Source: https://rivet.global/blog/israel-vat-18-percent-and-exported-services
Published: 2026-07-09 · Updated: 2026-07-09 · By Alexia M.

# Israel VAT at 18%: exported services, zero rating and foreign clients

Israel's VAT rose to 18% in January 2025. How zero rating works for services to foreign residents, the evidence to keep and how allocation numbers fit in.

## Key takeaways

- Israel's standard VAT rate rose from 17% to 18% on 1 January 2025.
- Services supplied to a foreign resident can be zero rated under the VAT Law, subject to conditions about who the client is and where the service is used.
- Evidence matters: the contract, the client's foreign residence, and payment in foreign currency from abroad.
- Invoice allocation numbers apply to domestic B2B tax invoices above the threshold; export invoices follow their own rules.

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](/blog/israel-invoice-allocation-numbers-2026) 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](/blog/how-to-invoice-international-clients).

## Questions

### 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.