Israel’s economic plan for 2023 to 2024 has been published by the Ministry of Finance. Israel’s e-Invoicing program includes provisions for combating fraud and tax evasion, for which it prescribes a model known as continuous transaction control (CTC) to allow invoices to be sent to the tax authority electronically and in real time. With this model, received invoices will be validated before being sent to the final recipient. The model will be introduced starting April, 2024.
How does the CTC model work?
Invoices must be transmitted to the tax agency for approval in real time. An identifier will be allocated to assess the data for acceptance or rejection. This includes information about the transaction date, the total invoice amount (excluding VAT), and supplier and buyer data. When the electronic invoice is validated by the tax authority, it can be returned to the seller and from there forwarded to the buyer.
What is the implementation timeline of the system?
The following phased implementation plan has been decided by the tax authority based on an invoice’s value:
- 1 April 2024: Invoices worth more than 25,000 NIS
- 1 January 2025: Invoices worth more than 20,000 NIS
- 1 January 2026: Invoices worth more than 15,000 NIS
- 1 January 2027: Invoices worth more than 10,000 NIS
- 1 January 2028: Invoices worth more than 5,000 NIS
What is the allocation number and its function?
With the beginning of the scheduled phased program, it will be mandatory to obtain an allocation number from the tax authority for all invoices. After acquiring the allocation number, it must be added to the tax invoice. Otherwise, the invoices will not be valid and permission will not be granted to deduct the input tax.
Taxpayers who exceed the thresholds above will need to request an allocation number by API or through the web portal of the Israeli Tax Authority (ITA). Because of the allocation number, purchasers will be able to access detailed information about an invoice through the tax authority’s service. The following invoice information prescribed by the tax authority is required when requesting an allocation number:
- Invoice ID
- Invoice type
- Accounting software number
- Issuer VAT number
- Invoice date
- Payment amount
- VAT amount
- Payment amount including VAT
How are issued e-Invoices transmitted to the tax authority?
The proposed transmission method will be based on real-time processing. E-Invoices can be transmitted via API or the ITA’s web portal system. There is also a manual option available: by using manual invoice books, taxpayers enter the invoice details into the application. Apart from manual intervention with the shared API document, issued e-Invoices can be submitted automatically. In addition, allocation numbers can be acquired through APIs.
Will there be an archiving period for the invoices?
The stipulated archiving period is seven years. For the validation of e-Invoices and compliance with the system, a digital signature is required.
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