Value Added Tax Law, 5736-1975

In this Law –

"area" – any of the following: Judea and Samaria and the Gaza Strip, excluding the Gaza and Jericho areas;

"Gaza and Jericho areas" – the areas included within the territorial jurisdiction of the Palestinian Authority pursuant to the agreement concerning the Gaza Strip and the Jericho area, signed in Cairo between Israel and the Palestine Liberation Organisation on the 23rd of Iyar 5754 (4 May 1994);

"hotel" – including a pension, rest house, guest house or the like, in which at least five persons are ordinarily accommodated for consideration;

"District Court" – the District Court within whose jurisdiction the principal place of business of the appellant or his registered office is situated;

"social bank" – a public benefit company as defined in the Companies Law, 5759-1999, holding a bank licence under the Banking (Licensing) Law, 5741-1981, or a cooperative society holding a licence to provide deposit and credit services as defined in section 25a of the Financial Services Supervision Law (Regulated Financial Services), 5776-2016, provided that their business is not for the purpose of profit;

"the Director" – the Director, as defined in section 1 of the Income Tax Ordinance [New Version];

"the tax" – value added tax, payroll tax, or payroll and profit tax;

"import declaration" – as defined in Section E of Chapter IV of the Customs Ordinance [New Version];

"export declaration" – as defined in Section B of Chapter VI of the Customs Ordinance [New Version];

"body of persons" – as defined in the Income Tax Ordinance [New Version];

"taxable person" – a dealer, a non-profit organisation, or a financial institution;

"invoice" – a transaction invoice or a tax invoice;

"tax invoice" – an invoice issued pursuant to section 47;

"transaction invoice" – an invoice that is required to be issued pursuant to section 45;

"secured electronic signature" – as defined in the Electronic Signature Law, 5761-2001 (hereinafter – the Electronic Signature Law), provided that it was issued by the State or by a person authorised by the State to do so, in accordance with the provisions made pursuant to section 145(a1);

"certified electronic signature" – as defined in the Electronic Signature Law;

"goods" – including –

"insurer" – an insurer as defined in the Insurance Business Supervision Law, 5711-1951, excluding a provident fund exempt from income tax under section 9(2) of the Income Tax Ordinance [New Version];

"index" – the consumer price index published by the Central Bureau of Statistics;

"financial institution" –

"non-profit organisation" or "non-profit" –

"turnover of a dealer" – the aggregate price, as defined in section 7, of transactions in the tax year that has passed, and if that amount is not known, or if the dealer engaged in business for only part of that year – the amount likely to be received in the current tax year, calculated in accordance with guidelines determined by the Minister of Finance, provided that if it becomes apparent to the Director or to the dealer on any day within the current tax year that the aggregate price of transactions as aforesaid in the current year exceeds or will exceed the aggregate price in the year that has passed or in the current year, as calculated as aforesaid, then from that day until the end of the tax year the higher amount shall be regarded as the turnover of the dealer; for this purpose, "transactions" – excluding the sale of equipment;

"sale", in relation to an asset – including the letting thereof, the hire-purchase thereof, the conveyance of a right to use it for consideration, the conveyance of a right therein, its use for own purposes, and including its expropriation, forfeiture or confiscation, for consideration, as well as the giving thereof as a gift, including a gift to an employee, and in relation to real property – also including an action in a real property association as defined in the Real Property Appreciation Tax Law, 5723-1963 and the listing on a stock exchange of securities issued by a real property association, as referred to in section 8 of that Law, but excluding an action in a security traded on a stock exchange;

"input tax" – the value added tax imposed on the sale of assets to a dealer, on the importation of assets by a dealer, or on the provision of services to a dealer, all for the purposes of the dealer's business or for use in the dealer's business;

"registration number" – the number under which a taxable person is registered, pursuant to Chapter X;

"real property" – including a right in real property and including a right in a real property association as defined in the Real Property Appreciation Tax Law, 5723-1963;

"securities" – as defined in the Securities Law, 5728-1968, including securities issued by the Government or pursuant to a special law, and including shares not issued in a series;

"asset" – goods or real property;

"dealer" – a person who sells an asset or provides a service in the course of his business, provided that he is not a non-profit organisation or a financial institution, as well as a person who engages in an occasional transaction;

"petty dealer" – (Repealed)

"authorised dealer" – a dealer registered pursuant to section 52 or pursuant to section 58 who is not an exempt dealer, as well as a person who belongs to a class of dealers in respect of whom the Minister of Finance has determined that they shall be registered as authorised dealers;

"exempt dealer" – a dealer whose turnover in all his businesses does not exceed NIS 122,833 per year or a higher amount determined by the Minister of Finance;

"transaction" – any of the following:

"occasional transaction" –

"business" – including a profession and a vocation;

"equipment" – an asset that served, serves or is intended to serve a dealer in his business, and whose sale is not part of the dealer's trade;

"buyer" – including a recipient of a service;

"profit" – taxable income, as defined in the Income Tax Ordinance [New Version], before the set-off of losses from tax years prior to the tax year in which the income was received, and after the deduction of payroll tax pursuant to section 4(b), excluding income from a dividend received from a financial institution and excluding income generated as a result of structural changes that meet the conditions of Part 5-B of the Income Tax Ordinance [New Version], but including income from interest or from a dividend or from the sale or redemption of a unit or from the distribution of profits to a unit holder in respect of which an exemption from income tax is granted under any law; for this purpose, "unit" – as defined in the Joint Investments in Trust Law, 5754-1994;

"own use" –

"service" – any act done for consideration for another that is not a sale, including a credit transaction and the deposit of money, and in a body of persons – also such an act done for its members even without consideration or in consideration of membership fees; the work of an employee does not constitute a service to his employer;

"salary" – employment income as defined in the Income Tax Ordinance [New Version], including a pension paid by an employer to a former employee;

"tax year" – as defined in the Income Tax Ordinance [New Version], including a special assessment period for that tax year.

"foreign resident" –

"tourist" – an individual sojourning in Israel pursuant to a visa and permit for a transit stay or for a visitor's stay, under paragraphs (1) or (2) of section 2(a) of the Entry into Israel Law, 5712-1952, or a person to whom the provisions of that Law do not apply by virtue of section 17 of that Law, excluding a person sojourning in Israel pursuant to a visitor's stay visa for the purpose of working temporarily for remuneration in Israel.

for the purpose of this subsection –

"Israeli national" – any of the following:

"resident of Israel" –

Value added tax shall be imposed on a transaction in Israel and on the importation of goods at a single rate of the price of the transaction or of the goods, as determined by the Minister of Finance by Order after consultation with the Finance Committee of the Knesset.

The provisions of the Customs and Excise Duties (Change of Tariff) Law, 5709-1949, shall apply to Orders made pursuant to section 2 as if they were Orders made pursuant to section 1 of that Law, with the necessary modifications and with the following modifications: in place of "two months" read "two weeks" and the period between sessions of the Knesset shall be counted; in place of "the Finance Committee of the Knesset" read "the Knesset" and the provisions of section 2(a)(2) and (3) shall not apply.

"salary" – salary including a grant upon retirement or a grant upon death, excluding such a grant paid from a provident fund, or paid by means of amounts deposited in a provident fund and returned to the employer for the purpose of the payment, as well as any amount paid by an employer to a study fund or to a provident fund, even if pursuant to the provisions of section 3 of the Income Tax Ordinance [New Version] it is not regarded as employment income at the time of payment to the study fund or to the provident fund, and also the amount of national insurance contributions paid by an employer in respect of an employee under the National Insurance Law [Consolidated Version], 5755-1995, less the insurance contributions that the employer deducted from the employee's salary pursuant to the provisions of section 342(c) of that Law;

"study fund" – a study fund that is a provident fund;

"provident fund", "central severance pay provident fund" – as defined pursuant to section 47 of the Income Tax Ordinance [New Version].

and all of this, provided that if the loss could be set off in one of the years, it shall not be permitted to set it off in subsequent years.

If tax has been imposed on a transaction or the rate of tax thereon has been increased after the transaction was agreed upon, the dealer may demand that the buyer pay to him the amount of the tax or the amount of the additional tax by which the dealer has become liable, unless otherwise provided in the agreement or in any law relating to price control.