Israeli VAT rates and compliance
Israeli VAT rates
There are two Israeli VAT rates – standard and nil rates.
The current rates are:
Israeli VAT rates
|Rate||Type||Which goods or services|
|17%||Standard||(since 1 October 2015)|
|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||Zero VAT rate applies to exports; some tourism services; sale of fruit and vegetables.|
|%||-||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.
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