Israel VAT at 18%: exported services, zero rating and foreign clients
Israel's VAT rate is 18%. Many services an Israeli company supplies to foreign residents are zero rated, but the conditions are specific, and the paperwork has to show the client is abroad and paid from abroad.
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Google's suggestions for "Israel e-invoicing" include "israel e invoicing threshold" and "israel e invoicing requirements". For an Israeli company selling abroad, the invoice question starts one step earlier: does this invoice carry VAT at all?
The rate
Israel raised its standard VAT rate to 18% on 1 January 2025. Domestic services and most domestic sales carry it.
Zero rating for foreign clients
The VAT Law zero rates many services supplied to a foreign resident. In broad terms:
- The client is a foreign resident without business or a branch in Israel, or the service is unrelated to it.
- The service is not consumed in Israel.
- Payment comes from abroad, typically in foreign currency.
A Tel Aviv development studio building software for a company in Germany, paid in euros from Germany, is the typical zero-rated case. A studio serving the Israeli branch of the same company is not.
The evidence file
| Item | Why |
|---|---|
| Signed agreement | Shows who the client is |
| Client's registration abroad | Shows foreign residence |
| Payment record in foreign currency from abroad | Supports the export |
| Invoice marked as zero rated | Matches the VAT return |
Keep these together for every foreign client. The tax authority asks for them in audits.
Allocation numbers
Israel's invoice allocation model requires numbers on domestic B2B tax invoices above the threshold. Our article on Israel invoice allocation numbers has the thresholds.
Where Rivet fits
Rivet gives registered companies USD details on the free Starter plan and EUR and GBP on Growth, so foreign clients pay from abroad in their own currency into the company's own details, with the payer and reference recorded on each receipt. Check our eligibility list for Israeli companies. Rivet is not a bank; regulated partner institutions hold the funds. See how to invoice international clients.
Questions people ask
What is the VAT rate in Israel?
18% since 1 January 2025, up from 17%.
Do I charge VAT to a US client?
Often not. Services to a foreign resident that has no business in Israel are commonly zero rated, as long as the service is not consumed in Israel. Some services, such as those related to Israeli property, are excluded.
Do export invoices need an allocation number?
Allocation numbers are required for domestic tax invoices above the threshold so the buyer can claim input VAT. Ask your accountant how zero-rated export invoices are handled in your software.
What evidence should I keep?
The signed agreement, proof the client is a foreign resident, and records showing payment from abroad, usually in foreign currency.
Sources
Alexia compares the accounts, cards and payment tools companies weigh before they switch, and writes Rivet's market guides for founders in a specific country. Prices in Alexia's comparisons come from each provider's own pricing page on the date given in the article, rules come from the regulator or tax authority that sets them, and every source is listed at the end.
More from Alexia M. →This article is general information, not legal, tax or financial advice. Rules and fees change; check the sources above and the provider’s current terms before you act on them.
- israel vat
- israel vat rate 18
- zero rated services
- export of services
- israel e invoicing
- allocation numbers
