Your Taxes: Easier e-commerce

The ruling makes it easier if there are multiple purchases by allowing a single combined monthly reverse charge self-invoice covering the consideration paid to all foreign suppliers that month.

September 13, 2018 22:15
3 minute read.

Shopping for sales (illustrative). (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)


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The Israeli Tax Authority (ITA) has issued a new generic ruling allowing a streamlined procedure for business-to-business (B2B) e-commerce supplies by foreign businesses to Israeli businesses (Ruling 6369/18).

The tax or lack thereof on e-commerce is a hot topic. On June 21, the US Supreme Court ruled in the Wayfair case that US states may in certain cases impose sales tax on e-commerce. This applies not only to suppliers from other US states but also from other countries such as Israel.

The EU is about to tighten its taxation of digital supplies by suppliers located outside the European Union. Back in 2016, the ITA issued a tough circular about income tax and VAT on foreign suppliers with significant digital presence in Israel. Now the ITA wants to make it easier for B2B supplies.

What’s in the ruling?

The ruling refers to an Israeli resident private company which is registered as a dealer (osek) for VAT purposes.

This company purchases from related and unrelated foreign companies various services and intangible assets such as software licenses, R&D, various professional services, headquarter services (apparently management), hub services, legal services, communications, regulatory services and so forth.

Normally in B2B cases, the Israeli importer can apply a “reverse charge” mechanism and issue a self-invoice on behalf of the foreign supplier. The Israeli importer then pays the VAT thereon (17% standard rate) to the ITA and can reclaim the same VAT as input VAT on this expense within six months.

However, the ruling makes it easier if there are multiple purchases by allowing a single combined monthly reverse charge self-invoice covering the consideration paid to all foreign suppliers that month.

Conditions for a single monthly combined self-invoice include:
• The invoice must clearly state, “Combined Self-Invoice Per Relief from the Tax Authority and According to Ruling Number 6369/18.”
• It is issued monthly.
• It is included in VAT returns.
• It contains separate lines for date, supplier’s name and address, amount paid including settlement fees and, where applicable, a description
• Proof of payment is attached.
• The VAT Professional Department at the ITA must be notified of any changes in character or scope.

The ruling is in effect for three years until May 16, 2021.

The ruling reminds us that if any part of the foreign supplier’s activity takes place in Israel, it may have to register for Israeli VAT purposes and appoint a fiscal representative.

The ruling takes no position on whether the foreign supplier has a taxable permanent establishment for income tax purposes. This can be a big issue and specialist advice is recommended.

If the importer is NOT a dealer, it can record a one-time transaction and pay the VAT to the ITA.


This ruling is an example of back-door law made without the Knesset, however, for once the ITA is to be commended.

But the ruling only works for B2B. The ITA will soon find out that the ruling does not work for B2C, business-to-consumers, which is where the main e-commerce VAT revenues are eluding it.

It remains to be seen whether foreign online portals serving Israeli consumers will feel compelled to collect Israeli VAT. Some are starting to do so, but not all of them.

For B2C the ITA would do well to copy the easy online reporting by e-commerce suppliers in countries like Australia and Estonia, and similar easy online reporting in the EU known as MOSS (mini one-stop shop).

All in all, the ITA is not yet in the 21st century. It needs MOSS in English for foreign e-commerce suppliers to Israeli consumers if it wants more VAT revenues.

Rules for e-commerce firms

If you are an e-commerce supplier, check your income tax and sales tax/VAT/GST liabilities in Israel and around the world.
Then work out how to comply. There are thousands of jurisdictions, if you factor in US state and local taxes. The US market is, of course, big and affluent. Fortunately, there are professional services to help you in the US and many other countries. Take appropriate advice.

What happens if you don’t? You may jeopardize your chances of going public or being acquired if you have tax baggage.
As always, consult experienced tax advisers in each country at an early stage in specific cases.

The writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd. He can be reached at

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