From 1 June 2026, the Israel Tax Authority requires qualifying B2B tax invoices exceeding NIS 5,000 (excluding VAT) to obtain an allocation number issued by the Israel Tax Authority before the purchaser may claim input VAT.” This immediately explains why the allocation number matters.

The change is the latest step in an accelerated, multi-year reduction of the mandatory allocation-number threshold and brings a significantly larger volume of everyday B2B transactions into Israel’s real-time invoice clearance model.

Background

Israel introduced its CTC “allocation number” model to combat VAT fraud through fictitious invoices. Under the regime, a business must request and receive a unique allocation number from the Tax Authority’s SHAAM system for qualifying tax invoices before those invoices are valid for input VAT deduction purposes.

The Tax Authority has progressively lowered the qualifying monetary threshold each year since the regime’s introduction, moving from an initial high threshold toward near-universal coverage of B2B invoices well ahead of the original glide path set out when the measure was first legislated.

The Legislative Change

Under implementing rules issued by the Israel Tax Authority, the mandatory allocation-number threshold fell from NIS 10,000 (in force from 1 January 2026) to NIS 5,000 or more (excluding VAT) with effect from 1 June 2026.

The Tax Authority has confirmed this accelerated timetable reaches thresholds originally not expected until 2028 several years early, reflecting its stated intention to expand real-time invoice validation as quickly as the ecosystem can absorb it.

Scope

The requirement applies to any B2B tax invoice issued by a VAT-registered business in Israel where the invoice value, excluding VAT, is NIS 5,000 or more. Invoices without a valid allocation number no longer support the recipient’s right to deduct the associated input VAT.

Timeline

2024: CTC allocation-number regime launched at a comparatively high threshold. 1 January 2026: threshold lowered to NIS 10,000. 1 June 2026: threshold lowered again to NIS 5,000 or more (current). Further reductions are expected in subsequent phases as the Tax Authority continues to accelerate the original rollout schedule.
Businesses Affected

All VAT-registered businesses in Israel that issue or receive B2B invoices above the NIS 5,000 or more threshold are affected, with the practical impact falling heaviest on small and mid-sized businesses that were previously excluded under the higher NIS 10,000 threshold and on any business still relying on manual or non-integrated invoicing processes.

Required Actions

Businesses should:

• Confirm that billing and ERP systems can request and receive SHAAM allocation numbers automatically and in real time for all qualifying invoices.
• Update invoicing workflows and system configuration to reflect the lower NIS 5,000 threshold.
• Review invoice-splitting practices and internal controls to ensure transactions are not artificially divided to remain below the reporting threshold (foreseeable anti-avoidance risk).
• Train accounts payable and accounts receivable staff to check for a valid allocation number before processing supplier invoices for input VAT deduction.
• Review contracts and processes with suppliers still using manual invoicing to avoid disruption to VAT recovery.

Practical Implications

Unlike many clearance systems, Israel does not require suppliers to submit invoices in a specific structured format. Suppliers can request the allocation number electronically from the SHAAM platform, usually via an API or accounting software.

After obtaining the allocation number, the invoice can be sent to the customer in the format agreed upon by both parties (such as PDF or paper), as long as it includes the allocation number.

Because the allocation number operates as a pre-clearance mechanism, a missing or invalid number results in an immediate and non-negotiable loss of input VAT deduction for the purchaser—there is no retrospective cure once the deduction is denied.

Businesses still using manual or non-integrated invoicing face a materially higher operational burden as the threshold falls, since a much larger share of routine transactions now requires real-time validation before the invoice can be relied upon.

Expected Next Steps

The Israel Tax Authority is expected to continue lowering the threshold in further phases, consistent with its accelerated rollout, ultimately moving toward a fully digitized, real-time VAT enforcement model covering the great majority of B2B invoices. Businesses should plan for continued reductions rather than treating NIS 5,000 or more as a stable long-term threshold.

How Can KGT Support You?

KGT builds SAP-integrated e-invoicing add-ons and supports SAP Document and Reporting Compliance (SAP DRC) implementations for continuous transaction control and digital reporting regimes worldwide. Where SAP DRC does not yet offer native local coverage, KGT develops certified add-ons—including data extraction, validation, and a reporting cockpit—to bridge the gap and keep clients compliant on schedule.

As an SAP partner for e-invoicing and tax technology services and an SAP Build partner, KGT supports clients through installation, configuration, customization, testing, and training, helping them plan ahead of legislative deadlines rather than react to them. If you would like to discuss the impact of this development on your SAP landscape, we are happy to arrange a call.