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Israel VAT foreign digital services 2022

The Israeli government has included proposals to levy VAT on non-resident providers of digital or electronic services to its consumers in its 2021/22 budget for 1 January 2022 at the earliest. The new ‘Arrangement Law’ would update the Israeli Income Tax Ordinance to reflect increased digital services and e-commerce being provided from off-shore. This was originally proposed in 2016, and would follow many other global VAT digital services implementations.

The current VAT rate in Israel is 17%. In the same budget, there is a proposal to withdraw low-value import VAT exemption on e-commerce sale of goods.

What digital services would be liable to Israeli VAT?

The 2016 plan included taxing the following supplies:

  • Telecoms – data and voice
  • TV and radio broadcasts
  • Digital services (media; gamming; webcasts; e-learning; apps; e-books; software etc)

The Tax Authorities will be provided with the powers to set registration and compliance rules, with an expectation of simplified processes with limited rights. For example, no right to deduct any input VAT.

The following guidelines have been set by the Ministry of Finance in the draft bill:

  • No requirement to appoint a local Fiscal Representative
  • No obligation to open a local bank account
  • No requirement to locally incorporate

Preparing Israeli VAT returns can be challenging.  VAT Calc’s single platform VAT Filer can accurately complete any country filings with verified transactional data from our VAT Calculator or VAT Auditorintegrated tools.

Digital Services Tax still an option

Israel’s Finance Ministry and tax authority announced in the last week of April that they intend to introduce a digital sales tax (DST) that may reap some $280 million for the treasury. The tax authorities will be working on a tax on the local sales turnover of foreign digital companies in Israel. This is likely to be rolled into the OECD inclusive tax reforms, which includes the right to tax turnover on digital services provided by large non-resident providers.

Africa & Middle East VAT on digital services

Comments (click for details) Rate Date Threshold Comments
Algeria 9% Jan 2020 Nil
Angola 14% Oct 2019
Bahrain 10% Jan 2019 Nil
Cameroon 19.5% Jan 2020 XAF 50 million
Egypt 14% Sep 2016 EGP 500,000
Ghana 12.5% Apr 2022 GHS 200,000
Israel 17% 2022 Proposal in 2021/22 budget
Ivory Coast 18% 2022 -
Kenya 16% Sep 2013 KES 5million
Kuwait 5% Jan 2023? - TBC
Mauritius 15% 2020
Nigeria 7.5% Jan 2020 $25,000
Oman 5% Apr 2021 OMR 35,000
Rwanda 18% TBC
Saudi Arabia 15% Jan 2018 Nil
South Africa 15% Jun 2014 ZAR 1 million
Tanzania 18% Jul 2022 Nil Residents since Jul 2015
Tunisia 19% Jan 2020 Nil Withholding VAT; 3% Royalty Tax
Uganda 18% Jan 2020 UGX 150m
United Arab Emirates 5% Jan 2018 AED 375,000
Zimbabwe 14.5% Jan 2020 Nil

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