The Israeli Tax Authority has established guidelines for the new e-Invoicing system, set to be implemented from 1 April 2024. Under this regime, businesses must utilize certified representatives to acquire approved sales invoice numbers. While voluntary adoption began on 1 January 2024, a structured mandatory rollout is planned:
Starting April 2024, it’s mandatory for transactions exceeding NIS 25,000 (around €6,250 or USD 6,710).
In January 2025, the threshold lowers to transactions above NIS 20,000.
By January 2026, it further reduces to above NIS 15,000.
January 2027 sees a threshold of above NIS 10,000.
Finally, in January 2028, all transactions above NIS 5,000 (approximately €1,300 or USD 1,600) will require compliance.
This progressive introduction marks a significant move towards digitizing tax compliance in Israel, aiming to streamline processes and enhance financial transparency. In this detailed Q&A blog post, we explore the intricacies of e-Invoicing in Israel, offering an in-depth perspective for businesses to understand and adapt to this new mandate.
How Does B2B Electronic Invoicing Work in Israel?
B2B electronic invoicing in Israel involves a digitalized process where invoices are created, sent, and processed electronically. Starting in 2024, businesses must issue e-Invoices for transactions exceeding a specified value. These e-Invoices are required to be transmitted to the Israeli Tax Agency for real-time approval. The Tax Authority assigns a unique digital identifier to each validated invoice, ensuring it meets the regulatory standards for tax compliance.
What are the Requirements for e-Invoicing in Israel?
The requirements for e-Invoicing in Israel encompass several key elements:
- Allocation Number: Businesses must obtain a unique allocation number for each e-Invoice from the Israeli Tax Authority.
- Digital Signature: e-Invoices must include a digital signature to ensure authenticity and compliance.
- Data Accuracy: Accurate representation of transaction details is mandatory, including dates, amounts, VAT rates, and party information.
- Storage and Accessibility: e-Invoices should be securely stored for a period of 7 years, ensuring they are readily accessible for audits or reviews.
- Technical Integration: Integration with the Tax Authority’s system through API or a digital platform is necessary for invoice validation and compliance.
Who is Obliged to Use e-Invoicing in Israel?
The e-Invoicing system in Israel initially targets VAT registered businesses involved in B2B transactions. The obligation applies to businesses issuing invoices above a certain value threshold, which will decrease annually from 2024 to 2028. This phased approach aims to gradually bring a wider range of businesses into the e-Invoicing system.
What are the Benefits of the Israel e-Invoice?
e-Invoicing in Israel offers multitude of benefits:
- Efficiency and Cost Reduction: Streamlines invoice processing and reduces costs associated with paper-based invoicing.
- Improved Cash Flow: Faster invoice processing can lead to quicker payments, positively impacting cash flow.
- Enhanced Compliance: Real-time validation of invoices ensures adherence to tax regulations and reduces errors.
- Data Management and Insights: Digital invoices facilitate better data management and can provide valuable business insights.
- Environmental Impact: Reduces the carbon footprint associated with traditional invoicing.
How Can I Issue an e-Invoice in Israel?
To issue an e-Invoice in Israel, businesses need to:
- Ensure their invoicing software or system is compatible with the requirements of the Israeli Tax Authority.
- Obtain the necessary allocation number and integrate a digital signature for each invoice.
- Transmit invoices to the Tax Authority for validation.
- Securely store the validated e-Invoices and maintain records as per regulatory guidelines.
To sum up, with e-Invoicing set to become a norm in Israel, businesses must prepare for a digital transformation in their financial processes. Understanding the requirements, benefits, and implementation process is crucial for a smooth transition to this new era of digital tax compliance.