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Value Added Tax Law, 5736-1975

חוק מס ערך מוסף, תשל"ו-1975

Published: 1976-01-06Consolidated Hebrew text as of 2026-07-13 · Last amended 2026-03-31✓ Amendment status checked against the Knesset legislation record on 2026-09-29
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Unofficial English translation — for reference only. It may contain errors or omissions and cannot be relied on as a legal text. Only the Hebrew text published in Reshumot is legally binding.More

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Despite these checks, it may contain errors, omissions, or imprecise renderings of legal terminology and cross-references, and it may not yet reflect the latest amendments. It cannot be relied upon as a legal text.

The Hebrew text as published in Reshumot (ספר החוקים) and on the Knesset website is the sole authoritative and legally binding version. In any discrepancy, the Hebrew text prevails.

This translation is provided for informational purposes only and does not constitute legal advice. For use in legal proceedings, request a certified Expert Legal Opinion.

Chapter XVI: Penalties

Offences§

117.
(a)A person who has contravened, as set out below, a provision of this Law or of the Regulations made thereunder, is liable to imprisonment for one year:
(1)refused or failed to deliver information, a document, a book or a sample that he is required to deliver, after having been required to do so;
(2)refused or failed to appear for investigation after having been required to do so;
(3)delivered incorrect or inaccurate information without a reasonable explanation, or delivered a report or other document containing such information;
(4)failed to do what is incumbent upon him in respect of his registration;
(5)issued a tax invoice without being entitled to do so or after having been prohibited from doing so;
(6)failed to submit, on time, a report that is required to be submitted under this Law or Regulations made thereunder, including a report that he is required to submit pursuant to a demand of the Director;
(6a)failed to detail in the periodic report a transaction designated pursuant to the provisions of section 67(e) as a transaction that is subject to reporting, contrary to the provisions made pursuant to that section;
(6b)failed to detail in a periodic report, a special report or an annual summary report a particular that he was required to detail pursuant to sections 69a(a), (b) or (c), 70(b) or 71a;
(7)failed to maintain books of account or other records that he was required to maintain, or it was determined by a final determination pursuant to sections 74, 95 or 113 that he maintained them with a material deviation from the provisions; for this purpose, "final determination" – a determination pursuant to those sections in respect of which no appeal has been filed or in respect of which the appeal that was filed was dismissed;
(8)held identification marks that he received other than from the Director, or used them after having been prohibited from using them;
(9)being a dealer, unlawfully delivered to another person goods the importation or sale of which is exempt on condition that they serve him alone;
(10)transported goods contrary to the provisions of section 129 or imported or exported goods contrary to the provisions made pursuant to section 129a;
(11)held goods in which he deals and the purchase of which was not recorded in the books of account as prescribed;
(12)a person who records his receipts on a cash register tape, a receipt slip, an invoice, a daily turnover book or other documentation pursuant to provisions made under section 66, and failed to record therein a receipt that he was required to record pursuant to those provisions;
(13)failed to issue a tax invoice although he was required to issue one;
(14)issued a tax invoice and failed to pay on time the tax included therein;
(15)failed to demand a tax invoice that he was required to demand;
(16)obstructed a person from performing what is incumbent upon him under this Law or prevented him from doing so.
(a1)Where a purchase was not recorded or a receipt was not recorded as referred to in subsection (a)(11) or (12) by an employee of the dealer or by an agent of the dealer who is not his employee, the employee or the agent shall be charged with the offence, and the dealer shall also be charged therewith unless he proves that the offence was committed without his knowledge and that he took all reasonable measures to ensure the prevention of the offence.
(a2)A person who failed to give notice of a marketed tax planning scheme, as defined in section 67c(a), contrary to the provisions of section 67b(f), is liable to imprisonment for one year or the fine prescribed in section 61(a)(2) of the Penal Law.
(b)A person who committed any of the acts set out below with intent to evade or to avoid payment of tax is liable to imprisonment for 5 years or double the fine prescribed in section 61(a)(4) of the Penal Law, 5737-1977 (in this section – the Penal Law):
(1)delivered false information or delivered a report or other document containing such information;
(2)continued to conduct transactions after having been prohibited from doing so or before fulfilling the conditions for the continuation of his business;
(3)issued a tax invoice or a document purporting to be a tax invoice, without having made or undertaken to make a transaction in respect of which he issued the said invoice or document;
(4)issued a credit note or a document purporting to be a credit note, without being entitled to do so;
(5)deducted input tax without holding in respect thereof a document as referred to in section 38;
(6)prepared, maintained or authorised another to prepare or maintain, false books of account or other false records;
(7)forged, concealed, destroyed or altered a book or other document that he was required to maintain or deliver, or authorised or failed to prevent another from doing so;
(8)used any fraud or artifice, or authorised another to use them, or committed any other act.
(b1)A person who acted with intent to cause another person to evade or avoid payment of tax that that person is liable to pay is liable to imprisonment for 5 years.
(b2)Where an offence under subsections (b) or (b1) was committed in aggravated circumstances, the perpetrator is liable to imprisonment for 7 years or a fine of 5 times the fine prescribed in section 61(a)(4) of the Penal Law; in this section, "aggravated circumstances" – one of the following:
(1)the offender was convicted of an offence under subsections (b) or (b1), and three years have not yet elapsed from the date of his conviction;
(2)more than 6 charges have been filed against the offender in respect of offences under subsections (b) or (b1) within a period of three years;
(3)the offender, through his acts, brought about evasion or avoidance of payment of tax, in an amount exceeding double the amount prescribed as a fine in section 61(a)(4) of the Penal Law.
(c)Where a person has been convicted of an offence under subsection (b) within three years of having been sentenced for such an offence, the court may, in addition to any other punishment, prohibit him from continuing in his business for a period to be determined by it.

Transfer of Assets with Intent to Prevent Payment of Tax§

117a.
(a)A person who transferred his assets to another without transferring control thereof, with intent to prevent the collection of tax that he was liable to pay or that he is about to become liable to pay, and, in the case of a transferor that is a body of persons – a person who brought about the transfer as aforesaid, is liable to imprisonment for two years.
(b)A person who distributed assets of a company among its members with intent to prevent the collection of tax that the company is liable to pay or that it is about to become liable to pay, is liable to imprisonment for two years, provided that if a fine is imposed, the amount of the fine shall not exceed the amount of the debt.

Offence for Which No Penalty Is Prescribed§

118.

A person who contravened a provision of this Law for which no penalty is prescribed for the contravention, or who contravened a provision in Regulations made thereunder where it is stated in the Regulations that the contravention is an offence, is liable to imprisonment for three months or a fine of 5,000 liras.

Offence by a Body of Persons§

119.

Where an offence under this Law or Regulations made thereunder has been committed by a body of persons, whether incorporated or unincorporated, every person who, at the time of the commission of the offence, was an active director, secretary, trustee, attorney, active partner, comptroller, bookkeeper or other responsible officer thereof shall also be guilty, unless he proves that the offence was committed without his knowledge or that he took all appropriate measures to ensure compliance with the provisions of the Law.

Liability for Acts of an Employee§

120.

Where an offence under this Law or Regulations made thereunder has been committed in the course of the business or activity of a taxable person by a clerk, worker or agent, the taxable person shall also be charged, unless he proves that the offence was committed without his knowledge or that he took all appropriate measures to ensure compliance with the provisions of the Law.

Compounding of Offences§

121.
(a)Where a person has committed or is suspected of having committed an offence under this Law or the Regulations made thereunder, the Director may, with the consent of that person, accept from him a composition in an amount not exceeding the highest fine that may be imposed for that offence, and upon doing so all legal proceedings in respect of the offence shall be discontinued; however, if an indictment has been filed, a composition may not be accepted except with the consent of the Attorney General or a person authorised by him for that purpose.
(b)The Director may make a composition conditional upon the giving of an undertaking to refrain from committing the offence within a period to be determined by him, not exceeding three years; the undertaking shall be a security not exceeding the highest fine that may be imposed for the offence that has been compounded, and shall be with or without a third-party guarantee, as the Director shall determine.
(c)Where a person has been convicted of an offence in respect of which he undertook pursuant to subsection (b) to refrain therefrom, the security shall be collected as a debt under this Law.
122.§

(Repealed — תשמ״ו)

Conviction Not to Exempt from Other Obligations§

123.

The conviction of a person, or the payment by him of a composition or an administrative fine, shall not exempt him from his obligations under this Law and the Regulations made thereunder.

Forfeiture in Addition to Other Penalties§

124.

Forfeiture under this Law is not in lieu of a punishment, fine or composition but is in addition thereto.

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Chapter XVII: Miscellaneous Provisions

Power to Amend Amounts§

125.

The Minister of Finance may amend the amounts prescribed in sections 94 and 95.

Linkage§

126.
(a)The amounts prescribed in section 1 in the definition of "exempt dealer" and in section 35 or pursuant thereto shall be adjusted on the 1st of January of each year to the increase in the consumer price index published by the Central Bureau of Statistics (hereinafter in this section – the index) as of the 15th of December preceding it; the amounts so adjusted shall be rounded to the nearest new shekel.
(b)The amount prescribed in section 47a shall be adjusted on the 1st of January and on the 1st of July of each year to the increase in the index published on the 15th of the month preceding them.
(b1)(Repealed)
(c)Where the Minister of Finance has exercised his power under subsection (a) within six months preceding the 1st of January of a given year, no adjustment as referred to in subsection (a) shall be made for that year.
(d)The amount prescribed in section 67(a2) shall be adjusted on the 1st of September of each year (in this subsection – the updating date) to the increase in the index most recently published before the updating date, compared with the index most recently published before the updating date in the preceding year; the adjusted amount shall be rounded to the nearest NIS 5,000.

Books Admissibility Committee§

127.
(a)The Minister of Finance, in consultation with the Minister of Justice, shall appoint persons from whom the Director shall compose committees for the admissibility of books of account.
(b)Each such committee shall consist of three members: its chairperson shall be a public figure with expertise in accountancy, and the other two members shall be certified public accountants, provided that not more than one of them shall be a State employee or an employee of a national institution.
(c)Notice of appointments as aforesaid shall be published in Reshumot (Official Gazette).
(d)In deliberating on an appeal, the committee may –
(1)determine that the taxable person does not maintain books or maintains them with a material deviation from the provisions of this Law and the Regulations made thereunder;
(2)determine that the taxable person maintains books or that the deviation in them is not material.
(e)The decision of the committee on an appeal shall be final, but it may refer a legal question to the District Court for its opinion.
(f)The committee is empowered to gather evidence for the purpose of exercising its powers under this Law.
(g)The committee may award the costs of the appeal, including the professional fee of the representative of the taxable person, travel expenses and loss of earnings of witnesses.
(h)The Minister of Justice may make Regulations regarding –
(1)procedures for convening the committees;
(2)rules of procedure of the committee;
(3)the fees to be paid in respect of proceedings before the committee;
(4)the remuneration of committee members.

Partnership and Joint Transaction§

128.
(a)A transaction carried out by a partner in a registered partnership, or by persons regarded as partners under section 56, in the course of the business of the partnership, shall be regarded as if it had been carried out by the partnership, unless the contrary has been proved to the satisfaction of the Director.
(b)A transaction carried out by an unregistered partnership, or by a partnership established for the purpose of carrying out a particular transaction, or a transaction carried out jointly by several dealers, shall not be regarded as a transaction of the partnership but as a transaction of each partner or dealer separately, according to his share, unless the partners requested to be registered as a single dealer; if they so requested, they shall be regarded as jointly and severally liable for every obligation, debt, act or omission connected with that matter.
(c)The Minister of Finance may prescribe provisions regarding registration, the submission of reports, refund of excess tax, excess input tax and partners' liability, deductions and the issuance of invoices in transactions as referred to in subsections (a) and (b), even in deviation from the provisions of this Law.
(d)If the Director has not accepted evidence submitted to him in respect of subsection (a), the partner or the partnership may appeal to the District Court.

Delivery Note§

129.
(a)Goods belonging to a person for use in his business shall not be transported in a vehicle unless accompanied by an invoice or a delivery note, or unless that person has been exempted from this obligation by Regulations or pursuant to the Director's instructions, subject to conditions he has prescribed.
(b)For the purposes of this section, "invoice or delivery note" – each of the following:
(1)an invoice or delivery note lawfully issued by a dealer registered under this Law, and in respect of goods transported to the area or to the Gaza and Jericho areas – an invoice lawfully issued by a dealer registered under this Law, containing particulars prescribed by the Director;
(2)an invoice lawfully issued in the area or in the Gaza and Jericho areas by a dealer registered there under the law corresponding to this Law, provided that it contains particulars prescribed by the Director.

Supervision of the Import and Export of Goods to and from the Area and the Gaza and Jericho Areas§

129a.

For the purpose of supervising compliance with the provisions made under this Law, the Minister of Finance may, in consultation with the Minister of Defence, direct the places at which the import of goods to the area and to the Gaza and Jericho areas and their export therefrom shall be permitted, and the days and hours at which such import or export shall be permitted, and may further direct that approval shall be required from the Director, in a manner to be prescribed by him, that the goods were imported or exported in accordance with the said provisions; a direction under this section may be general or in respect of categories of goods.

Identification Marks§

130.

The Minister of Finance may prescribe an obligation to mark goods of a certain type with identification marks to be prescribed by him and the manner of use thereof, and may exempt a dealer from the obligation to mark goods in the course of his business.

Display of Price to Include Notice of Tax§

131.

A dealer who publicly displays or advertises in any manner the price of an asset or service to which the Commodities and Services Price Supervision Law, 5718-1957, does not apply, shall indicate whether or not the price includes tax.

131a.§

(Repealed — תשל״ח־2)

Burden of Proof§

132.

The burden of proof lies upon one who claims that he has paid tax or has submitted a report, or that tax was deducted by virtue of a tax invoice.

Presumption of Sale§

133.

A dealer who, in the course of his business, delivers to another a business asset of his, other than a delivery for the purpose of sale on consignment, shall be regarded as if he had sold it, unless the contrary is proved; for this purpose, "delivery" – as defined in section 8 of the Sale Law, 5728-1968.

Exemption from Signature§

134.

A notice, demand, tax determination, assessment or other document issued pursuant to this Law, where the name or title of the issuer is indicated therein, does not require his handwritten signature.

Defect in an act does not invalidate it§

135.

The validity of any act done pursuant to this Law shall not be impaired by reason of a defect in form, an error or an omission therein, if they are not such as to affect the substance or to mislead.

Registration in the real property registers§

136.

The Director may require that a sale of real property requiring registration in the real property registers, or a class of such sales, shall not be registered unless the purchaser holds a tax invoice in respect of that sale, or unless a certificate has been furnished from the Director that the tax due in respect of that sale has been paid or that security for the timely payment of the tax has been given to him.

Notice of changes§

137.

A taxable person shall notify the Director, in the manner and at the time prescribed, of every change that has occurred in the ownership of the business or institution, in its affairs, in its activities, and in any other particular prescribed by the Minister.

Status of business assets after cessation of activity§

137a.
(a)Where it has been proved to the satisfaction of the Director that a dealer has completely ceased his business or has transferred ownership of his business to another, and an asset remains in his possession, that asset shall, at the end of two years from the date of cessation or transfer, be treated as an asset used for private purposes.
(b)The provisions of subsection (a) shall not apply to business assets whose total price is less than the amount fixed in respect of an exempt dealer.
(c)Where an asset that is real property remains in the possession of a dealer as referred to in subsection (a), the Director may, at the dealer's request, notwithstanding the provisions of that subsection, defer the date of the tax liability until the date of transfer of the real property asset to another, or until such other date as he shall direct and subject to such conditions as he shall direct; where the Director has deferred the date of the tax liability as aforesaid, the tax shall be paid even if the said dealer is not liable to tax at the time of the sale.

Status of business assets where the dealer's registration is changed to a non-profit organisation or financial institution§

137b.

An asset acquired by a dealer who deducted the input tax in respect of its acquisition or importation, whose registration was subsequently changed to a non-profit organisation or financial institution and the asset remains in their possession, shall be treated as an asset used for private purposes upon the change of registration.

Artificial or fictitious transaction§

138.
(a)The Director may disregard a transaction or an act if he is of the opinion that it is artificial or fictitious or that one of its main purposes is the avoidance of tax or an improper reduction of tax.
(b)A decision of the Director under subsection (a) may be appealed to the District Court.

Rounding of amounts§

139.

Every amount stated in a return under this Law shall be rounded to the nearest whole lira, and an amount of half a lira shall be rounded upwards.

Forms§

140.

The Director may prescribe forms required for the implementation of this Law and the format of account books and other records that a taxable person is required to keep, and may direct the use of such forms, books or records.

Service of documents§

141.
(a)Without derogating from the provisions of section 80, a document for the purposes of this Law shall be served in the manner prescribed by Regulations.
(b)Where a document has been sent by post, it shall be deemed to have been served on the addressee on the fifth day after it was sent, even if the addressee refused to accept it.
(c)A document addressed to a partnership, other than a partnership as referred to in section 128(b), that has been served on one of the partners, shall be deemed to have been served on all the partners.

Confidentiality§

142.
(a)A person shall not disclose information that has come to his knowledge in the course of implementing this Law, unless –
(1)the Minister of Finance has permitted its disclosure;
(2)he is required to disclose it in legal proceedings pursuant to this Law or a tax law as defined in the Law for the Amendment of Tax Laws (Exchange of Information between Tax Authorities), 5727-1967.
(3)the information is as specified in section 384a of the National Insurance Law [Consolidated Version], 5755-1995, or in Regulations made thereunder, provided that such information shall be transmitted to the National Insurance Institute and that such information is required for the purposes referred to in that section, and to the extent required.
(a1)For the purposes of subsection (a)(1), the Minister of Finance may also grant a permit for the disclosure of information by categories thereof, provided that such a permit shall be granted to holders of positions specified therein for the purpose of lawfully performing their functions, and for reasons that shall be recorded.
(b)Where information has come to a person pursuant to subsection (a), he shall be regarded as having received it in the course of implementing this Law.
(c)A person who unlawfully discloses information that has come to his knowledge in the course of implementing this Law is liable to imprisonment for one year or a fine of 20,000 liras.

Application of provisions of the Income Tax Ordinance§

143.

The provisions of sections 117, 119, 143, 144 and 235a to 235d of the Income Tax Ordinance [New Version] shall apply in respect of the tax, with the necessary modifications.

Authority to represent a taxable person§

143a.
(a)A person who is authorised to represent a taxpayer as referred to in section 236 of the Income Tax Ordinance [New Version] is authorised to represent a taxable person under this Law, except for representation in connection with the provisions contained in Chapter XVI, other than in respect of the provisions of section 121.
(b)The provisions of the Regulation of Tax Consultants Practice Law, 5765-2005, shall apply in respect of the representation of a taxable person.

Application of provisions of the Customs Ordinance§

144.

The provisions of sections 39(b), 64, 81 to 89, 92, 93, 104, 122, 128, 140 to 145, 149, 150, 152, 156, 162 to 162b, 170, 171, 198, 204 and 231c of the Customs Ordinance [New Version] shall apply in respect of the tax on the importation of goods, and the provisions of section 156 of the Customs Ordinance [New Version] shall apply in respect of the importation of goods exported by a person who is not a dealer.

144a.§

(Repealed — תשנ״ה)

The State's status§

144b.

The provisions of this Law shall also apply to the State.

Implementation and regulations§

145.
(a)The Minister of Finance is charged with the implementation of this Law and may make Regulations in all matters relating to its implementation.
(a1)The Minister of Finance and the Minister of Justice may prescribe provisions regarding the manner of issuing a secured electronic signature, as well as provisions regarding the duties and liability of the holder of an electronic signature device in respect of its use; such provisions shall be brought before the Government and the Government may approve or amend them within 21 days from the date on which they were brought before it; if the Government has not adopted a decision as aforesaid, the provisions shall be deemed to have been approved by the Government at the end of the said period; the commencement of such provisions shall be, at the earliest, on the date of their publication.
(b)The Minister of Finance may prescribe that in respect of the collection of tax, as regards financial institutions and non-profit organisations, the provisions of the Income Tax Ordinance [New Version] concerning assessment, objection, appeal, collection, interest and fines, or some of those matters, shall apply, with the necessary modifications.
(c)Regulations of the Minister of Finance, other than Regulations under subsection (a1) and under sections 2, 4, 48, 49, 127 and 142, require the approval of the Finance Committee of the Knesset, and Regulations under section 140 shall be brought to its notice.

Procedural regulations§

146.

The Minister of Justice may make procedural Regulations for proceedings under this Law, as well as Regulations regarding fees, costs and witnesses' expenses in such proceedings.

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