Israel digital VAT update

Thu 14th Apr 2016

Israel is continuing with proposals to levy 16% VAT on supplies of digital services to Israeli consumers by foreign providers.

The tax authorities issued a new Circular this week outlining plans to make supplies by foreign companies of goods and services via e-commerce taxable.  The Circular makes reference to the Base Erosion Profit Shifting (BEPS) Action Point 1, highlighting that no physical presence is required to trigger a taxable event.

A separate draft Circular had been issued at the start of April for public discussion. This covered the VAT issues for non-resident e-service providers with substantial business interests in Israel.

The proposal to change the existing VAT legislation is being reviewed by the Knesset, the Israeli parliament.