Value Added Tax

 

Registration: All entities including individuals’ businesses must register for VAT.

Filing and payment: A VAT return generally must be filed and paid periodically (monthly or every two months – depends on the annual expected turnover basis) no later than the 15th of next month or upon specific instructions.

Value added tax (VAT) is levied on the supply of most goods and services, including imported goods and services at each level (including importing, manufacturing, distributing, wholesaling and retailing).

VAT Exempted Transactions:

Certain transactions are exempted from VAT; including exported goods, intangible goods sold to foreign-residents, tourism services including Hotels and car rental services to tourists, also include residential rent, transactions of very small businesses (defined as “exempt dealers”, having an annual turnover of up to 100,000 NIS in Israel).

VAT Rates:

  • VAT rate in Israel is 17% commencing October 1, 2015, while in Palestine VAT rate remain 16%.
  • VAT changed to 18% in Israel and 16% in Palestine commencing 2 June 2013.
  • VAT changed to 17% in Israel and 15% in Palestine commencing 1 September 2012.
  • The value added tax rate is 16% in Israel starting from 1/1/2010. 
  • The Value added tax rate is rising by 1%, from 15.5% to 16.5% in Israel stating from 1/7/2009.
  • The value added tax rate has been changed to 14.5% in Palestine and 15.5% in Israel stating from 1/7/2006.

According to Paris economical agreement the margin between Palestinian and Israeli VAT rate must not exceeds 2%.

VAT in Palestine:

For financial institutions, VAT is levied at a rate of 16% on gross salaries and on taxable income. VAT paid on salaries is not deductible in the computation of VAT on taxable income. VAT paid on salaries and on taxable income is deductible for income tax purposes.

VAT in Israel:

For financial institutions, VAT is levied at a rate of 17% on gross salaries Payroll tax, and is levied on nonprofit organizations at a rate of 7.5% of wages, is imposed instead of the VAT for these types of entities.

Historical VAT Rates in Isreal:

Start Date

End Date

VAT Percentage

October 1, 2015

Current

17.0%

June 2, 2013

September 30, 2015

18.0%

September 1, 2012

June 1, 2013

17.0%

January 1, 2010

August 31, 2012

16.0%

July 1, 2009

December 31, 2009

16.5%

July 1, 2006

June 30, 2009

15.5%

September 1, 2005

June 30, 2006

16.5%

March 1, 2004

August 31, 2005

17.0%

June 15, 2002

February 28, 2004

18.0%

January 1, 1993

June 14, 2002

17.0%

January 1, 1991

December 31, 1992

18.0%

March 1, 1990

December 31, 1990

16.0%

October 1, 1985

February 28, 1990

15.0%

June 1, 1985

September 30, 1985

17.0%

August 1, 1982

May 30, 1985

15.0%

November 1, 1977

July 31, 1982

12.0%

The VAT law was first applied on July 1, 1976 with a percentage rate of 8%