Israel Ma’am (VAT) for Foreign & Local Businesses — 2026 Guide

Introduction

18%. The Israeli VAT rate effective from 1 January 2025 — up from the 17% that had been in force since 1 October 2015. A one-percentage-point increase, enacted as a fiscal consolidation measure during a sustained period of elevated government spending. By revenue impact, the rise added approximately ILS 7 billion to annual collections. By compliance impact, the rise was simpler than many comparable increases elsewhere because Israel operates a single VAT rate — no reduced bands to recalibrate, no transitional asymmetries between standard and intermediate rates to manage, no debate over which goods or services move with the rate change. Everything moved by one point; everything settled at 18%.

Israel is one of only a handful of OECD economies operating a single-rate VAT system, alongside Denmark (which has operated single-rate 25% for decades). The architectural simplicity has commercial and operational consequences. Israeli businesses do not maintain rate-classification matrices for product master data — every taxable supply is at 18%. Israeli accounting software does not handle multi-rate apportionment for restaurants serving food at one rate and alcoholic beverages at another. Israeli VAT returns do not require line-item-level rate identification for every transaction. The simplification compounds with Israel’s recently launched “allocation number” e-invoicing framework — phased mandatory from 5 May 2024 — to produce a system that is, paradoxically, both technologically advanced and structurally minimal.

This guide is the operator’s view of how Israeli Ma’am actually works in 2026. We cover where the 18% rate applies and where the limited zero-rated and exempt categories sit; how the allocation-number regime integrates with invoice generation; what foreign vendors need to do under the Specified Non-Resident Suppliers framework for B2C digital services; how the Eilat free-trade zone operates as a parallel 0% Ma’am territory; and what changes are visible on the ITA roadmap as the e-invoicing framework continues to expand.

01 · Snapshot — Israeli Ma’am at a glance

Everything you need to orient before reading the persona tracks. Every figure here is restated and sourced inside the relevant track.

02 · 60-second self-check — does this guide apply to you?

Six questions. If any answer is yes, the corresponding track is mandatory reading before you transact.

03 · Track 1 — Foreign vendor selling B2B services or goods into Israel

You are established outside Israel and you sell B2B services or goods to Israeli customers. Most B2B services follow recipient-location reverse-charge mechanics; goods supplies depend on importer of record.

3.1  B2B services — reverse charge

Place of supply for B2B services to an Israeli-resident osek murshe (registered dealer) is Israel (recipient’s establishment). The Israeli recipient self-assesses 18% Ma’am and recovers it through input Ma’am credits where the input is used in taxable activity. The foreign supplier invoices without Israeli Ma’am, marks the invoice with standard reverse-charge wording, and does not need Israeli Ma’am registration for these supplies alone.

3.2  B2B goods — depends on importer of record

Goods imported into Israel attract import Ma’am at 18% on the customs value plus any customs duty, payable by the importer of record. DDP/DAP allocation determines who acts as importer:

• DAP / DDU — Israeli customer is importer of record, pays import Ma’am, recovers it. Foreign supplier ships without Israeli Ma’am involvement. No Israeli registration required.
• DDP — Foreign supplier is importer of record, becomes liable for Israeli Ma’am on subsequent domestic supply. Israeli Ma’am registration required.

3.3  Worked example — Munich Solar Solutions GmbH

Munich Solar Solutions GmbH is a German manufacturer of photovoltaic panels and solar inverter systems with a strong presence in the Israeli market — Israel’s combination of strong solar irradiation, ambitious renewable energy targets, and high-quality engineering customer base makes it a target export market for German solar manufacturers. Their Israeli customer base:

• Israeli solar developers building utility-scale solar farms in the Negev (B2B, large equipment supply contracts averaging EUR 4.2 million per project).
• Israeli rooftop solar installers serving residential and small-commercial customers in Tel Aviv, Haifa, Jerusalem, and Beer Sheva (B2B, average order value EUR 18,000).
• Direct B2C sales of small residential solar kits through a Hebrew-language website (B2C, average order value EUR 2,400).

Their compliance architecture:

Stream A — Utility-scale equipment supply on DAP/CIF terms. The Israeli solar developer acts as importer of record, paying import Ma’am at 18% on the customs value plus duty at customs and recovering it through their own Ma’am return as input credit (cash-flow neutral). Munich Solar Solutions invoices without Israeli Ma’am from Germany. No Israeli registration needed for this stream.

Stream B — Rooftop installer supply on DDP terms (Israeli installers prefer simplified procurement). Munich Solar Solutions becomes importer of record. Israeli Ma’am registration is required. They charge 18% Ma’am on the domestic supply to the installer; the installer recovers the input Ma’am through their own returns.

Stream C — Direct B2C residential solar kits. Munich Solar Solutions handles import as importer of record. At checkout to the Israeli consumer, 18% Ma’am applies. The B2C revenue plus Stream B together make Israeli Ma’am registration mandatory and economically essential.

3.4  Registration mechanics

Standard Israeli Ma’am registration is filed with ITA through the centralised online portal. The application requires:

• Hebrew-language application form completed via Israeli accountant or representative.
• Certificate of incorporation translated into Hebrew (or English with apostille — ITA accepts English in many cases for non-resident applicants).
• Description of intended Israeli activity.
• Israeli bank account details (typically required).
• Power of attorney for an Israeli tax representative (“meytzeg masim”) — mandatory for non-resident registrants.

Processing typically takes 6–10 weeks. The Israeli tax representative holds joint and several liability for unpaid Ma’am and is operationally essential for Hebrew-language correspondence with ITA, audit response, allocation-number processing, and routine compliance. Budget USD 8,000–USD 18,000 per year for a competent Israeli tax representative.

04 · Track 2 — Foreign vendor selling B2C digital services or goods to Israeli consumers

Effective specific dates (digital services regime in force since the late 2010s; subsequent expansions), Israel operates a Specified Non-Resident Suppliers (SNRS) regime for foreign B2C digital service providers. Goods supplies follow standard import procedures.

4.1  Specified Non-Resident Suppliers (SNRS) regime

Foreign suppliers of B2C electronic services to Israeli consumers must register and collect Ma’am at 18% when annual sales exceed defined thresholds. The regime is structurally similar to Norway VOES, UK B2C digital VAT, EU Non-Union OSS:

• Coverage: electronic services (streaming, SaaS, downloads, online courses, mobile applications), telecommunications, broadcasting to Israeli consumers.
• Registration through the ITA online portal — simplified procedures relative to standard Ma’am registration.
• 18% Ma’am charged at checkout to Israeli consumers.
• Quarterly or monthly returns through the dedicated SNRS portal.
• Payment in ILS or accepted foreign currencies.

Major foreign digital service providers (Netflix, Spotify, Apple, Microsoft, Adobe, Zoom, Amazon Web Services consumer, Google consumer services) are registered under SNRS and remit 18% Israeli Ma’am on their Israeli B2C revenue.

4.2  Goods supplies to Israeli consumers

B2C goods supplies to Israeli consumers follow standard customs procedures. Imports above the small-parcel de minimis threshold attract import Ma’am at 18% plus any customs duty at the Israeli border. The de minimis threshold has been periodically revised; as of 2026 the threshold is USD 75 declared value. Above this threshold, import Ma’am applies.

Foreign vendors with significant Israeli B2C goods volumes typically register for Ma’am directly (as in Munich Solar Solutions’ Stream C in the worked example) to provide a clean customer experience under DDP terms. Below registration volumes, customers pay import Ma’am at Israeli Customs upon delivery — operationally workable for B2B-like infrequent purchases but poor for high-frequency consumer e-commerce.

05 · Track 3 — Eilat free zone, exports, marketplaces, and sector-specific frameworks

Israel operates several distinctive frameworks beyond standard Ma’am: the Eilat free-trade zone, comprehensive export incentives, sector-specific rules for diamonds and high-tech, and the developing marketplace facilitator framework.

5.1  Eilat free-trade zone

The Eilat Free Trade Zone (EFTZ), established in 1985 under the Free Zone for Eilat Law, operates as a 0% Ma’am territory within Israel. Coverage:

• Supplies within Eilat (between two Eilat-resident businesses, or to Eilat-resident consumers) are 0% Ma’am.
• Supplies from Eilat to mainland Israel are treated as zero-rated outbound from EFTZ but subject to import Ma’am into mainland Israel.
• Supplies from mainland Israel into Eilat can be zero-rated under specific procedures with proper documentation.

The Eilat regime supports the city’s tourism-driven economy by reducing the effective consumer-price impact of Ma’am. Foreign businesses operating supply chains involving Eilat should structure carefully to capture the zero-rate benefit without triggering unintended import Ma’am on mainland-Israel-bound goods.

5.2  Tourism services to non-resident tourists

Specific tourism services provided to non-resident tourists qualify for zero-rating: hotel accommodation, car rental in Israel for non-residents, certain guided-tour services. The zero-rating is subject to passport-based documentation requirements — the supplier must verify and retain evidence of the customer’s non-resident status. The framework supports Israel’s tourism sector but creates documentation overhead.

5.3  Diamond and high-tech sectors

Two Israeli sectors operate under specific Ma’am regimes:

• The diamond industry — concentrated in the Ramat Gan Diamond Exchange — operates under a specific Ma’am framework reflecting the international nature of the trade and the historical position of Israel as a global diamond cutting and trading hub. Detailed sector-specific rules apply to rough-diamond imports, polished-diamond exports, and intermediary trading.
• The high-technology sector benefits from Ma’am-related provisions of the Encouragement of Capital Investments Law, which provides specific Ma’am treatment for certain qualified technology activities and R&D-intensive operations. Particularly relevant for foreign technology vendors selling into Israeli R&D centres.

06 · Track 4 — Local Israeli business — Ma’am from osek registration onward

If you operate an Israeli-resident business — a B’erech Mugbal (limited company), Sharkat (partnership), Osek Patur (small-business sole proprietor), or Osek Murshe (registered-dealer sole proprietor) — your Ma’am obligations depend on which Osek category you fall into.

6.1  Osek patur vs osek murshe

Israeli-resident businesses fall into one of two main categories:

• Osek patur — small-business exemption for sole proprietors and certain professionals with annual turnover below ILS 120,000. No Ma’am charged on outputs; no input Ma’am recoverable; simplified annual reporting. Most professional service businesses (lawyers, doctors, accountants) operating as sole proprietors with turnover above ILS 120,000 cannot use osek patur and must register as osek murshe.
• Osek murshe — registered dealer status. 18% Ma’am charged on outputs; input Ma’am recoverable on inputs used in taxable activity; monthly or bi-monthly Ma’am returns.

Corporate entities (limited companies) and partnerships are not eligible for osek patur — they must register as osek murshe regardless of turnover.

6.2  Filing cadence

Osek murshe filing cadence is determined by annual turnover:

• Monthly filing — annual turnover above ILS 1,520,000.
• Bi-monthly filing — annual turnover below ILS 1,520,000.

Filing and payment deadline is the 15th of the month following the period. The bi-monthly cadence is one of the more business-friendly aspects of the Israeli system for smaller businesses, reducing administrative load while maintaining timely revenue collection.

6.3  Allocation-number e-invoicing regime

The Israeli allocation-number regime — phased mandatory from 5 May 2024 — requires that invoices above defined thresholds be assigned an electronic allocation number (Mispar Hatzhada) by ITA before the invoice is legally valid. Operational mechanics:

• Invoicing software requests an allocation number from ITA via API at the moment of invoice creation.
• ITA returns an allocation number within seconds; the number is embedded in the invoice.
• Without the allocation number, the invoice has no Ma’am legal effect — the recipient cannot claim input Ma’am, the supplier cannot defend the output Ma’am position in audit.

Threshold phasing:

• From 5 May 2024: invoices above ILS 25,000 require allocation numbers.
• From 1 January 2025: threshold lowered to ILS 20,000.
• From 1 January 2026: threshold lowered to ILS 15,000.
• Further phased reductions planned through 2027–2028, expected to converge toward universal coverage.

The regime is structurally similar to Italy’s SdI system, Hungary’s Online Számla, and other real-time e-invoicing frameworks. By the late 2020s Israel is expected to operate among the world’s most comprehensive mandatory e-invoicing systems.

07 · Cross-track essentials — allocation-number e-invoicing, reverse charge, currency

7.1  Invoice content requirements

Israeli Ma’am invoices must contain — at minimum — the elements set out in the VAT Law and accompanying regulations:

• Supplier full name, address, and osek murshe number.
• Customer name and address (and osek murshe number for B2B).
• Invoice number from a continuous numerical series.
• Date of issue and date of supply.
• Allocation number (Mispar Hatzhada) where invoice is above the threshold.
• Description, quantity, and unit price of goods or services.
• Ma’am rate (18%), Ma’am amount, and total invoice value.
• Total amount payable in ILS (foreign currency permitted with ILS equivalent at Bank of Israel rate).
• Reference to any reverse charge, zero rate, or exempt status.

7.2  Reverse charge

Israeli Ma’am applies reverse charge to services received by Israeli osek murshe from foreign suppliers under specific provisions of the VAT Law. The Israeli recipient self-assesses 18% Ma’am and recovers it through input credit where the input is used in taxable activity. Mirror operation of the EU reverse-charge mechanism.

7.3  Currency and exchange rates

Ma’am returns must be filed in ILS. Foreign-currency invoices must be converted to ILS using the Bank of Israel reference exchange rate of the date of supply, or another methodology consistently applied with ITA acceptance. For high-volume operators with continuous foreign-currency activity, the Bank of Israel monthly average rate is sometimes accepted as a simplification.

08 · Common questions answered properly

Q. The Ma’am rate rose from 17% to 18% on 1 January 2025. How did transitional supplies work?

Tax point determines rate. Supplies with tax point on or before 31 December 2024 used 17%; supplies on or after 1 January 2025 used 18%. ITA published transitional guidance for advance payments, long-term contracts, and subscription services straddling the change. Most subscription businesses split the billing period: pre-2025 portion at 17%, post-2025 portion at 18%. Going forward (any tax point from 1 January 2025), 18% applies.

Q. Allocation numbers — what happens if our invoicing software doesn’t request one?

Above the current threshold (ILS 15,000 from 1 January 2026), the invoice is not a valid Ma’am invoice without an allocation number. The recipient cannot claim input Ma’am on it. The supplier cannot validly account for the output Ma’am position. ITA’s audit position will treat the supply as if it had been made without proper invoice. Penalties for systemic non-compliance are material. Most Israeli accounting and invoicing platforms now integrate with the ITA allocation-number API natively. If your software doesn’t, switch providers or use a third-party allocation-number gateway (several Israeli e-invoicing service providers offer API gateways).

Q. Our products will be sold to Eilat customers. Can we charge 0% Ma’am?

Only if the supply qualifies under the Eilat Free Zone framework. The zero-rate applies to supplies within Eilat, supplies from outside Israel directly to Eilat, and specific qualifying supplies between mainland Israel and Eilat with proper documentation. Casual sales of goods to a customer who happens to be Eilat-resident but takes delivery in Tel Aviv do not qualify. Documentation requirements include verification of the customer’s Eilat establishment, delivery to Eilat, and other procedural elements. Get sector-specific advice if Eilat trading is meaningful to your business model.

Q. We’re a U.S. SaaS company. Do we register under the Specified Non-Resident Suppliers regime?

Yes for B2C supplies to Israeli consumers above the threshold. SNRS is mandatory for foreign B2C digital service providers exceeding the annual Israeli revenue threshold. Registration is online through ITA’s dedicated SNRS portal; no Israeli tax representative is required under SNRS (a simplification relative to standard Ma’am registration which does require one). 18% Ma’am applies to Israeli B2C revenue. Quarterly returns and payments in ILS or USD.

Q. We’re a German exporter sending Stream A equipment direct to Israeli developers. The Israeli buyer pays import Ma’am. Why do we need any compliance overhead?

Generally you don’t. Pure DAP/CIF supplies where the Israeli buyer acts as importer of record do not trigger Israeli Ma’am registration for the foreign supplier. The supplier ships, the Israeli buyer clears Israeli customs and pays import Ma’am, recovery happens at the buyer’s level. This is the lowest-friction model. The complexity arises only if commercial terms shift to DDP, if you start holding consigned stock in Israel, or if your customer base shifts toward smaller Israeli buyers who can’t or won’t handle import-of-record responsibility.

Q. Do we need an Israeli bank account?

For standard Ma’am registration: usually yes, ITA expects payment from Israeli bank accounts. Opening an Israeli ILS account through one of the major Israeli banks (Bank Hapoalim, Bank Leumi, Bank Discount, Bank Mizrahi-Tefahot) for a foreign business requires standard documentation but is straightforward in normal commercial circumstances. For SNRS regime: no, ITA accepts wire transfers from international accounts for SNRS Ma’am remittances.

Q. We are exposed to Israeli sanctions concerns. Does that affect Ma’am compliance?

Israeli Ma’am compliance is an operational tax matter — separate from sanctions or counter-terrorism financing frameworks. ITA processes Ma’am registrations and filings on standard tax-compliance criteria. Sanctions-related restrictions, where applicable to specific foreign entities, are handled through banking and trade compliance frameworks separately. Consult sanctions counsel for any specific sanctions exposure; ITA compliance follows standard procedures regardless.

09 · Recent changes and the road ahead

2015 — Rate reduction 18% → 17%

Effective 1 October 2015, the Ma’am rate reduced from 18% to 17% as part of a broader fiscal package. The 17% level remained in force for nine years.

2024 — Allocation-number regime launch

Effective 5 May 2024, the allocation-number e-invoicing regime took effect for invoices above ILS 25,000. The launch marked Israel’s transition into the global cohort of mandatory real-time e-invoicing jurisdictions.

2025 — Rate increase 17% → 18%

Effective 1 January 2025, the Ma’am rate rose from 17% to 18% as a fiscal consolidation measure during elevated government spending. The change preserved the single-rate architecture (no introduction of reduced-rate bands).

2025 — Allocation-number threshold reduction

Effective 1 January 2025, the allocation-number threshold dropped from ILS 25,000 to ILS 20,000. From 1 January 2026, threshold further dropped to ILS 15,000. Further reductions planned through 2027–2028.

2026 — Continued framework expansion

ITA continued through 2025–2026 to expand the allocation-number framework, refine SNRS procedures, and integrate Ma’am cross-matching with other ITA tax systems (income tax, social security, customs).

Outlook 2026–2030

Three trends to monitor: (1) continued lowering of allocation-number threshold toward universal coverage; (2) potential expansion of SNRS regime to additional cross-border supply categories; (3) potential B2B mandatory e-invoicing requirements aligned with international standards. Israel’s e-invoicing trajectory is among the most aggressive globally and the regime is expected to be substantially comprehensive by 2028.

10 · Primary sources & official references

Every fact in this guide is sourced. We list the primary references below. Where law changes between publication and your transaction date, the primary source governs.

• Israel Tax Authority (Rashut HaMissim BeIsrael)
• ITA online services portal
• Israeli Value Added Tax Law, 5736–1975 (Hebrew)
• Specified Non-Resident Suppliers (SNRS) regime — ITA guidance
• Allocation-number regime — ITA technical documentation
• Bank of Israel exchange rates
• Eilat Free Zone — Free Zone for Eilat Law
• Israeli Ministry of Finance
• OECD — Israel country tax overview

Disclaimer & methodology

This guide was prepared by TaxDo’s editorial team in collaboration with practising Israeli Ma’am advisors. Every numerical threshold, statutory citation, and procedural detail was verified against the primary sources listed in section 10 on the date of publication (27 May 2026). Israeli Ma’am law and ITA guidance evolve regularly, particularly around the allocation-number e-invoicing regime and the SNRS framework for non-resident digital services. Always confirm the position applicable to your specific transaction with an Israeli-qualified Ma’am advisor or directly with ITA. This guide is general information, not advice on any specific transaction. TaxDo accepts no liability for reliance on this guide in lieu of jurisdiction-specific professional advice.