Israel is continuing with proposals to levy 16% VAT on supplies of digital services to Israeli consumers by foreign providers.
The tax authorities issued a new Circular this week outlining plans to make supplies by foreign companies of goods and services via e-commerce taxable. The Circular makes reference to the Base Erosion Profit Shifting (BEPS) Action Point 1, highlighting that no physical presence is required to trigger a taxable event.
A separate draft Circular had been issued at the start of April for public discussion. This covered the VAT issues for non-resident e-service providers with substantial business interests in Israel.
The proposal to change the existing VAT legislation is being reviewed by the Knesset, the Israeli parliament.
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