VAT-fraud measure proposal for B2B construction and personnel services
Israel’s parliament, Knesset, is considering a proposal to impose mandatory domestic reverse charge on VAT for the provision of construction and staff services. The aim is to tackle VAT fraud were the tax element of such transactions goes missing.
The reverse charge switches the VAT reporting obligations from the provider to the customer. So the customer reports the sales VAT against the purchase VAT, and there is therefore no requirement to make a cash payment for the VAT element of the sales invoice. This takes the opportunity to syphon off tax dues.
Israel has a particular problem with fake invoices, used for unlawfully claiming deductions against VAT due. The reverse charge would eliminate this opportunity. Israel e-invoicing is also being introduced this Spring 2024.
Staff services includes the provision of: temporary staff; cleaning staff; and security staff.
