The Israeli Tax Authority has announced the advancement of the completion date for its centralized Continuous Transaction Control (CTC) electronic invoicing regime from January 2028 to June 2026.
This initiative is being implemented in six phases.
The initial phase commenced in May 2024, with the third phase, which addressed transactions exceeding NIS 20,000, already completed. The updated timeline for the remaining phases is as follows:
January 2026: For transactions over NIS 10,000
June 2026: For transactions over NIS 5,000
Introduction of Pre-Reporting Requirements
Effective May 2024, the new "Invoice Law" mandates that taxpayers report B2B transactions exceeding NIS 25,000 to the Tax Authority for a unique invoice allocation number. Failure to obtain this number will prevent customers from deducting input VAT from their own VAT liabilities. This measure is aimed at combating the increasing issue of fraudulent invoices that are used to unlawfully reclaim input VAT.
The phased rollout of the invoicing requirements is as follows:
January 2024: Voluntary compliance
May 5, 2024: Applicable to transactions over NIS 25,000 (approximately €6,250 or USD 6,710)
January 2025: Applicable to transactions over NIS 20,000
January 2026: Applicable to transactions over NIS 15,000
January 2027: Applicable to transactions over NIS 10,000
January 2028: Applicable to transactions over NIS 5,000 (approximately €1,300 or USD 1,600)
Frequently Asked Questions Released
In preparation for the implementation of the e-invoicing rules on May 5, 2024, the Israeli Tax Authority has published a set of Frequently Asked Questions (FAQs). From this date, purchase invoices exceeding NIS 25,000 will only be eligible for VAT deductions if they are accompanied by a pre-issued Allocation Number. The FAQs address topics such as:
The definition of the 9-digit e-invoice Allocation Number
How to verify a supplier’s invoice Allocation Number
Procedures for obtaining allocation numbers for sales invoices
Registration requirements with the IRS
Steps to take if an allocation number is not received
Additional FAQs
Delay Due to Fictitious Invoice Fraud
The IRS has recently postponed the phased launch of the B2B e-invoicing system, originally scheduled for April 2024, to May 5, 2024. This decision was made in consideration of business owners who need more time to complete their technological preparations due to ongoing conflicts. Although some businesses have managed to configure their systems to issue allocation numbers, many others have reported challenges in accessing the tax authority's services.
The initiative aims to address the pervasive issue of fraudulent invoicing, frequently employed by criminal organizations to launder money. A unique digital sales invoice number—referred to as the Allocation Number—will be mandatory before issuing e-invoices. A one-year pilot program is planned for 2025, which includes requirements for certified representatives to obtain approved sales invoice numbering.
The Ministry of Finance will implement a phased introduction of thresholds for eligible invoices to be submitted in real time to the Tax Authority for validation and unique digital invoice number allocation. Without this number, businesses will be unable to deduct input VAT.
October 2023 Update: Delay on E-Invoicing Launch
The Israeli Ministry of Finance is advancing a centralized CTC-based e-invoicing system; however, the launch date has been postponed by three months, now scheduled for April 1, 2024, instead of January 1, 2024.
Pre-Clearance Model for Combatting Fraud
This initiative aims to effectively address significant issues related to fictitious B2B VAT invoices, which companies use to claim deductions against their VAT liabilities. The Tax Authority estimates that these fraudulent practices result in billions of shekels in lost revenue for the state. The proposed pre-clearance model would allow tax authorities to verify submitted invoices against suppliers' original records in advance. The Ministry of Finance is currently evaluating this pre-clearance framework for implementation.
How Can KGT Support You?
KGT has created an SAP-integrated e-invoicing add-on solution for Israel, featuring outbound and inbound functionalities to meet tax reporting requirements. This add-on includes a data extractor and a cockpit for generating periodic electronic invoices in the legal format and controls before submission. When SAP DRC launched the Israeli e-invoicing solution as part of its e-document offerings, KGT emerged as a leading consultancy firm for SAP DRC and tax services. Recognized as an SAP DRC partner for Israeli e-invoicing services, KGT is one of SAP's recommended implementation partners for this solution. We provide comprehensive support, including installation, configuration, customization, and training, to help you maximize the long-term value of your SAP DRC investment.
KGT is an SAP partner for PE services and an SAP Build partner, and to become an SAP partner, strict due diligence requirements must be met, including having certified SAP consultants. You can find us at: https://partnerfinder.sap.com/profile/0001925409
