailers were outside of the scope of VAT based on their residency, and the mere use of local services did not trigger a liability to VAT or permanent establishment for direct tax purposes.

However, the tax Commissioner is expected to change this position shortly.  There will be a public consultation on the issue.

Australia recently reviewed GST on e-commerce, but will not lower the current high GST-free import threshold of AUS$1,000.  Canada GST e-commerce and Japan digital services consumption tax are similarly reviewing their consumption tax position on foreign retailers.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.