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 | - | |
| 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 2015 | TZS 40 million | Only resident |
| Tunisia | 19% | Jan 2020 | Nil | Withholding VAT; 3% Royalty Tax |
| Uganda | 18% | Jan 2020 | Nil | |
| United Arab Emirates | 5% | Jan 2018 | AED 375,000 | |
| Zimbabwe | 14.5% | Jan 2020 | Nil |
