With the long-lasting problem of fictitious invoices in Israel, a move towards some form of mandatory e-invoice clearance might be the answer. After having been withdrawn once due to failing support, the idea of a Continuous transaction control (CTC) model is being revived by the Israeli tax authority. The proposed model, similar to Chile, would include a direct connection between the tax authority and businesses in real time for each transaction. The proposal, which is currently being reviewed with interested stakeholders, will be presented to the Knesset Finance Committee, with the hope of promoting legislation for implementing the planned reform measures as soon as a new government is formed.
Subject to final adoption in law, the core points of the reform are:
- B2B Invoices over NIS 5,000 must be reported in real-time to and approved by the tax authority.
- The reporting will occur through an accounting software or a government web portal.
- Information required to be reported includes the date of the transaction, invoice number, business numbers of the transacting parties and the amount of the invoice, excluding VAT.
- An authentication by the buyer of the invoice on the government portal is envisaged.
- Pre-population of the VAT return is also envisaged.
It’s an interesting observation that for years Israel appeared to be heading towards the EU approach of a post-audit system, yet recently they seem to have pivoted and be heading towards the more Latin American style of Continuous transaction controls.
Either way, the Israeli Tax Authorities are now taking firm measures to combat VAT fraud, as to whether they go for a model similar to Chile, or something close to home in India or Turkey, we will have to wait and see.