LawTax Law
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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Chapter VII: Zero Rate and Exemptions
Tax at zero rate§
30.
(a)The following are transactions on which the tax shall be at zero rate:
(1)the sale of goods – other than goods as referred to in section 33 – if an export declaration or another document approved by the Director for this purpose has been submitted in respect thereof and a release has been given in respect thereof;
(2)the sale of an intangible asset to a non-resident;
(3)the sale of goods to the holder of a licensed warehouse as defined in the Customs Ordinance [New Version], approved by the Director for this purpose (hereinafter in this section – licensed warehouse), for the purpose of their transfer to the warehouse, if the goods were transferred thereto;
(4)the sale of goods in a licensed warehouse to persons departing from Israel, and also the sale in a licensed warehouse of supplies approved by the Director, in the form he has prescribed, for a vessel or an aircraft used for the carriage of passengers or the transport of cargo on international routes;
(5)the provision of a service to a non-resident, except for a service prescribed by the Minister of Finance for this purpose; a service shall not be regarded as provided to a non-resident where the subject of the agreement is the provision of the service in practice, in addition to the non-resident, also to a resident of Israel in Israel, to a partnership in which the majority of rights are held by partners who are residents of Israel, or to a company regarded as a resident of Israel for the purposes of the Income Tax Ordinance [New Version], unless it is a service whose consideration forms part of the value of the goods determined as referred to in sections 129 to 133i of the Customs Ordinance [New Version], as the case may be;
(6)a service in connection with the entry of aircraft or vessels into Israel or their departure therefrom, or in connection with the shipment of goods –
(a)provided by the Airports Authority or a port company as defined in the Ports and Shipping Authority Law, 5764-2004, to the aircraft or vessel or to a passenger thereon in connection with his entry into Israel or his departure from Israel;
(b)provided to cargo owners and whose consideration forms part of the value of the goods determined as referred to in sections 129 to 133i of the Customs Ordinance [New Version], as the case may be;
(7)the provision of a service abroad by a dealer whose principal place of business is in Israel;
(8)
(a)the accommodation of a tourist in a hotel and additional services prescribed by the Minister of Finance, with the approval of the Finance Committee of the Knesset, provided incidentally to such accommodation;
(b)
(1)the rental of a private motor vehicle to a tourist for self-drive;
(2)the transportation of a tourist on a tour in a private motor vehicle or by bus, and also the supply of meals to a tourist by the carrier incidentally to such transportation by bus, whether he supplies them directly or indirectly;
and all this, provided that the said vehicles hold a licence or permit for rental or transportation as aforesaid, pursuant to the Supervision of Commodities and Services Law, 5718-1958;
(b1)the provision of a service to a tourist by a person who, for consideration or without consideration but on a regular basis, provides a service that is one of the travel agency services as defined in the Tourism Services Law, 5736-1976;
(b2)
(1)the provision of a service to an international organisation for the purpose of holding an international conference attended by at least fifty tourists, to be held in Israel;
(2)the sale to a tourist of the right to participate in an international conference attended by at least fifty tourists;
(c)(Repealed)
(d)(Repealed)
(e)the carriage of a tourist by aircraft from a place in Israel to another place in Israel;
(f)(Repealed)
(g)the hospitalisation of a tourist in a hospital registered pursuant to the Public Health Ordinance, 1940, and additional services provided incidentally to such hospitalisation;
(9)the sale of goods to a person who, by reason of his entry into Israel, is entitled to purchase them with full exemption from purchase tax;
(10)a transaction that is the sale of a right to foreign travel; "right to foreign travel", for this purpose – a right to travel by aircraft or by vessel from Israel to a place abroad, or from a place abroad to another place abroad, or from a place abroad to Israel; and if the place abroad is a state with which Israel has a land border and which has been prescribed for this purpose by Order (hereinafter in this section – a bordering state) – also a right to travel by a means of transport that is not an aircraft or vessel;
(11)the carriage of cargo by air or sea from Israel and to Israel;
(11a)the carriage of cargo from Israel to a bordering state or from a bordering state to Israel;
(12)
(a)the sale of aircraft to a dealer whose business is the provision of scheduled air service on fixed routes for the carriage of passengers or the transport of cargo for consideration;
(b)the sale of vessels to a dealer whose business is the carriage of passengers or the transport of cargo for consideration between Israeli ports and ports abroad;
(c)the import of aircraft or vessels by a dealer as referred to in sub-paragraphs (a) or (b);
(13)the sale of fruits and vegetables of types prescribed by the Minister of Finance, in which no processing whatsoever has been carried out; for this purpose, cleaning, sorting, packing, ripening, storage and refrigeration shall not be regarded as processing.
(14)the sale of assets from the business of a dealer or dealers – including equipment – to a company, solely in exchange for shares in that company, if immediately after the sale the dealer or dealers held at least 90 percent of the voting power in that company; provided that the sale of the assets by the company after it acquired them in the said circumstances shall be subject to tax even if the company is not a dealer on the date of sale;
(15)in the sale of all the assets of the business of a dealer who is a body of persons, including equipment, to the holders of rights in the body of persons, incidentally to the dissolution of the body, where assets are sold to each holder of rights, without consideration, in proportion to his share in the dissolving body – a sale to a holder of rights who is a dealer; provided that the sale of the assets by a holder of rights as aforesaid, who acquired them in the said circumstances, shall be subject to tax even if the holder of rights is not liable to tax for any reason on the date of sale.
(16)the sale of real property from a financial institution or a non-profit organisation to a financial institution or a non-profit organisation, carried out within the framework of structural changes meeting the conditions of Part 5-B of the Income Tax Ordinance [New Version].
(17)the grant of a right of use to a non-resident in exhibition space, and ancillary services provided by the grantor of the right of use as aforesaid in connection with the exhibition, even if the non-resident is present in Israel as a tourist for the purposes of the exhibition.
(18)the provision of a service to a non-resident by an Israeli production company, for the purpose of producing a film in Israel, excluding an Israeli film.
(19)the provision of supervision, coordination and control services in connection with the conduct of medical trials on human beings, to a non-resident.
(b)A person subject to tax at zero rate shall, for the purposes of this Law and the Regulations made thereunder, have the same status as a taxable person.
(c)In this section, "non-resident" – a non-resident as defined in section 1 who is outside Israel and has no business or activity in Israel, and for the purposes of subsection (a)(18) – even if he is present in Israel for the purpose of producing the film;
"film production" and "Israeli production company" – as defined in the Law for the Encouragement of Film Production in Israel (Temporary Provision and Amendment of Legislation), 5769-2008;
"film" and "Israeli film" – as defined in the Cinema Law, 5759-1999.
Exemption for certain transactions§
31.
The following transactions are exempt from tax:
(1)the rental of residential accommodation for a period not exceeding 25 years, excluding rental for the purpose of hotel accommodation;
(1a)the sale of that part of a building approved as a building for rental pursuant to the Law for the Encouragement of Capital Investment, 5719-1959, or the sale of apartments for institutional rental in a building for institutional rental pursuant to that Law, provided that that part of the building or those apartments, as the case may be, had been let for at least five years or were sold in accordance with the provisions of section 53b(c)(1) of that Law, and that the application for approval as aforesaid was submitted in 1979 or thereafter and the conditions prescribed in or under that Law were fulfilled;
(1b)the sale of real property for residential rental purposes by a real property investment fund, provided that it served for rental purposes for at least five years in accordance with the provisions and conditions prescribed pursuant to Part 4, Chapter II-1 of the Income Tax Ordinance [New Version], and that the income from its sale was not exceptional income; for this purpose, "real property for residential rental purposes", "real property investment fund" and "exceptional income" – as defined in section 64a2 of the Income Tax Ordinance [New Version];
(2)the transfer of real property by key money as defined in the Tenants' Protection Law [Consolidated Version], 5732-1972, the rental of real property to which that Law applies, and the sale of real property so rented;
(3)transactions of an exempt dealer, excluding transactions that are sales of real property, or transactions that are sales of equipment that is not real property in respect of which input tax paid at the time of its purchase was deducted;
(4)the sale of an asset in respect of which, by law, it was not permissible at the time of purchase or import to deduct the input tax in respect of its purchase or import, provided that if it has been determined that part of the input tax may be deducted – a proportionate part of the tax shall be paid in the ratio that the deductible part bears to the total input tax;
(5)the deposit of money by a dealer with a financial institution or the granting of a loan by a dealer to a financial institution.
Evacuation-construction complexes – special provisions§
31a.
(a)The terms appearing in this section shall have the meaning ascribed to them in Chapter V-4 of the Real Property Taxation Law (Appreciation, Sale and Purchase), 5723-1963 (in this section – the Real Property Taxation Law).
(b)In the sale of a right in a substitute residential unit by a developer, and in the provision of construction services in a complex, by a developer, in exchange for the acquisition by him of a right in a residential unit in the complex, carried out in accordance with the provisions of section 49v of the Real Property Taxation Law – the tax on that part of their price not exceeding the value ceiling shall be at zero rate.
(b1)In the sale of a substitute residential unit to which the provisions of section 49v2 of the Real Property Taxation Law apply – the tax shall be at zero rate.
(b2)In the sale of a right in a preferred area as defined in section 49af of the Real Property Taxation Law, in a substitute unit intended to serve as a business, by a developer, and in the provision of construction services in a complex by a developer in exchange for the acquisition by him of a right in a unit serving as a business in the complex, carried out in accordance with the provisions of section 49v of that Law – the tax on that part of the price not exceeding the value ceiling as defined in paragraph (2) of the definition of "value ceiling" in section 49v(a)(1) of the Real Property Taxation Law shall be at zero rate, provided that the proportion of the areas serving as a business in that building does not exceed 25% of the total built areas in that building; the provisions of this subsection shall apply to a seller in respect of one unit in a building.
(c)The provisions of this section shall also apply in respect of a sale and the provision of construction services as referred to in subsection (b), in an urban renewal complex, as defined in section 49ae.
(d)The Minister of Finance, with the approval of the Finance Committee of the Knesset, may prescribe rules and provisions in respect of this section.
(e)The provisions of section 49ac of the Real Property Taxation Law shall apply for the purposes of this section with the necessary modifications.
Provision of Construction Services pursuant to the Strengthening Plan – Special Provisions§
31b.
(a)The terms appearing in this section shall have the meaning ascribed to them in Chapter V 5 of the Real Property Taxation (Appreciation and Acquisition) Law, 5723-1963 (in this section – the Real Property Taxation Law).
(b)The provision of construction services pursuant to the strengthening plan in consideration for the sale of the sold right that is exempt from tax in accordance with the provisions of sections 49ag and 49ag1 of the Real Property Taxation Law – shall be at zero rate.
(b1)In the sale of a right in an alternative residential apartment to which the provisions of section 49ag1(f1)(2) of the Real Property Taxation Law apply – the tax shall be at zero rate.
(c)The Minister of Finance, with the approval of the Finance Committee of the Knesset, may prescribe rules and provisions in respect of this section.
Tax Exemption for a Transaction of the Sale of a Residential Apartment to a Real Property Investment Fund§
31c.
Transactions of the sale of a residential apartment to a real property investment fund, by a person who is not liable to tax, and the sale of the residential apartment by that fund – shall be exempt from tax; for this purpose –
"residential apartment" – provided that it is income-producing real property for rental housing purposes;
"income-producing real property for rental housing purposes" and "real property investment fund" – as defined in section 64a2 of the Income Tax Ordinance [New Version].
Exemption on Import§
32.
The following are goods whose import is exempt from tax:
(1)goods imported by a person who is exempt from the full customs duty applicable to them by reason of his entry into Israel;
(2)goods that were exported from Israel and returned to it and that, while abroad, did not undergo repair, renewal or improvement, or that underwent repair, renewal or improvement within the framework of the supplier's warranty and without consideration;
(3)gift parcels whose import is exempt from the full customs duty;
(4)original works of art whose import is exempt from the full customs duty and that were imported for a museum or an educational institution for their use, or that were imported for a local authority or a public institution designated by the Minister for this purpose, for the purpose of their permanent display in a public place.
Exemption for Precious Stones§
33.
The import and export of diamonds, excluding synthetic diamonds, precious stones and semi-precious stones that are unset and are of the type exempt from the full customs duty, and any transaction in them with a dealer whose business, in the course of which the transaction is carried out, consists exclusively of them – are exempt from tax.
Power to Exempt or to Apply Zero Rate§
34.
(a)The following are goods whose import the Minister of Finance may exempt from tax, in whole or in part:
(1)goods that are to be exempt from indirect taxes or from part thereof pursuant to an international convention to which Israel is a party;
(2)goods that were imported not on a permanent basis;
(3)goods whose import is exempt from the full customs duty.
(b)The Minister of Finance may exempt the import of goods by persons listed in the Schedule to the Customs, Excise and Purchase Tax (Abolition of Special Exemption) Law, 5717-1957, or the sale of goods or the provision of services to such persons, and may also apply zero rate to such transactions.
Exemption for Certain Non-Profit Organisations§
35.
(a)A non-profit organisation whose total annual wages paid to its employees do not exceed NIS 160,000 or a higher amount prescribed by the Minister of Finance – is exempt from the tax under section 4(a).
(b)The Fund as defined in the Israel–United States Binational Science Foundation Law, 5737-1977, the Fund as defined in the Israel–United States Binational Industrial Research and Development Foundation Law, 5738-1978, and the Fund as defined in the United States–Israel Agricultural Research and Development Fund Law, 5740-1980, and the Fund as defined in the Germany–Israel Foundation for Scientific Research and Development Law, 5754-1994 – are exempt from the tax under section 4(a).
Power to Exempt Persons Registered in the Area§
35a.
The Minister of Finance, with the approval of the Finance Committee of the Knesset, may prescribe in Regulations an exemption from tax for transactions or activity in Israel, that are not continuous and permanent, of a dealer, financial institution or non-profit organisation registered pursuant to the law corresponding to this Law in the area or in the Gaza and Jericho areas.
Power to Prescribe Zero Rate for Donations§
35b.
The Minister of Finance may prescribe zero rate on the sale of goods to donating bodies to the Palestinian Authority as shall be defined in Regulations, if the goods are intended for development projects or for humanitarian, non-commercial purposes in the Gaza and Jericho areas or in the area, and they are actually used for those purposes.
Power to Make Exemption and Zero Rate Subject to Conditions§
36.
The Minister of Finance may make any exemption and the application of zero rate subject to such conditions as he sees fit.
Non-Application of Exemption by Virtue of Another Law§
37.
The provisions of any law exempting from indirect tax shall not apply to the tax under this Law, unless the Knesset has determined otherwise by way of resolution.
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