Israel VAT bill on foreign digital services
- 19 March 2016 | Richard Asquith
The Israeli Tax Authority has issued its draft bill to tax foreign providers of digital services to consumers with 17% VAT.
The new proposal will seek to tax income on services to Israeli consumers including:
- Streaming or downloads of music, films and games;
- Digital newspapers or journals;
- Online telephony;
- SaaS-based software services;
- Internet access
- Online ad’s
- Membership fees for online sites;
- Telephony services; and
- Broadcast of TV or radio content.
Non-resident providers of these services will be required to VAT register in Israel, collect and remit VAT. Digital services provided to Israeli businesses will be taxed under the reverse charge regime.
Operators of online stores (e.g. Google Play and Apple iTunes) that charge on behalf of app creators will also be responsible for the VAT compliance on behalf of their sellers.
The new bill reflects changes already implemented in the EU, South Africa, South Korea and Japan to charge VAT in the country of residence of the customer. Other countries with similar plans include: Russia; Australia; New Zealand; Canada; and many more.