Exciting news out of Israel as the government approved the 2023-2024 budget on 24 February 2023 to introduce a Continuous Transaction Control (CTC) model in their tax system. This is a long-awaited move that will have significant implications for businesses operating within the country.
The new plan, which was prepared by the Ministry of Finance and approved by the government, envisages a clearance model for invoices over NIS 5,000 (appx. 1300 Euros) issued between businesses. Under this model, invoices will need to be issued through a tax authority system and get real-time approval. The tax authority system will issue a unique number as proof of clearance for each invoice, which will subsequently be used to deduct input VAT. It is also proposed that, the tax authority would be entitled to refuse a request to assign a number and not clear the invoice if there is a reasonable doubt that the invoice is not issued legally.
While this plan is an exciting development, it’s only the beginning of a long journey towards implementing a CTC. The above plan is currently only outlined in a budget document, which will be subject to further readings and approvals before it can be implemented. Additionally, an amendment to VAT Law and the publication of technical details will be necessary to make it legally and technically enforceable.
