Tax rate by region Israel

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The information provided on this page is intended for general informative purposes only. It should not be interpreted as tax advice, nor is it meant to be. For advice on your particular tax responsibilities, consult with an experienced tax expert. PayPro Global does not assume any responsibility for any action taken or not taken based on the information presented here.

VAT Compliance for SaaS Businesses in Israel

SaaS businesses in Israel are subject to a Value Added Tax (VAT). The standard VAT rate in Israel is 18%, and businesses are required to register for VAT if their annual turnover exceeds a certain threshold. VAT registration and compliance are crucial for SaaS companies operating in Israel, as failure to comply can result in significant penalties and fines.

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Israel

Israel adopted a VAT system in 1976 to modernize its tax administration and enhance revenue collection.

Official government link: Israel Tax Authority

18.00%

E-products and services VAT/Sales tax rate

Reduced tax rate product categories

No specific digital goods or services have reduced tax in Israel

Exempted product categories

No specific digital goods or services categories are exempt in Israel

Reverse charge mechanism for B2B sales

Yes

Tax ID validation required

Yes

When do you have to register

Registration is necessary before supplying taxable goods or services in Israel

Online registration possible

No

Local representative needed

Yes

Registration procedure

For foreign companies offering digital services in Israel, the registration process necessitates manual submission via a local tax representative. This means a local tax representative must be appointed to handle all VAT-related issues on the company’s behalf. The required documents include the company’s registration certificate, the ID card of the local representative, and a filled-out VAT registration form (Form 821). These documents should be submitted to the VAT Department in Israel. Upon processing and approval of the registration, a VAT registration number will be issued by the Israel Tax Authority.

List of digital and electronic services liable for tax

Cloud-Based Services
Distance teaching and e-learning services
Electronically Supplied Services
Online advertising services
Online consulting and professional services (e.g., legal, financial)
Online Marketplaces
Telecommunication Services
Television and radio broadcastings
Web hosting and website maintenance services

Penalties

Penalty for late registration – 1% from the taxable turnover amount.

Fines and penalties may be applied for the late submissions of VAT returns and payments.

Registration threshold

No threshold, non-resident companies must register for VAT

Filing interval

Monthly or bi-monthly

Filing deadline

By the 15th day of the month following the end of the reporting period

E-invoicing requirements

Not mandatory

Record keeping

Businesses are required to keep comprehensive transaction records for a minimum of 7 years, and these records should be accessible for review by the tax authorities in Israel.

How-To Guides: Israel SaaS VAT

Step: 1 Threshold

VAT is governed by the Value Added Tax Law, 1975
There is no formal registration threshold, NIS 0 (Zero). Non-resident suppliers may be required to register when supplying taxable services in Israel.

Step: 2 Business Registration

Non-resident suppliers may register as “Foreign Dealers” with the Israel Tax Authority. Appointment of a local representative may be required depending on the circumstances.

Step: 3 TIN/VAT Number

The VAT Registration Number is issued by the Israel Tax Authority (ITA). Non-residents are typically registered as “Foreign Dealers.”

Step: 1 Standard VAT Rate

The standard VAT rate in Israel is of 18%. 

Step: 2 VAT Formula

To calculate your tax amounts, use the following formula:

 

Tax Amount = Net Price x 18%

Step: 3 Reverse Charge (B2B)

It applies. When selling to an Israeli-registered “Dealer,” the buyer is responsible for reporting and paying the VAT (Self-Assessment). The foreign seller does not charge VAT if the buyer provides a valid VAT ID.

Step: 1 Selling B2C

The foreign provider must charge the standard VAT rate to private individuals and remit it to the ITA.

Step: 2 Selling B2B

VAT is not collected by the seller. The invoice should state that the Reverse Charge mechanism applies. The seller must verify the buyer’s VAT ID through the ITA’s online validation tool.

Step: 3 Invoice Requirements

Must include:

  • Supplier Name & Address
  • Supplier VAT ID, Date of Issue
  • Sequential Invoice Number
  • Buyer Name & Address
  • Buyer VAT ID (for B2B)
  • Description of Service (SaaS/Digital)
  • Total Amount
  • Currency (USD/EUR allowed, but VAT must be converted to ILS for reporting).

Important: For B2B transactions over NIS 10,000 (as of Jan 2026), an ITA Allocation Number must be obtained via the “Israel Invoice” clearance system.

Step: 1 Filing Interval

Taxes are filed monthly or bi-monthly (determined by the ITA based on turnover).

Step: 2 Filing Deadline

Taxes are filed by the 15th day of the following month for standard reports; the 23rd day for detailed electronic reports (via the ITA web portal).

Step: 3 Submission

Taxes are filed electronically via the SHAAM (ITA Processing Center) portal. Payments are typically made through the local representative via authorized Israeli banks.

Step: 4 Record Keeping

Records must be accessible for inspection in Israel for a minimum of 7 years from the end of the tax year. 

PayPro Global Solution: Simplified Registration & Fiscal Representation

Navigating Israel’s VAT registration and fiscal representation can be daunting. PayPro Global acts as your Merchant of Record, handling these complexities, including VAT registration and fiscal representation where needed, so you can focus on your business.

Learn more about our MoR services.

FAQ

Overwhelmed by SaaS sales tax compliance?

Our team of SaaS tax experts is here to help. Contact us today for a free consultation.

 

 

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