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VAT in Israel - VAT rate decreased as of October 1, 2015

On October 1, 2015, the standard rate of VAT in Israel was decreased from 18% to 17%. The current change of VAT rate is not the first time the standard  rate of VAT in Israel has been changed. VAT in Israel was changed in June 2013, increasing from 17% to 18%.


Changing the VAT rate can potentially cause a degree of procedural and technical confusion.
To avoid confusion, payers of VAT in Israel should always remember to follow some basic rules of VAT taxation in Israel:


• VAT rate applicable while issuing VAT invoice is the rate in force at the time when a relevant transaction is taxable according to VAT law and regulations and not necessarily the rate in force at the time the invoice is being issued.


According to VAT law and its regulations, an invoice for VAT purposes might be issued 14 days from the date the transaction is taxable (or 7 days since the date the payment was received for certain types of transactions or certain categories of tax payers taxable on a cash-basis).


Therefore, invoices for transactions that became taxable prior to October 1, 2015 when the tax rate was 18%, might be issued after the transition date, when VAT in Israel was decreased to 17%. In that case, the relevant rate would still be 18%. For example, supply of goods is taxable for VAT purposes at the date of delivery/supply, but the invoice might be issued during 14 days since that date. Invoices issued after October 1, 2015 in respect of sale of goods supplied prior to October 1, 2015 shall be issued therefore with the tax rate of 18% even though standard VAT rate is now 17%.


• A credit note's purpose is normally to correct/cancel an invoice issued in respect of a past transaction. Therefore a credit note should show or include VAT at the rate in force at the time the original invoice was issued. Following this rule, any invoice issued after October 1, 2015 in respect of a prior transaction, that was taxed and invoiced at the rate of 18%, should be issued exactly with the same VAT rate of 18% despite the changed standard VAT rate.


In order to assist taxpayers in understanding the consequences of VAT rate change and to avoid confusion, the VAT authorities in Israel published explanatory material and examples which are very useful in understanding the consequences of the tax rate changes and reporting VAT correctly in the transition period.


If you have any questions regarding the effect of VAT standard rate change on specific transactions your business is involved in or on VAT reporting in the transition period, please contact
Raveh Ravid & Co. CPA.



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