ISRAEL: VAT on Foreign Digital Services

Israel plans to extend its VAT rules to the supply of B2C digital services by non-residents and to the sale of low value goods via online marketplaces. Israel’s Ministry of Finance has included plans to extend the country’s VAT system to foreign suppliers of digital services as well as the potential introduction of VAT rules for the sale of low value goods via online marketplaces. It is still unclear what the actual effective date for the new VAT rules will be, but 1 January 2022 is predicted to be the earliest possible date.

The draft proposals are contained in a Memorandum called ‘The Law of Economic Efficiency (Legislative Amendments to Achieve the Budget Targets for the Budget Years 2021 and 2022)’. The Israeli authorities expect the new rules to raise circa USD110 million in 2022, the first year of the rules, and an additional USD115 million in 2023.

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