The Israel Tax Authority is planning to introduce mandatory e-invoicing in Israel in order to fight tax evasion. The authorities plan to adopt the Chilean model for the e-invoicing mandate, which is a clearance model that requires documents be approved by tax authorities before a buyer and seller complete a transaction. According to the latest updates, Israeli businesses will be required to transmit all invoices with a value exceeding NIS 5 000 to authorities.
Adoption of the Chilean model was discussed few years ago, but the plan was abandoned as it was not broadly supported at the time. Current Tax Authority Director General, Eran Yaacov, has been making efforts to reintroduce the discussions. As part of his efforts, he appointed a team to fight fictitious invoices: The Committee Responsible for the Invoices Allocation Model in the Tax Authority, led by Miri Savion. The team’s first proposal aimed at introducing the mandate only for transactions exceeding NIS 50 000. However, after months of discussion, the Committee lowered the threshold to NIS 5 000.
Key elements of the mandate
Although it is too early to determine how the model will work, there are some elements of the mandate that the tax authorities are planning to implement:
- Invoices that exceed NIS 5 000 must be reported to and approved by the Israel? Tax Authority through software or a web portal. The Tax Authority will check the data and approve or reject the document.
- The model will only apply to business-to-business (B2B) invoices.
- The date of the transaction, invoice number, business numbers of the issuer and receiver, and the amount of the invoice excluding VAT will have to be shared with the Tax Authority.
- An internet application will allow the receiver to verify the particulars of the received invoice in order to ensure the authenticity of the document.
- Both issuer and the receiver will be required to report the number of approvals. Inconsistency between the number of approvals and the invoice particulars will lead the invoice to be rejected.
Combating fictitious invoices
Tax evasion, defined as “a national plague” by Israeli officials, has been a big problem in the country. Israeli authorities during recent years revealed professional networks distributing hundreds of millions of shekels in fictitious invoices. Currently it is not possible for the authorities to check all invoices that are issued in Israel, which exacerbates the problem.
An e-invoicing mandate allowing authorities to check each transaction exceeding NIS 5 000 will contribute to a more transparent system and to the reduction of human errors and fictitious invoices.
The Tax Authority has been carrying out discussions with several tax-related institutions to promote the implementation of the e-invoicing mandate once a new government is formed.
Stay tuned and stay compliant
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