Israel VAT (Ma'am) System – Complete Guide

📘 What is VAT (Ma'am) in Israel?

In Israel, VAT is called “Ma'am” (מע"מ – מס ערך מוסף), meaning Value Added Tax. It is a general consumption tax levied on the sale of goods and services and the importation of goods.

VAT is administered by the Israel Tax Authority (ITA) and applies at each stage of the supply chain, with businesses charging VAT on sales and claiming credits for VAT paid on purchases.

📊 VAT Rates in Israel

As of 2025, the standard VAT rate in Israel is:

🔸 Standard Rate: 17%

This rate applies to most goods and services sold or imported in Israel.

🟢 Zero-Rated Supplies:

• Exports of goods
• International transport
• Certain tourism services
• Sale of intangible assets to non-residents

🚫 Exempt Supplies:

• Residential rental
• Financial services
• Lottery and gambling
• Education services provided by recognized institutions
• Medical services in public institutions

🏢 VAT Registration in Israel

✅ Who Must Register?

• Businesses with annual turnover exceeding NIS 100,000 must register for VAT.
• Registration is mandatory for Israeli-resident businesses meeting the threshold.
• Foreign companies operating in Israel may also need to register through a local fiscal representative.

📌 Registration Process:

• Submit application to the Israel Tax Authority
• Provide business documents, ID, and financial info
• Receive VAT number and file periodic returns

🧾 VAT Invoice Requirements

To be compliant, a tax invoice (חשבונית מס) in Israel must include:

• Supplier’s name and VAT number
• Buyer’s name and ID/VAT number (if registered)
• Invoice number and date
• Description of goods/services
• Net amount, VAT rate (17%), VAT amount
• Total payable amount

Invoices must be issued in Hebrew, though bilingual invoices are common.

📅 VAT Return Filing in Israel

⏳ Filing Frequency:

• Monthly filing for large businesses
• Bi-monthly filing for smaller businesses (turnover under NIS 1.5 million annually)

🧾 What to Include:

• Total taxable sales and purchases
• Output VAT collected
• Input VAT claimed
• VAT payable or refundable

📍 Filing & Payment:

• Returns are submitted electronically via the ITA e-Tax portal
• VAT must be paid by the 15th of the following month (or filing deadline)

🌍 VAT on Imports & Digital Services

• Imports are subject to 17% VAT at customs, payable by the importer
• Foreign digital service providers (like streaming, software, etc.) must register and charge Israeli VAT if they sell to Israeli consumers (B2C)

🧮 VAT Calculation Example

Example:

A registered Israeli business sells electronics for NIS 50,000

• VAT @ 17% = NIS 8,500
• Total Invoice = NIS 58,500
• Input VAT = NIS 2,000
• Net VAT payable = NIS 6,500

🚫 VAT Exemptions (Detailed)

The following supplies are exempt from VAT in Israel:

• Educational services by recognized institutions
• Medical services at public hospitals
• Rent from residential apartments
• Financial transactions (interest, securities, insurance)
• Non-profit activities (some NGOs, religious institutions)

Exempt businesses cannot claim input VAT credits.

✅ How to Stay Compliant

• ✔️ Issue valid tax invoices
• ✔️ Register on time with ITA
• ✔️ File monthly/bi-monthly returns
• ✔️ Keep accurate digital records (for 7 years)
• ✔️ Ensure correct VAT treatment for imports and exports
• ✔️ Monitor changes in the VAT law or rates

📌 Conclusion

Israel’s VAT (Ma'am) system is modern and digitalized, with a standard rate of 17% and detailed compliance rules. Whether you're a domestic business or a foreign digital service provider, understanding Israel's VAT structure is crucial for smooth operations and tax compliance.

👉 Use our Israel VAT Calculator at gstcal.org to automate your VAT calculations and ensure accuracy.