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The Tax Authority Will Assign Numbers to Invoices in Transactions Between Dealers as Part of Its Fight Against Fictitious Invoices

6 June 2023

Dear friends and colleagues,

We would like to bring to your attention that the Knesset approved an amendment to the Value Added Tax Law (temporary provision for five years) within the framework of the Economic Plan Bill (Legislative Amendments for the Implementation of the Economic Policy for the Budget Years 2023 and 2024) (the “Economic Plan”), according to which the Tax Authority will assign numbers to invoices in transactions between dealers so that it will be possible to deduct input tax only from invoices with such numbers.

The purpose of the amendment (after the end of a trial period) is to reduce the use of fictitious invoices to offset the input tax included in them by preventing, in advance, the issuance of invoices that there is a reasonable basis to assume that they are fictitious. The amendment does not apply to invoices issued in a transaction subject to VAT at a zero rate.

There are two phases according to the approved amendment:

In the first phase, starting January 1, 2024, dealers will need to contact the Tax Authority through an online system to be allocated a unique number for invoices over NIS 25,000 for transactions with dealers. It will not be possible to deduct the input tax included in invoices without unique numbers, and only in exceptional circumstances of a malfunction in the Tax Authority’s computer system, and with the Tax Authority’s approval will it be possible to deduct the input tax included in the invoices.
At this phase, the Tax Authority will assign invoice numbers to each applicant and will not apply sanctions. After a transition period of one to two years, and with the approval of the Minister of Finance and the Finance Committee of the Knesset, the second phase will enter into force.

In the second phase (subject to the publication of an order by the Minister of Finance which shall be approved by the Finance Committee), the Director of the Tax Authority will be entitled, subject to the considerations detailed in the law, to refuse the request to assign a unique number to an invoice before the invoice is issued, thus preventing the offset of the input tax for this invoice. A dealer will be entitled to appeal against the decision to refuse his request for number allocation. Alternatively, the buyer will be entitled to pay the VAT in the transaction and receive a number allocation for a self-invoice.

According to the amendment, the amount of the invoice that requires the assignment of a number will be reduced every year as follows:

  • In the first year, 2024, the Tax Authority will assign numbers to invoices over NIS 25,000.
  • In the second year, 2025, the Tax Authority will assign numbers to invoices over NIS 18,000.
  • In the third year, 2026, the Tax Authority will assign numbers to invoices over NIS 15,000.
  • In the fourth year, 2027, the Tax Authority will assign numbers to invoices over NIS 10,000.
  • In the fifth year, 2028, the Tax Authority will assign numbers to invoices over NIS 5,000.

These days the Tax Authority is preparing to distribute instructions to software companies and dealers.

We will update you on any new development, including if the Tax Authority will publish detailed instructions. We suggest checking with your software company whether it is preparing to adapt your accounting software to the Tax Authority’s system. If your accounting system is unique and customized, we will be happy to assist with contacting the Tax Authority to adapt it to the new requirements.

​To the amendment of the Value Added Tax Law >> click here



We would be pleased to assist with any queries you may have.
The Tax Department
Herzog Fox & Neeman

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