Israel’s progress towards the implementation of an electronic invoicing regime has advanced over the first half of 2023. We have been closely monitoring and analysing the unfolding developments in Israel's tax landscape, so that you have the most up to date information.
February 2023: First hints of Israel’s e-invoicing intentions
In February 2023, the Israeli Ministry of Finance announced its intention to introduce a CTC-based electronic invoicing (e-invoicing) regime.
The proposed system aims to prevent fictitious invoices and ensure fair competition between tax compliant businesses. The regime requires real-time approval from the Tax Authority for business-to-business (B2B) invoices exceeding NIS 5,000.
While the announcement was significant for the country, further administrative and operational hurdles, such as further readings and approvals of the budget document, amendments to the VAT Law and publication of technical details, required resolution before any implementation could take place.
May 2023: A gradual rollout plan
In May 2023, the Israeli Tax Authority shared more details of their plan.
The high level timeline was presented with a start date of the 1st of January 2024, for invoices above NIS 25,000 (~ EUR €6,100). The threshold plans to gradually decrease over the next five years, eventually reaching NIS 5,000 by January 2028. However, there were still questions about the operational and technical aspects of the proposed system.
July 2023: Clarification and a voluntary start
Recently, the Israeli Tax Authority (ITA) published the "Israel Invoice Model Description - API's" document. This document sheds light on the intricate aspects of Israel's e-invoicing plan, providing software service providers and businesses useful, valuable insights.
Expected timelines
The e-invoicing initiative will begin with a pilot phase from the 1st of January 2024 to the 31st of December 2024. These dates may be extended by an additional year, which will ultimately be decided by the Finance Committee.
The rollout will then continue as follows:
- 2024: Invoices with a net amount (before VAT) above NIS 25,000
- 2025: Invoices with a net amount above NIS 20,000
- 2026: Invoices with a net amount above NIS 15,000
- 2027: Invoices with a net amount above NIS 10,000
- 2028: Invoices with a net amount above NIS 5,000
Expected initial scope
The electronic invoicing’s initial scope will apply the following:
- VAT registered businesses exclusively.
- Only B2B transactions, including invoices and credit notes.
- Only taxable invoices; cross-border invoices are excluded from the scope.
Expected invoice transmission process
During the initial phases of implementation, the invoice issuance process may involve the following:
- Initially, only header-level data may be required, while line-level detail may not be necessary.
- The transmission process is expected to be in real-time.
- Following submission, the Tax Authority will issue approval or rejection, providing an allocation number for approved invoices. This allocation number must be added to the invoice and must be included in the VAT report. A user-friendly interface will be available for the receiver to validate the allocation number.
- The responsibility of distributing invoices outside the Tax Authority lies with the issuer. In PDF format (with digital signature) or on paper, invoices must include the previously received allocation number. Although electronic exchange is possible, it may not initially be recognised as a valid replacement for traditional hard copies or signed PDFs.
Looking ahead
As Israel embarks on their groundbreaking e-invoicing journey, we are dedicated to keeping you informed and well prepared for the changes ahead by providing you with timely updates and actionable insights. We believe this development has the potential to significantly impact businesses operating in Israel.
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