January 2025 1% VAT rise approved by government
Israel’s draft 2025 Budget Law has now been approved by its government, and includes a 1% Vat rise from 17% to 18% from 1 January 2025. The current VAT exemption for tourists will be withdrawn.
The government’s indirect tax hike is to raise extra funding for the military conflict in Israel and Gaza. The state’s budget deficit is now running at 8.5% compared to the target of 4.3%.
The budget now moves to Parliament for approval.
Sept 2012 VAT rises by 1% to 17%
Israel last raised its Value Added Tax by 1% to 17% from 1st September 2012.
This increase followed a rise three years previously from 15.5% to 16%. At the time, this increase was only intended to be temporary. However, the decline in export markets, especially the key Euro zone, meant this reversal was put off at the start of 2011.
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Israel’s application of VAT on consumption in Israel is extended also to “imported” intangibles or services provided to Israeli entrepreneurs by foreign suppliers. It may be collected in one of two ways: from the Israeli purchaser (provided that the purchaser is not an individual) or by requiring the foreign vendor to register in Israel and file VAT returns. In principle, a foreign entity that has a substantial presence in Israel should register for VAT and file VAT returns.
