Is Your Company Overpaying VAT on activities in Israel?
A recent tax ruling by the Israel Tax Authority significantly changes the VAT obligations for foreign companies operating within the Israeli market. This landmark decision can potentially exempt foreign companies from paying redundant VAT on specific activities within Israel, eliminating instances of double VAT payments and offering substantial tax savings.
Foreign companies often find themselves inadvertently paying VAT twice: first, when importing goods through customs, and second, on accompanying services rendered in Israel. The new tax ruling explicitly addresses this issue, establishing that services like advertising, marketing, or promotional activities associated directly with imported goods may be eligible for a 0% VAT rate, provided that service costs are included in the customs value of the imported goods.
How Can Your Company Benefit from this VAT Exemption?
If your company has already paid VAT at customs for imported goods, you should not incur additional VAT on related services such as repairs or warranty services provided within Israel. That ensures you’re not paying unnecessary duplicate VAT.
Moreover, you may be entitled to retroactively claim VAT refunds if your company previously incurred double VAT payments, significantly impacting your bottom line.
Who Can Benefit from This New Ruling?
- International companies that import goods into the Israeli market through local distributors.
- Foreign entities that receive services within Israel, especially in advertising, marketing, and product maintenance when these services will factored into the customs value of imported products.
However, navigating the complexities of VAT regulations requires professional expertise to ensure compliance with all legal prerequisites and maximize your benefits.
AUREN is Here to Guide You. Our team of tax professionals will assess your eligibility for VAT exemptions or refunds and help you leverage these new regulations optimally, safeguarding your financial interests.
Contact us today for a consultation and eligibility assessment.
Yaniv Angel CPA (Adv)
Managing Partner, International Taxation Division
