Updates in VAT registration threshold, deductions and penalties
The Israeli Tax Authority updated VAT invoicing, reporting thresholds, and penalties from 1 January 2025. There was also an Israeli 1% VAT rise.
In Israel, VAT registration is mandatory for businesses with annual turnover exceeding NIS 120,000 (threshold as of 2025, subject to updates). Businesses below this threshold may register voluntarily to claim input VAT credits. VAT registration classes include Authorized Dealer (Osek Morshe) for most businesses, Exempt Dealer (Osek Patur) for small businesses with turnover below the threshold, and Nonprofit organizations. Authorised Dealers must charge and remit 18% VAT on taxable sales, file monthly or bi-monthly VAT returns, and maintain detailed records. Foreign companies operating in Israel generally require a fiscal representative for VAT registration and compliance unless exempt under specific conditions.
2025 Israeli VAT thresholds
- Business turnover threshold set at 120,000 Israeli shekels – unchanged
- Buyers subject to VAT must require invoices for purchases over 350 (up from 338) shekels for business use
- Additional VAT requirements apply for purchases valued over 28,115 (up from 27,183) shekels
- Periodic reporting threshold for specified input tax surplus is 20,974 (up from 20,279) shekels
- Late reporting penalty set at 239 (up from 233) shekels every two weeks starting July 1, 2024
- Inadequate recordkeeping penalty is 1 percent or at least 359 (down from 350) shekels starting July 1, 2024
