Israel court says no VAT on foreign e-retailers
- 14 March 2014 | Richard Asquith
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.