Ministry of Finance 2023/24 economic plan includes introduction of pre-clearance B2B e-invoices to tackle fictitious invoice fraud
The Israeli Ministry of Finance has published its economic plan for public consolation prior to the 2023/24 budget process. It includes a proposed Continuous Transaction Control (CTC) based electronic invoicing regime. The aim is to tackle the large ‘fictions invoice’ fraud problem, often used by criminal gags to launder money.
The Ministry is proposing requiring invoices above NIS 5,000 (approx €1,300 or USD 1,600) to be submitted to the Tax Authority in real-time for validation and approval prior to issuing to the customer. This would apply to all B2B transactions above the invoice threshold. The Tax Authority estimated only 15% of invoices pass this hurdle.
Pre-clearance model to combat fictitious VAT invoices
The aim is to tackle the huge fraud problems around fictitious B2B VAT invoices, used by companies as deductions against their own VAT liabilities. The Tax Authority believe this costs the country billions in lost revenues. A pre-clearance model would give the tax authorities an advanced opportunity to cross-check any submitted invoice with the original supplier’s records.
The Ministry of Finance is considering a pre-clearance model, along the lines of Italy or Chile. The EU VAT in the Digital Age proposal for Digital Reporting Requirements being progressed for 2028.
Likely to follow Chilean e-invoice model
A similar plan was put forward in 2016 to follow the Chilean e-invoicing model. This requires taxpayers to work through e-invoice certified partners. Draft invoices are passed to them, they would transmit live to the Tax Authority for approval and return. The agent could then forward the invoice to the customer.
However, political difficulties in forming a government mean that the plans my face a long delay in implementation.
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