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Do you have a business exporting goods abroad, or providing a service to a customer residing outside Israel (telemarketing, application development, etc.)?
You can now invoice without the VAT at Israel
This is a considerable tax advantage decreed by the Israeli government to encourage exports.
Companies meeting certain criteria will be granted the right to invoice without VAT (VAT rate 0%), while reclaiming VAT in Israel on goods and supplies purchased by the company.
A few figures to help you understand this exemption (based on a true story)
Got your calculator? Let's get started!
A Smartphone application developer, whom we'll call David, recently signed a contract for an Israel-based company, worth 1,200,000 shekels plus VAT.
The recognized accounting expenses for the development of this application are 480,000 shekels excluding VAT (service providers, subcontracting, purchase of equipment, etc.), which leaves us a net margin of 720,000 shekels excluding VAT.
From a cash flow point of view, our dear friend David has received 1,404,000 shekels (incl. VAT) into his account, and spent 561,600 shekels (incl. VAT). This leaves him with a net cash position of 842,400 shekels incl. VAT, and he will have to pay back 122,400 shekels to the Israeli VAT office, as Value Added Tax, which leaves us, as described above, with 720,000 NIS excl. tax profit.
A small check that pays 122,400 shekels.
After calling on our firm, and after some further research on our part. It turns out that the company benefiting from this application is actually located abroad.
This small detail is very important. David was able to invoice at 1,404,000 shekels incl. VAT, recognizing 561,600 shekels incl. VAT in expenses. This left him with a net profit of 842,400 shekels.
Thanks to this tax optimization, David ends up with a legal surplus of 122,400 shekels.
Who can benefit from this exemption?
Any company in Israel can benefit from this exemption, with the exception of a company invoicing as a Osek Patur.
Consult our firm to see if you can obtain this exemption and considerably improve your cash flow.
