Israel e-invoicing
Israel is set to implement a continuous transaction controls (CTC) model that will require businesses to submit invoice data in electronic format for the tax authority to validate.
The mandate, set to come into force in May 2024, will require invoice data to be validated by the country’s tax authority before being sent to the final recipient. Read on for an overview of Israel e-invoicing requirements – we encourage you to bookmark the page to stay updated as the mandate develops.
Table of contents
1. At a glance: Characteristics of invoicing data submission in Israel
2. Electronic invoicing laws in Israel
3. Benefits of using e-invoicing in Israel
4. Timeline of e-invoicing clearance in Israel
5. What is the future of e-invoicing in Israel?
6. What happens if I don’t comply?
CTC Type
CTC Clearance
Format
JSON
Allocation Number
Assigned by the ITA
E-invoicing
Not mandatory
Electronic Signature
Not applicable (though needed in case of e-invoicing)
Archiving
Not applicable
Electronic invoicing laws in Israel
From 5 May 2024, Israel will make clearance CTC clearance mandatory. Authorised dealers (taxpayers) will have to clear invoices above a threshold of NIS 25,000 (before VAT), obtaining an allocation number acquired by the SHAAM – a computer system provided by the Israeli Tax Authority (ITA).
The invoice value threshold will be gradually reduced annually until 2028, ending at NIS 5,000 pre-VAT. Nevertheless, suppliers may report invoice data to the tax authority for clearance and request an allocation number for any amount.
Besides CTC clearance, e-invoicing rules remain in place and do not change with the new CTC requirements. Electronic invoices are still optional.
Since 2019, public entities in Poland have been mandated to receive and process e-invoices. While currently optional for suppliers of public entities, the transmission of e-invoices will be required for B2G and B2B transactions when the mandate is implemented (this was planned for 1 July 2024 until it was postponed in January 2024).
CTC clearance model
Israel’s model will include a clearance system from 5 May 2024. Businesses that exceed a specific threshold will be required to obtain an allocation number for invoices regarding B2B transactions. They can do so by issuing the invoice to the tax authority before sending it to the final customer.
Without receiving this number and including it on invoices, businesses will not be able to deduct input VAT.
Israel B2B e-invoicing
Israeli CTC clearance covers B2B transactions between authorised dealers.
However, e-invoicing is not mandatory under the new CTC clearance system. In case invoices are issued in electronic format (structured or unstructured format, including PDF), they must be cleared by the ITA and assigned with an allocation number before exchanged with the trading party.
Without receiving this number and including it on invoices, businesses will not be able to deduct input VAT.
Benefits of using e-invoicing in Israel
Although CTC Clearance mandate does not require e-invoicing, there are numerous benefits for businesses that electronically issue and receive invoices, including:
- Cost savings through the reduction of paper, postage and manual labour
- Saving time by using automated and structured processes
- Streamlining operations through interoperable, uniformed initiatives and systems
- Fewer issues and risks through the validation and authentication of data
Timeline of e-invoicing clearance in Israel
While combating fraudulent invoices has been discussed in Israel for a long time, the implementation of the upcoming CTC model is a relatively recent development.
- February 2023: The 2023-2024 state budget and economic plan are approved, outlining a clearance CTC model
- June 2023: The ITA announces plan for CTC implementation
- July 2023: The ITA publishes technical specifications for the upcoming CTC model
- October 2023: Clearance model is postponed from 1 January 2024
- 1 January 2024: The original date that the clearance e-invoicing model would be implemented
- 1 January 2024: The ITA platform becomes operational
- 5 May 2024: CTC clearance comes into effect
- January 2025: Invoice threshold lowers to NIS 20,000 pre-VAT
- January 2026: Invoice threshold lowers to NIS 15,000 pre-VAT
- January 2027: Invoice threshold lowers to NIS 10,000 pre-VAT
- January 2028: Invoice threshold lowers to NIS 5,000 pre-VAT
What is the future of e-invoicing in Israel?
While electronic invoice data will be required as part of the CTC initiative, Israel does not yet have a specific electronic invoicing mandate requiring dealers to issue invoices electronically.
Currently, Israel’s e-invoicing rules – which are classified as post-audit – include e-signing, content remarks and prior notification to the tax authority.
Israel has the potential to go the way of countries like Romania and Spain, mandating the use of e-invoices across transactions with governments and businesses. There is no official word on Israel’s future e-invoicing plans beyond the current CTC mandate.
What happens if I don’t comply?
If an allocation number is not requested for the invoice by the supplier, the buyer cannot deduct its VAT based on that invoice.
Setting up e-invoicing in Israel with Sovos
Sovos’ continuous transaction controls (CTC) software was purpose-built to help customers stay on top of their obligations wherever they do business, even as the rules change.
Currently, e-invoicing is permitted in Israel, provided it is prominently stated on the invoice that it is a ‘computerized document’ and prior notification is made to the ITA. A digital signature compliant with the local law is required to ensure the integrity and authenticity of the electronic invoice.
Storage of e-invoices must be within Israel – unless derogation has been granted. Both issuance and storage of e-invoices can be outsourced to third parties like Sovos.
Taxpayers opting to use e-invoices must comply with the abovementioned rules, as well as the CTC clearance requirements rolling out in 2024.
As CTCs and e-invoicing continue to grow in global adoption, it is vital to partner with a provider that closely monitors the decisions of tax administrations and understands the regulations you face. Sovos can help to stay compliant wherever you do business.
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Israel CTC Clearance and E-invoicing FAQ
Is e-invoicing mandatory in Israel?
No, e-invoicing is not mandatory in Israel. Israel’s continuous transaction controls (CTC) mandate involves the electronic submission of invoice data and is set to come into effect on 5 May 2024.
What do I need for an invoice in Israel?
Electronic invoice data must include specific information when submitted to the tax authority, including invoice ID, VAT number, invoice date, invoice amount and accounting software number. They also need to be given an allocation number by the ITA for the buyer to use this invoice for a tax deduction, as per the CTC clearance mandate.
Sovos has the first global solution for e-invoicing compliance, including e-reporting functionality.
Is there a contingency measure to address potential failures in systems?
Within the CTC mandate, the use of emergency allocation numbers is instituted as a contingency measure to address potential failures in its computer systems. In anticipation of such events, taxpayers must acquire and store these emergency numbers.
Do I need to sign the e-invoice?
In case the taxpayer chooses e-invoicing, electronic invoices in Israel must be signed with a digital signature compliant with the local law.
How does Israel’s CTC clearance platform work?
Israel’s mandated CTC clearance platform requires electronic invoice data to be submitted to and approved by the Israeli Tax Authority in real time. The authority will assign an allocation number and verify or reject the invoice data. Once validated, the allocation number will be returned to the seller so it can be issued to the buyer (in electronic or paper format).
