How vat / sales tax works in Israel
Israeli VAT defaults to 18% on transactions and imports since January 2025, with dealers charging output tax, deducting input tax, and filing monthly or bi-monthly returns by the 15th.
Exports, foreign-resident services, inbound tourism, and Eilat supplies zero-rate, while residential rental and defined financial services are exempt.
The Israel Invoice reform requires allocation numbers on B2B invoices above falling thresholds, foreign digital suppliers register from the first B2C sale, and financial institutions pay wage-and-profit tax alongside.
Tax rates at a glance
- Standard VAT
- 18%
- Zero-rated supplies
- 0%
- Exempt supplies
- Exempt
- Invoice threshold
- NIS 10,000
- Foreign digital sellers
- 18%
- Eilat zone
- Exempt
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
E-commerce sellersSaaS foundersExpatsFoundersCross-border traders
Watch out for
- The 17%-to-18% transition still sits in contracts, price lists, and invoicing logic, with delivery-versus-payment timing deciding which rate each 2025-straddling supply takes.
- Allocation numbers are validity conditions for buyer input credits above threshold, so missing numbers destroy deductions rather than merely delaying them.
- Foreign digital sellers face registration from the first shekel of B2C sales with no shelter, and B2B reverse charge needs registered-customer proof.
- Wage-and-profit tax on financial institutions and non-profits runs parallel to VAT and changes effective pricing in those sectors.
Frequently asked questions
What is the VAT rate in Israel?
Israel applies 18% standard VAT in 2026, raised from 17% in January 2025, with 0% on exports, foreign-resident services, and tourism and exemptions for rental and finance.
What is the Israel Invoice allocation number?
A real-time clearance number required on B2B invoices above threshold — NIS 10,000 from January 2026 — without which buyers cannot deduct input VAT.
Do foreign SaaS sellers register in Israel?
Yes for B2C digital supplies, from the first sale with no threshold. B2B sales to registered dealers generally reverse-charge instead.