Israel is to raise its Value Added Tax by 1% to 17% from 1st September 2012.
This increase follows a rise three years ago from 15.5% to 16%. At the time, this increase was only intended to be temporary. However, the decline in export markets, especially the key Euro zone, meant this reversal was put off at the start of 2011.
In addition to the new VAT rise, there will also be an increases in individual income tax and a new top rate corporation tax rate.
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Israel’s application of VAT on consumption in Israel is extended also to “imported” intangibles or services provided to Israeli entrepreneurs by foreign suppliers. It may be collected in one of two ways: from the Israeli purchaser (provided that the purchaser is not an individual) or by requiring the foreign vendor to register in Israel and file VAT returns. In principle, a foreign entity that has a substantial presence in Israel should register for VAT and file VAT returns.