Disclaimer: The Following is an unofficial translation, and not necessarily an updated one. The binding version is the official Hebrew text. Readers are consequently advised to consult qualified professional counsel before making any decision in connection with the enactment, which is here presented in translation for their general information only.
VALUE ADDED TAX REGULATIONS Contents
Value Added Tax Order (Determination of Neighboring States) 5755-1995
Value Added Tax Regulations (Registration) 5736-1976
Value Added Tax Regulations 5736-1976
Value Added Tax Regulations (Tax Planning that Must Be Reported) (Ad Hoc Provision) 5767-2006
Value Added Tax Order (Tax Rate on Transaction and on the Import of Goods) 5752-1992 Value Added Tax Regulations (Sale of Used Furniture) 5739-1979
Value Added Tax Regulations (Sale of Coins, Medals and Gold Bars) 5754-1994
Value Added Tax Regulations (Financial Institutions and Non-profit Organizations) 5736-1976 Value Added Tax Order (Tax Rate on Non-profit Organizations and Financial Institutions) 5753-1992
Value Added Tax Order (Determination of Financial Institution) 5737-1977
Value Added Tax Regulations (Determining Amount of Petty Dealer's Business Turnover) 5747-1987
Taxes Order (Setting Interest Rate) 5736-1976
Value Added Tax Regulations (Increase of Amount of Fines) 5744-1984
Value Added Tax and Purchase Tax Regulations (Procedure on Appeal) 5736-1976 Value Added Tax Regulations (Procedure on Appeal against Imposition of Administrative Fine) 5736-1976
Value Added Tax Notification (Determination about Foreign Currency Payments on the Matter of Zero Rate Value Added Tax) 5756-1995
Notice on Determination of Forms for Implementation of the Law Notice of Approval of Documents
Permission to Include Term "Tax Included" in Tax Invoice Notice of Approval of Bonded Warehouses
Value Added Tax Order (Demand for Additional Returns) 5756-1996
Value Added Tax Regulations (Determination of Particulars that Must Be Included in Tax Invoice Issued by or to an Area Resident Dealer or a Gaza or Jericho Territory Resident Dealer and Particulars that Must Be Included in a Delivery Note Issued by Him) 5756-1996 Value Tax Instructions (Exemption from the Obligation to Transport Goods in Production with an Invoice or Delivery Note)
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VALUE ADDED TAX ORDER (DETERMINATION
OF NEIGHBORING STATES) 5755-1995
By my authority under sections 30(a)(10) and 145 of the Value Added Tax Law 5736-1975 (hereafter: the Law) and with approval by the Knesset Finance Committee as follows:
Neighboring state
1. For purposes of section 30(a)(10) of the Law, these are neighboring states:
(1) the Arab Republic of Egypt;
(2) the Hashemite Kingdom of Jordan.
VALUE ADDED TAX REGULATIONS
(REGISTRATION) 5736-1976
By my authority under sections 1, 52, 55, 56, 57, 65, 118 and 145 of the Value Added Tax Law 5736-1976, and with approval by the Knesset Finance Committee, I make these regulations:
Definition
1. In these regulations, "person liable to tax" – a dealer, a non-profit organization or a financial institution, even if exempt of paying the tax or if all his transactions are exempt of tax, except for –
(1) a person all of whose transactions are exempt of tax under sections 31(1) or 31(2) of the Law;
(2) a person, the tax on all of whose transactions is paid by the recipient of the service under regulation 6A of the Value Added Tax Regulations 5736-1976 (in this regulation: implementation regulations);
(3) a person, for whom tax on real estate sold by him is paid under regulation 6B of the implementation regulations and who is not a non-profit organization, a financial institution, or a dealer within the meaning of subregulation (d) of the said regulation.
Registration of person liable to tax
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registration form prescribed by the Director and by delivering it – (1) if he is a dealer – by hand in person or through an auditor,
lawyer, tax consultant, audit union official as said in section 72 of the Law, or through his bookkeeper, and if he is a non-profit organization or a financial institution – by hand or by registered mail, to that Value Added Tax Office of those specified in the schedule, which is nearest to his place of business;
(2) a person liable to tax shall deliver the form said in this regulation to the Director not later than on the day on which he begins his business or activities.
(b) The registration form said in subregulation (a) shall include particulars, which in the Director's opinion are needed for implementation of the Law, and for the purpose of registering a dealer also these particulars: type of business, the annual business turnover, the number of employees in the business, and the number of the deductions file at the Income Tax Division. (c) If a person received a registration form and he believes that he is
not a person liable to tax, then he shall return the form by the date said in subregulation (a), after indicating his reasons.
Registration of dealer whose business has not yet begun to operate 3. If a person wants to register as a dealer under section 52(b) of the Law
before he begins to sell assets or to render services in the course of his business, then he shall submit an application on a form prescribed by the Director, also indicating on it the type of his bookkeeping system and the projected date on which he will begin to sell assets or to render services.
Registration of partnership
4. (a) If a person liable to tax is a partnership, as defined in the Partnership Ordinance, including an unregistered partnership, then he shall indicate on the registration form particulars about the partners, and also about the partnership's representative for purposes of the Law; the partnership's representative shall be one of the partners whose permanent place of residence is in Israel and who is competent for every legal act.
(b) If the partnership did not notify him of its representative, then the Director may designate one of the partners to be the representative, and he shall notify the partnership's representative of his decision.
(c) The partnership's representative shall sign the registration form and any other return required under the Law in the partnership's name; any document to be served under the Law or under regulations under it may be served on the partnership's representative.
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Registration of non-profit organization
5. A form for registration of a non-profit organization shall be filled out and submitted by the person who at that time serves as the organization's director, or by its treasurer or financial director, if there is no director as aforesaid.
Registration of legally incompetent
5A. (a) In this regulation, "guardian", "legally incompetent" and "minor" – within the meaning of those terms in the Capacity and Guardianship Law 5722-1962.
(b) A form for registration of a minor, of a legally incompetent or of a person for whom a guardian has been appointed (hereafter: legally incompetent) shall be filled out, submitted and signed by the guardian, indicating the fact that he is the legally incompetent's guardian;
(c) The guardian shall sign – in the name of the legally incompetent – every return and every other document required under this Law, indicating the fact that he is the legally incompetent's guardian. Registration of foreign dealer
6. (a) If a person liable to tax has most of his business or activity outside of Israel and if he also has business or activity in Israel (hereafter: foreign dealer), then he shall inform the Director within 30 days after the day on which he begins activity in Israel or until April 30, 1976, whichever is later, of the name of the person who will be his representative in Israel; the representative shall be an individual whose permanent place of residence is in Israel or a body corporate registered in Israel.
(b) The notification under subregulation (a) shall be on a form prescribed by the Director, accompanied by a power of attorney from the foreign dealer to his representative; the power of attorney shall include the following:
(1) name of the foreign dealer; (2) his form of incorporation;
(3) address of the business abroad;
(4) address at which the business is conducted in Israel; (5) authority to submit any return that must be submitted under
the Law, to pay the tax, to receive monies if due to the foreign dealer, and to deal with any matter necessary for purposes of the Law and of the regulations under it.
Registration certificates
7. (a) If a person holds a registration certificate or any other document from the
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prima facie, to have been lawfully registered.
(b) If a person who submitted a registration form did not receive a certificate or document said in subregulation (a) within 30 days after the day on which he submitted it, or until May 14, 1976, whichever is later, he shall so notify the Director by registered letter.
(c) A person registered by the Director under section 54 of the Law shall not deduct input tax and shall not issue tax invoices, as long as he has not been registered at his own initiative.
(d) If a registration certificate or other document has been lost, then the person liable to tax shall immediately notify the Director in writing.
Changes in the business
8. (a) If the business or activity of the person liable to tax has been completely discontinued, or has been discontinued for a period longer than one return period, or if events occurred that necessitate changes in the registration or its cancellation – such as changes in the address of the business or of the registered office of a business that is a body corporate, changes of partners in a partnership, of the partnership's representative, of the legal status of the person liable to tax, or a change in the economic branch to which the business belongs – then the person liable to tax shall inform the Director thereof in writing within 15 days after the day on which the event occurred.
(b) (1) If a person liable to tax died, went bankrupt or became incompetent to run a business for any other reason, then any person who duly acts as representative of the person liable to tax or actually manages his affairs shall inform the Director that he acts as representative or that he conducts the business, as the case may be; the same holds for a person liable to tax, which is a company for which a receiver has been appointed, and the notification shall be made by the receiver;
(2) the said notification shall be in writing and made within 30 days after the appointment of the representative or the receiver, or after the day on which the person who makes notification begins to conduct the business, as the case may be.
Separation of businesses
9. (a) If a person has several businesses, or if his business has several business units, then he may register separately for each business or unit in his business, if the following conditions have been met: (1) separate accounting records are kept for each of them; (2) aforesaid separate registration does not make him, in
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respect of them, a dealer exempt of tax.
(b) If a person wishes to register under subregulation (a), he shall submit an application to the Director on the form prescribed by the Director, attaching to it his undertaking to inform the Director immediately after the condition said in subregulation (a)(2) ceases to hold.
Dealers who wish to register jointly
10. (a) If dealers wish to register jointly, then they may do so if the following conditions hold –
(1) account books of all of them are kept jointly;
(2) a representative has been appointed for those dealers, as said in regulation 4.
(b) If dealers who wish to register jointly are a company and its subsidiary, or two or more subsidiaries of the same company, or a partnership and a partner whose share in it is 50% or more, or a cooperative society and its shareholders who jointly hold at least 50% of its shares, then they may register jointly even if the account books of each are kept separately; for this purpose, "subsidiary" – as defined in the Securities Law 5728-1968. (c) Persons who wish to register as said in subregulation (a) shall
submit an application to the Director on a form prescribed by the Director.
Registration of petty dealer as authorized dealer
11. (a) A petty dealer, other than a dealer exempt of tax under section 31(3) of the Law, may register as an authorized dealer if he proves to the Director's satisfaction that he keeps the account books that must be kept by an approved dealer under the Value Added Tax Regulations (Bookkeeping) 5736-1976.
(b) If a person wishes to register under subregulation (a), then he shall submit an application to the Director on a form prescribed by the Director.
Registration in a different category
12. (a) If a person liable to tax wishes to register under section 58 of the Law in a different category of persons liable to tax, then he shall submit a written application to the Director, specifying his reasons. (b) Until the Director's decision, the applicant said in subregulation (a) shall register in the category of persons liable to tax prescribed for him by the Law.
Registration as authorized dealer
13. The Director shall register a dealer included in any of the categories below as an authorized dealer, even if he would be deemed a petty dealer on the basis of his business turnover or the number of
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employees in the business:
(1) a member of a free profession, who is an agronomist, architect, practical engineer, private investigator, rabbinical pleader, technician, dental technician, organizational, management, scientific or tax consultant, economist, engineer, surveyor, accountant, translator, insurance agent, lawyer, auditor or assessor, owner of a chemical or medical laboratory, and also dealers whose business is the rendering of services of the categories enumerated in regulation 6A of the Value Added Tax Regulations 5736-1976, and only in respect of those services; (2) a physician, including a psychologist, physiotherapist, veterinary,
dentist or dental practitioner;
(3) an owner of a driving school, under a license issued under section 15 of the Traffic Ordinance;
(4) an owner of a school, including a kindergarten, in which students study or are educated systematically and which is not a non-profit organization, and also a school in which vocational, academic or practical instruction is provided – including instruction for the arts and sport – to groups each of which numbers no fewer than five students, exclusive of incidental instruction of not more than 30 days of instruction carried out in the course of one year for each group of students.
(5) a real estate trader or real estate broker; in this paragraph – "real estate trader" – a dealer whose business or part of whose business is the sale of real estate rights;
"real estate broker" – a dealer whose business or part of whose business is brokerage in real estate rights;
(6) a vehicle trader or broker; in this paragraph –
"vehicle trader" – a dealer whose business or part of whose business is trading in vehicles;
"vehicle broker" – a dealer whose business or part of whose business is brokerage in the sale, purchase or exchange of vehicles;
"trade in vehicles" – including the exchange of vehicles or their rental on the hire purchase plan;
"vehicle" – motor vehicle, within its meaning in section 1 of the Traffic Ordinance;
(7) a company duly registered under the Companies Ordinance; (8) a cooperative society duly registered under the Cooperative
Societies Ordinance.
Rules for calculating business turnover
14. (a) If a dealer's business turnover in the preceding tax year is not known because his business operated only during part of that tax year, then his business turnover shall be calculated according to the average monthly turnover during the period of its activity in the
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preceding tax year, multiplied by 12.
(b) If a dealer's business turnover for the preceding tax year is not known for a reason other than that said in subregulation (a), then his business turnover shall be calculated according to the total of transactions carried out in the month before his registration, multiplied by 12, and if he has not yet begun to conduct business or was active for less than one month before his registration – according to the estimated amount for the following tax year, as if he were to be active throughout that year.
Declaration of transaction turnover
15. A dealer exempt of paying tax under section 31(3) shall declare his turnover of transactions in the preceding year until January 31 of each year, and that on a form prescribed by the Director.
Registration of dealer in occasional transaction
15A. (a) If a person performed an occasional transaction and is not bound to register under section 52 of the Law for transactions in the course of his business, then his registration shall be by notice to the Director on a form prescribed by the Director, specifying the nature of the occasional transaction, when it was carried out, its price – and if it has not yet been completed, then its estimated price – as well as every particular from the day on which the occasional transaction was begun.
(b) Notification under subregulation (a) shall be submitted by the 15th of the month after the month in which the occasional transaction was begun.
(c) If the price of an occasional transaction was less than the determining amount, then the obligation to register said in subregulation (a) shall apply only if, in the year in which the occasional transaction was performed, the same dealer performed additional occasional transactions, the total of their prices together with the price of that transaction being equal to or in excess of the determining amount, and the registration shall be for all those occasional transactions; in the notification to the Director he shall fill out all particulars required on that form for all those occasional transactions; for purposes of this subregulation, "determining amount" – the amount of a petty dealer's transaction turnover for purposes of section 31(3) of the Law. (d) Subject to the provisions of subregulation (c), registration for an
occasional transaction does not exempt from renewed registration for additional occasional transactions, unless the dealer stated, at the time of his aforesaid registration, that he will perform additional occasional transactions in the future and undertook to report them; having so stated and undertaken, he shall be exempt from registration in respect of additional occasional transactions in
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that tax year.
(e) Subregulations (c) and (d) shall not apply, if the occasional transaction is the performance of a service within the sphere of one of the professions specified in regulation 6A(a)(2) of the Value Added Tax Regulations 5736-1976.
Address for applications
16. Applications or notifications under regulations 3, 6, 7, 8, 9, 10, 11, 12, 15 and 15A shall be submitted to the Value Added Tax Office specified in the Schedule, which is located in the area in which the person liable to tax conducts his business, and in respect of a person liable to tax who is a body corporate – to the office in the area in which the office of the body corporate is located.
Offenses
17. The violation of a provision of regulations 2, 4, 6, 7, 8, 15 and 15A, which is not defined as an offense in the Law, is hereby determined to be an offense.
SCHEDULE (Regulation 16)
Customs and Value Added Tax House, Jerusalem, Keren Hayessod 20; Regional Value Added Tax / Purchase Tax Office, Haifa, Shaar Hanamal 3; Regional Value Added Tax Office, Hadera, Rehov Rothschild 27A;
Regional Value Added Tax Office, Tiberias, Rehov Haprachim 3; Regional Value Added Tax Office, Nazareth, Kiryat Hamemshala 3; Regional Value Added Tax Office, Acco, Derekh Haarbaah 34; Regional Value Added Tax Office, Tel Aviv 1, Yaffo, Rehov Yefet 42; Regional Value Added Tax Office, Tel Aviv 2, Yaffo, Rehov Yefet 42; Regional Value Added Tax and Purchase Tax Office, Tel Aviv, Rehov Ahad Haam 27;
Regional Value Added Tax Office, Givatayim (Gush Dan) – Rehov Weizmann 19;
Regional Value Added Tax Office, Tel Aviv 3, Rehov Weizmann 19; Regional Value Added Tax Office, Netanya, Rehov Smilansky 6;
Regional Value Added Tax Office, Petah Tikva, Rehov Bar Kochba 40; Regional Value Added Tax Office, Rehovot, Rehov Binyamin 4;
Regional Value Added Tax Office, Ashdod, Rehov Harishonim 26;
Free Trade Area Value Added Tax Office, Eilat, Bet Evrona, Rehov Eilot; Regional Value Added Tax Office, Beersheba, Unico Passage, corner Rehov Herzl and Rehov Hapalmach.
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VALUE ADDED TAX REGULATIONS 5736-1976
By my authority under sections 1, 5, 12, 13, 21, 29, 30, 34, 36, 38, 42, 44, 51, 67, 69, 99, 129 and 145 of the Value Added Tax Law 5736-1976, and with approval by the Knesset Finance Committee, I make these regulations:
CHAPTER ONE: GENERAL Determination of assets for own use
1. Use of the following business assets for the needs of the business shall also be deemed use for private needs:
(1) use of a private vehicle for the needs of the business –
(a) by a dealer who produced the vehicle; for this purpose, "production" – includes assembly from parts or subassemblies and changes in the vehicle's structure, but excludes of changes in the vehicle's structure that do not change its vehicle classification;
(b) by a dealer said in regulation 14(b), not for the purposes specified there, if the dealer deducted input tax paid on the vehicle's purchase or import;
for purposes of this regulation and of regulations 2 and 14, "private vehicle" – a passenger vehicle and a private dual purpose vehicle, a consolidated commercial vehicle and an unconsolidated commercial vehicle within their meaning in the Traffic Regulations 5721-1961, on condition that the total permitted weight of a said commercial vehicle not be greater than 3,500 kg, and also a vehicle specified in Schedule 4 or one similar to or identical with it, other than a jeep constantly used under field conditions or on the premises of a business or enterprise; (2) use of real estate for rental, which is tax exempt under sections
31(1) or 31(2) of the Law, if the person who rented the real estate to another also performed the construction work on it; this paragraph shall not apply to the part intended for rental in a building approved as a rental building under the Encouragement of Capital Investments Law 5719-1959, the sale of which is exempt of tax under section 31(1) of the Law, as long as the conditions of the exemption are complied with.
Determination of used assets
2. (a) The provisions of section 5 of the Law shall apply to the sale of a used vehicle, of a used motorcycle or a used all terrain vehicle by a dealer whose business is the purchase and sale of used vehicles, and the tax shall be paid on the difference between the price of the vehicle at the time of its sale and the price at the time
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of its purchase.
(b) The provisions of subregulation (a) shall not apply to the sale of a used private vehicle, motorcycle or all terrain vehicle, if they were acquired from a dealer who is entitled to deduct the input tax paid on its purchase or importation by virtue of regulation 14(b) or by virtue of any other statute.
(c) For purpose of this regulation, "motorcycle" and "all terrain vehicle" – within their meaning in the Traffic Regulations 5721-1961.
CHAPTER TWO: THE PRICE Monies received under section 12
3. (a) (1) A contribution, support or other assistance (hereafter: monies received) given to a dealer directly from the State budget for the following purposes shall not be deemed part of the price:
(a) subsidies on basic food products;
(b) grants under the Encouragement of Capital Investments Law 5719-1959, including additions to said grants for science intensive industry within the boundaries of the City of Jerusalem in accordance with a recommendation from the Chief Scientist in the Ministry of Industry and Trade, or grants under the Encouragement of Capital Investments in Agriculture Law 5741-1980;
(c) subsidies for tuition fees in kindergartens;
(d) subsidies for public transport (transportation fees); (e) grants for research and development under approval
by the Chief Scientist in the Ministry of Industry, Trade and Tourism, the Ministry of Energy and Infrastructure, the Ministry of Agriculture or the Ministry of the Environment, or under approval by the Director of the National Research and Development Council in the Ministry of Science and Development;
(f) subsidies for the supply of electricity;
(g) money paid to a dealer under the Binational Industrial Research and Development Foundation Law 5738-1978, the United States-Israel Agricultural Research and Development Fund Law 5740-1979 or under the Binational Science Foundation Law 5737-1977; (h) compensation for war damage, indirect damage or
drought damage under the Property Tax and Compensation Fund Law 5721-1961;
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(i) grants to exporters by the Ministry of Industry and Trade, out of the Support Fund for Exporters for the Advancement of Foreign Marketing;
(j) money received by a dealer from the Fund for the Support of Recognized and Authorized Export Companies, conducted by the Ministry of Industry and Trade;
(k) grants for the absorption of scientists in research and development projects, approved by the Absorption in Science Center in the Ministry of Immigrant Absorption;
(l) incentive payments to employers under the Encouragement of the Business Sector (Employee Absorption) (Ad Hoc Provisions) Law 5751-1991; (m) incentives given to employers by Government decision,
which constitute participation in the employment and training of employees;
(n) money received to dealers by the Fuel Administration out of the "fuel sector expenses" budget;
(o) monies received by dealers out of the Fund for the Preparation for Exposure, managed by the Ministry of Industry and Trade;
(p) money given to dealers within the framework of the program for the preparation and retraining of man-power in industry, managed by the Ministry of Industry and Trade;
(q) grants awarded for the production of a film by an assisting public institution, as defined in the Motion Picture Regulations (Recognition of a Film as an Israel Film) 5765-2005;
(2) monies received, which are specified below, shall not be deemed part of the price of the dealer's transactions: (a) money given to the dealer directly out the budgets of
the Jewish Agency for Israel, of the World Zionist Organization or of llan – Israel Organization for Injured Children ;
(b) money received by dealers directly out the budgets of the Jewish National Fund to finance research projects approved by the Chief Scientist in the Ministry of Agriculture;
(c) special grants and allocations out of the Water Price Equalization Fund, paid under Article Two in Chapter Four of the Water Law 5719-1959.
(d) any money paid to the dealer directly or indirectly by the European Union as part of the Research and Development Program of the European Union;
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payment or reduced payment of linkage differentials or interest, in respect of a loan extended to the dealer by a controlling member, as defined in section 3(i) of the Income Tax Ordinance, in the same business, exclusive of said money given by a non-profit institution.
(b) For purposes of bookkeeping and periodic reports, receiving money to which subregulation (a) does not apply shall be deemed the performance of a transaction with whoever paid the money that was received, and a tax invoice shall be issued for it within one week after the money was received.
Rules on packaging
4. If goods are sold packaged and if payment is set at the time of packaging, then the following provisions shall apply:
(1) if the packaging is not returnable, then its price shall be part of the price of the goods;
(2) if the packaging is returnable and if, upon its return, the price charged at the time of sale is refunded in whole or in part, then the packaging shall be deemed to have been sold to the buyer, and at the time of its return it shall be treated like goods returned by the buyer to the seller, after a tax invoice is issued in the amount of the refund.
Rules on deposit or surety
5. (a) If an amount was given as a deposit or as surety for the return of borrowed goods, or to assure the performance of a transaction or the rights of a person connected to a transaction, then six months after it was paid the deposit or surety shall be deemed part of the price, unless it was returned or unless it earlier became part of the price of the transaction; however –
(1) if the parties agreed in writing that the deposit or surety be kept by the seller or by a person on his behalf for a period longer than six months, then they shall be deemed part of the price one month after the end of the agreed period; (2) if it is proved to the Director's satisfaction that a longer
period of deposit or surety than that set in this regulation is customary in a certain industry, or that the refund of the deposit or surety was delayed by a special reason, then they shall be deemed part of the price one month after the end of the said period or after that reason lapsed.
(b) Notwithstanding the provisions of subregulation (a), the amount of deposit or of surety, or any similar amount paid for the items in paragraphs (1) and (2) below (in this regulation: deposit) shall be deemed part of the price of the transaction at the time of their payment:
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(1) the amount of deposit for – a. gas balloons;
b. electricity meters; c. water meters;
d. other similar products. (2) repealed.
Expenditures incurred for a third party
6. (a) If an amount was paid by a dealer as an expenditure on behalf of his customer, and if a tax invoice or another document approved by the Director for this purpose was issued in that customer's name, then it shall not be part of the price.
(b) If an amount is received for the payment of expenses for a customer, as said in subregulation (a), before the dealer paid it as aforesaid, then it shall be deemed a deposit and not part of the transaction price, and the provisions of regulation 5 shall apply, if the following conditions hold and as long as they do:
(1) an invoice was issued to the customer, stating specifically that the amount was received for the payment of expenses for the customer and specifying the character of those expenses;
(2) the amount received was deposited in a separate bank account for aforesaid expenses and for deposits said in regulation 5, which is a current account, and money in this account shall not be used for any purpose except for aforesaid expenses or for the use of aforesaid deposits. (c) Any part of the deposit not used to pay said expenses and not
refunded to the customer shall be deemed part of the price on the day on which it becomes clear that the deposit will not be used to pay aforesaid expenses.
(d) If the condition in subregulation (b)(2) is not met, the amount shall be deemed part of the price seven days before the end of the report period after the period in which the amount was received, or at the time at which it became clear that all or part of the amount will not be used for expenses, whichever is earlier. Obligation of recipient of service to pay tax
6A. (a) If a dealer, non-profit organization or financial institution received services of the types specified below from a person, whose main income is from wage, benefit or pension, then he must pay the tax in respect of that service, unless he received a tax invoice from the person who rendered the service; these are the services: (1) artistic performance, including direction of a performance;
construction or preparation of stage sets; preparation, checking, conducting and supervising examinations; lectures, instruction, direction, practicing or participation in a
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performance that is not an artistic performance; typing or shorthand; oral or written translation; writing or editing; mediation, as defined in section 79C of the Courts Law (Consolidated Version) 5744-1984; or membership in a committee established under a statute;
(2) services of the following professionals: agronomist, architect, practical engineer, private investigator, rabbinical pleader, technician, dental technician, organizational, management, scientific or tax consultant, economist, engineer, surveyor, accountant, translator, insurance agent, lawyer, auditor, assessor, owner of a chemical or medical laboratory, physician, psychologist, physiotherapist, veterinary, dentist or dental practitioner.
(b) If the person who rendered a service did not issue a tax invoice as aforesaid, then he shall give the recipient of the service a declaration that his main income is from wage, benefit or pension; his failure to give an aforesaid declaration shall not free the recipient of the service from the obligation to pay tax under subregulation (a).
(c) If a person renders a service and if, in respect of that service, the recipient of the service is under obligation to pay the tax under subregulation (a), then that person is not entitled to deduct the tax on inputs used in rendering the service.
(d) If a dealer is liable to pay the tax under subregulation (a), then he shall report the rendering of the service in the return that he must submit under section 23 in respect of his transactions, and he shall, in place of the person who rendered the service, issue an invoice in his own name on the date set therefor.
(e) If a non-profit organization or a financial institution is liable to pay the tax under subregulation (a), then it shall report the rendering of the service and pay the tax in the manner in which it must report and pay in respect of deductions at the source under sections 164 and 166 of the Income Tax Ordinance, unless the Income Tax Commissioner or a person authorized by him for that purpose ordered otherwise.
(f) If a dealer renders a service, in respect of which under this regulation tax is payable by the recipient of the service, then he must submit a periodic return if he had other transactions, and in that case he shall report transactions on which tax is payable by the recipient of the service as transactions to which the nil rate applies.
Payment of tax on a real estate sale, which is an occasional transaction 6B. (a) The purchaser shall pay the tax on a real estate sale, which is an occasional transaction on the part of a person who is not a dealer, a non-profit organization or a financial institution.
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(b) If a person is under obligation to pay tax under subregulation (a) and –
(1) if he is a dealer, then he shall issue an invoice in his own name in place of the seller, and he shall report the sale in the return which he must submit under section 23 in respect of his own transactions;
(2) if he is a non-profit organization or a financial institution, then he shall report the sale in the manner in which he must report occasional transactions, as said in section 15A(a) and (b) of Value Added Tax Regulations (Registration) 5736-1976, and he shall pay the tax due when he submits the return.
(c) The provisions of subregulation (b) shall apply, mutatis mutandis, to a real estate sale which is an occasional transaction by a dealer, a non-profit organization or a financial institution.
(d) In this regulation, "dealer" – any person who sells an asset or renders a service in the course of his business, and who is not a non-profit organization or a financial institution.
Payment of tax for printed matter imported by mail
6C. (a) When a person acquires foreign exchange from an authorized dealer in order to pay for goods said in section 26(b) of the Law (in this regulation: imported goods), or when he requests an authorized dealer to transfer foreign currency to a person abroad for an aforesaid payment, then the authorized dealer shall collect the tax from that person when the foreign currency is acquired or when it is transferred abroad, whichever is earlier.
(b) The authorized dealer shall transmit the tax collected by him under subregulation (a) in any month to an account at the Bank of Israel, as the Director will prescribe, on the first of the following month; the authorized dealer shall keep records, as the Director shall instruct.
(c) If an authorized dealer did not transmit the tax at the time set, then he shall pay on it linkage differentials and interest for the period of delay, as said in section 97 of the Law.
(d) If person imports imported goods and does not acquire or transfer foreign currency to pay for them through an authorized dealer, then –
(1) if he is a dealer, he shall issue an invoice in his own name, report the sale in the return which he must submit under section 23 in respect of his own transactions and pay the tax due when he submits the return;
(2) if he is not a dealer, he shall report the sale in the manner in which he must report occasional transactions, as said in section 15A(a) or (b) of the Value Added Tax Regulations (Registration) 5736-1976, and he shall pay the tax due when
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he submits the return.
Obligation of purchaser to pay tax on imported services
6D. If a transaction is performed in Israel, and the seller or performer of the service is a foreign resident, then the obligation to pay the tax rests on the purchaser, unless the purchaser holds an invoice on the transaction; the provisions of regulation 6C(d) shall apply to this matter, mutatis mutandis.
Keeping documents
6E. If a person is under obligation to pay tax under regulations 6C and 6D, then he shall keep the documents that relate to his payment of tax under these regulations, or those that prove that he does not have to pay the tax or is exempt from it, and that for the following periods – (1) if he is a dealer, a non-profit organization or a financial institution
– five years after the day on which they were drawn up;
(2) if he is not a dealer – one year after the day on which they were drawn up.
Transactions for purposes of section 29(1) of the Law
6F. When goods specified below are sold, then tax shall accrue in respect of every amount paid on account of the consideration at the time of its payment, before the date of accrual under Chapter Six of the Law: (1) air conditioning systems for cooling, heating or both, or parts
thereof;
(2) central heating systems or parts thereof; (3) any kind of prefabricated building;
(4) acoustic ceilings; (5) traffic lights; (6) elevators.
Payment of tax upon the sale of scrap metal
6G. Upon the sale of goods classified under items 72.04, 74.04, 75.03, 76.02, 78.02 and 79.02 of the Schedule to the Customs and Exemptions Tariff Ordinance 1937, the purchaser – if he is a dealer – shall be liable to pay the tax, and the provisions of regulation 6B(b)(1)shall apply, mutatis mutandis as the case may be.
CHAPTER THREE: TAX LIABILITY AND TAX PAYMENT Transactions for purposes of section 29(2) of the Law
7. (a) The following are transactions, on which tax accrues at the time the consideration is received and on the amount received: (1) transactions of dealers, who are under obligation to keep
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books under one of the following Schedules of the Income Tax Rules (Bookkeeping) (No. 2) 5733-1973 (in these regulations: income Tax Rules): Schedule Three, as far as it applies to dealers to whom subsections (c), (d), (e), (f) and (g) of section 2 of that schedule apply; Schedules Five, Six, Seven, Eight and Nine, as far as they apply to brokers, and Schedule Ten, as far as it applies to vehicle brokers; (2) transactions of asset rentals;
(3) transactions specified in regulation 6A, on which tax is payable by the recipient of the service;
(4) transactions of the extension of credit;
(5) transactions of the sale of subscriptions to newspapers, periodicals, books, collections and their updaters, performances, concerts and the like;
(6) transactions of a dealer to whom the provisions of section 2(c) of Schedule Eleven of the income Tax Rules apply, in respect of which he does not have to issue an invoice under that section.
Under Value Added Tax Regulations (Ad Hoc Provisions) 5769-2008 – KT 5769, p. 286, in the year 2009 the above subregulation (6) is replaced by the following subregulation (6):
(6) transactions of a dealer to whom applies the obligation to keep account books under Schedule Eleven of the Income Tax Rules, on condition that his transaction turnover does not exceed NS 15 million;
(b) The provisions of subregulation (a) shall not apply to a transaction, the price of which is affected by a special relationship between the parties, or for which no price was set or for which all or part of the consideration is in kind,
(c) repealed
CHAPTER FOUR: NIL RATE AND EXEMPTION Fruit and vegetables to which the nil rate applies
8. (a) The nil rate applies to the vegetables specified in Schedule One. (b) The nil rate applies to fruit specified in Schedule Two.
Tax exemption on imports in accordance with treaties
9. (a) Goods to be exempted of import taxes under the following treaties are exempt of tax:
(1) The Geneva Convention of August 12, 1949, on the treatment of prisoners of war;
(2) the Geneva Convention of August 12, 1949, on the protection of civilians in times of war;
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(3) the agreement on the International Monetary Fund; (4) the agreement on the International Finance Corporation; (5) the customs convention on easing the importation of goods
for exhibition or use at trade fairs, conventions and similar events;
(6) the customs convention on the temporary importation of professional equipment;
(7) the customs convention on containers;
(8) the customs convention on the international transport of goods under TIR books;
(9) the customs convention on the temporary importation of scientific equipment;
(10) the customs convention on the temporary importation of packing materials;
(11) the customs convention on welfare equipment for sailors; (12) the customs convention on the temporary importation of
pedagogic equipment;
(13) the customs convention on the temporary importation of private road vehicles;
(14) the convention on privileges and immunity of the United Nations;
(15) the international convention on easing the importation of commercial samples and advertising materials;
(16) the International Civil Aviation Convention;
(17) the "proposal" attached to the agreement between Egypt and Israel, of September 1, 1975;
(18) the agreement between the governments of Israel and the United States of America on the Israel-U.S. Binational Science Foundation;
(19) the agreement between the governments of Israel and the United States of America on the Israel-U.S. Binational Industrial Research and Development Foundation;
(20) the agreement between the governments of Israel and the United States of America on the establishment of the Israel-U.S. Binational Agricultural Research and Development Foundation;
(21) the agreement between the governments of Israel and the German Federal Republic on the Goethe Institute – German Cultural Center;
(22) the general agreement on technical cooperation between Israel and the United States of America under the Point Four program;
(23) the protocol signed on August 3, 1981 between the State of Israel and Egypt on the establishment and maintenance of
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the Multinational Observer Force in Sinai;
(24) the basic agreement between the World Health Organization and the Government of Israel on the provision of assistance by technical advisers;
(25) the agreement on the International Bank for Rehabilitation and Development, Washington 1945;
(26) The Inter-American Development Bank Convention (Immunities and Privileges) 5736-1976;
(27) the protocol between the Government of Israel and the Government of the Ukraine on the mutual establishment of cultural and science centers and their activities;
(28) the Germany-Israel Scientific Research and Development Fund agreement;
(29) the agreement between the State of Israel and the United States of America on the status of U.S. staff personnel; (30) the agreement between the State of Israel and the
Government of the Russian Federation on the establishment and operation of cultural centers.
(b) Exemption under subregulation (a) is conditional upon the fulfillment of all conditions of the agreement under which it is given, also subject to every restriction concerning the date of the importation and when the goods are to be in Israel.
(c) Whenever one of the said agreements provides that, if any of its conditions are violated, customs or importation taxes be paid, then value added tax shall also be paid, also subject to every restriction concerning the date of the importation and when the goods are to be in Israel.
(d) Whenever one of the said agreements provides that, if any of its conditions are violated, customs or importation taxes shall be paid, then value added tax shall also be paid if any condition has been violated.
Exemption on importation of goods which are exempt of all customs 9A. (a) Goods completely exempt of customs under items 5, 12,
30.01.9000, 212, 410, 428 and 614 of the Schedule to the Customs and Exemptions Tariff 1937 (hereafter: the tariff) are exempt of tax upon their importation; this regulation shall go into effect –
(1) in respect of the exemption under item 12 of the tariff – on May 12, 1976;
(2) in respect of the exemption under item 84.53.2000 of the tariff – on December 1, 1976.
(b) Stamps exempt of customs under item 97.04 of the tariff are exempt of tax upon their importation, if imported for a museum owned by the State.
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otherwise than permanently shall be exempt of part of the amount of tax to the payment of which they would have been liable at the time of accrual said in section 26(a) of the Law, if not for the said exemption, at the rate specified below in accordance with the length of time approved for their stay in Israel –
when the period is up to half a year – 90% when the period is up to one year – 80%
when the period is up to a year and a half – 70% when the period is up to two years – 60%
when the period is up to two and a half years – 50% when the period is up to three years – 40%
when the period is up to three and a half years – 30% when the period is up to four years – 20%
when the period is up to four and a half years – 10% (2) for purposes of this subregulation, part of half a year shall be
deemed half a year. Exemption on book imports
9B. (a) Books and periodicals (in this regulation: books), which are fully exempt of customs, are exempt of tax upon their importation, if the Director is satisfied that all the following hold true for them: (1) the books were given as a gift to an institution recognized as
an institution of higher education under the Council for Higher Education Law 5718-1958, or to another educational or cultural institution approved by the Director after consultation with the Director General of the Ministry of Education and Culture, or to a legal library that serves the general public approved by the Director after consultation with the Director General of the Ministry of Justice;
(2) the books were published at least 20 years before the date of their import;
(3) the institution declared that the books would not leave its possession.
(b) The provisions of subregulation (a)(2) shall not apply to an exemption given to a legal library said in subregulation (a)(1). (c) The exemption under this regulation shall not be given for more
than two copies of the same book.
Exemption and nil rate for representatives and representations
10. (a) Goods imported for representations and representatives of foreign states shall be exempt of tax, if they are fully exempt of customs. (b) The nil rate shall apply to sales of gasoline, kerosene and diesel oil, as defined in the Fuel Excise Order (Imposition of Excise Tax) 5735-1974, if sold to one of these:
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following hold true:
(a) the fuel is only used in motor vehicles of the representation or the representative, or to heat the representation's premises or the representative's home;
(b) the foreign state grants an exemption or a nil value added tax rate to the Israel representation and representative in that country, if tax applies in that country;
(2) to an international organization, of which Israel is a member, if one of the following holds true:
(a) the fuel is only used in motor vehicles;
(b) the fuel is used for space heating or to operate generators for lighting at U.N. observer observation posts along cease fire lines, or for their staff units. (c) Fuel at the nil tax rate, as said in subregulation (b), shall be sold
at fuel stations only against fuel coupons issued by the Director. (d) In this regulation, "representative" or "representation of a foreign state" – as defined in item 3 of the Schedule to the Customs Tariff and Exemptions Ordinance 1937 (hereafter: Customs Ordinance).
Nil rate on sale of goods
10A. The nil rate shall apply to sales from a bonded warehouse approved for this purpose by the Director, of goods fully exempt of customs under items 3, 4, 5 or 11, on condition that the sale is against foreign currency deposited in a bank that is an authorized dealer, as defined in Defense Regulations (Finance) 1941.
Nil rate on furniture
10B. Tax shall be at the nil rate on furniture not subject to purchase tax, when it is sold to persons entitled to buy furniture exempt of purchase tax because of their entry to Israel, on condition that the conditions of the purchase tax exemption are met.
10C. Repealed
Goods imported from an administered area
11. Goods other than motor vehicles, within their meaning in rule 4 of the rules for Chapter 87 of the customs tariff, imported from an area within its meaning in section 44(4) of the Law, are exempt of tax upon their importation.
Conditions for application of the exemption to transactions with precious stone
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11A (a) In this regulation –
"precious stone" and "transaction" – within their meaning in section 33 of the Law;
"exchange" – the Precious Stones Exchange Ltd.; "invoice" – a transaction invoice or a tax invoice;
"customer" – a dealer who buys a precious stone and all of whose transactions are with precious stones, including diamonds within their meaning in section 33 of the Law;
"seller" – the dealer who sells a precious stone or who renders a service in connection with it;
"registration number" – the dealer's registration number for purposes of Value Added Tax.
(b) Tax exemption on any transaction is conditional upon the following:
(1) the invoice to be issued by the seller (in this subregulation: invoice) must specify the name of the precious stone, its weight and its price per carat;
(2) if the seller is a member of the exchange, "Exchange Member Number _______ " shall be printed in the heading of the invoice, specifying his number;
(3) the purchaser's name shall be accompanied by his registration number and – if he is an exchange member – also by "Exchange Member Number _______", specifying his number;
(4) the customer shall personally sign the following declaration on the original of the invoice and on the copy thereof, which the seller must keep:
Declaration
1. I, the undersigned _________________________ (Customer's name), ____________________ (Business address) ______, (Registration number), hereby declare that all my transactions are only with precious stones and that this transaction is in the course of my business.
2. I keep books which at least constitute a bookkeeping system within the meaning of regulation 11 of the Value Added Tax Regulations (Registration) 5736-1976.
Signature and stamp _____________ (5) The seller keeps books as said in paragraph (4).
Tax refund for tourists
11B. For the purposes of section 30(a)(1) the nil rate shall apply to goods sold to a tourist who leaves Israel with the goods, if – when he received the refund of value added tax – the tourist paid expenses as prescribed in the agreement between the State of Israel and the person through whom the tax is refunded.
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Conditions for application of nil rate
12. (a) The nil rate under section 30(a)(1), (2), (4), (5), (7) and (8) of the Law is conditional on proof to the Director's satisfaction that all the following have been complied with:
(1) the transaction price was entered in the dealer's books, including the manner of payment and the currency in which it was paid;
(2) the dealer holds an agreement or other written document that certifies the particulars of the transaction, and – for purposes of applying the nil rate under section 30(a)(8) of the Law – he holds a record of the tourist's name, permanent address and passport number, and an invoice has been issued, specifying the service rendered to him; (3) in respect of services specified in section 30(a)(8)(b), (c) and
(d) – the invoice issued to the tourist specifies the vehicle's license number and, as the case may be, the name of the vehicle's driver;
(4) for purposes of the supply of meals said in section 30(a)(8)(d), when those were prepared by another dealer for the transporter – the invoice issued to the transporter specifies the license number of the bus.
(b) (The contents of this subregulation, although not repealed, were made irrelevant by other changes in this regulation – Tr.)
(c) Repealed
(c1) The provisions of this regulation shall not apply to the sale of goods from a bonded warehouse to persons leaving Israel, to which section 30(a)(4) of the Law applies.
(d) Application of the nil rate to the sale of goods, in order to transfer them to a bonded warehouse under section 30(a)(3) of the Law, is conditional on those goods being stored in the bonded warehouse in accordance with the provisions of the Customs Ordinance and its regulations.
Reservation in respect of nil rate on services
12A. (a) In respect of section 30(a)(5) of the Law, the nil rate shall not apply to a service rendered in respect of an asset located in Israel, unless the person who renders the service proves, to the Director's satisfaction, that the consideration for the service constitutes part of the value of the goods, which was determined as said in sections 129 to 133I of the Customs Ordinance. (b) Subregulation (a) shall not apply, if one of the following has been
proven to the Director's satisfaction:
(1) that the asset, in respect of which the service was rendered, is a ship, an aircraft or a container, within their meaning in the customs convention on containers and the signature protocol (Kitve Amana 677, vol. 17, p. 407);
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(2) that the purpose of the service is the goods= export from Israel, that the service was actually rendered by the person who acquired the goods for a foreign resident – all if those goods actually were exported;
(3) that the asset, in respect of which the service was rendered, is petroleum imported to Israel in order to transport it abroad through a pipeline, as defined in the Concession Deed in Schedule One of the Petroleum Pipeline Concessions Law 5728-1968, on condition that the petroleum was actually exported.
(c) For the purposes of section 30(a)(5) of the Law, the nil rate shall not apply to a service rendered to a foreign resident, if the subject of the agreement is the rendering of a service to another foreign resident during his stay in Israel, the service not being of a kind specified in section 30(a)(8) of the Law and in regulation 12B; this provision shall not apply to transportation of a tourist by boat from one place in Israel to another place in Israel and to the provision of meals to a tourist by the operator of the boat in the course of said transportation, whether he provides them directly or indirectly.
(d) For purpose of section 30(a)(5) of the Law, the nil rate shall not apply to a service provided in respect of making an agreement, to which an Israel resident is a party, unless one of the following holds true:
(1) the person who provided the service proved to the Director's satisfaction that the consideration of the service constitutes part of the value of the goods, which was determined as said in sections 129 to 133I of the Customs Ordinance;
(2) the service is one of the category of services that are entitled to the nil rate by virtue of section 30(a)(8) of the Law.
Services in connection with overnight stay
12B. The following are the additional services for the purposes of section 30(a)(8)(a) of the Law, on condition that they were rendered to a tourist in the hotel in which he stays overnight, by that hotel, and that the invoice issued to the tourist specified each service rendered as aforesaid separately with its price:
(1) food and drink;
(2) use of swimming pool and related services; (3) laundry services;
(4) rental of TV set, for use in the tourist's room; (5) use of sauna and related services;
(6) use of telephone, telex and facsimile; (7) use of sport and health facilities;
(8) translation of documents, correspondence, typing and other office services.
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CHAPTER FIVE: DEDUCTION OF INPUT TAX Tax invoice not in dealer's name
12C Notwithstanding the provisions of section 38 of the Law, the Director may recognize, for purposes of input tax deduction, a tax invoice issued to a category of dealers or to a certain dealer not in their name, if it is proven to his satisfaction that the inputs were used for purposes of their business and that the input tax is for telephone, water, gas, electricity or similar expenses.
Deduction of input tax by operator of bonded warehouse
12D.(a) Notwithstanding the provisions of section 38 of the Law, if a person holds a permit for a bonded warehouse, within its meaning in the Customs Ordinance, and if he paid customs in respect of stored goods under sections 83 or 84 of the Customs Ordinance and tax under the provisions of section 144 of the Law, then he may deduct – as input tax – the tax he paid, which is specified in the cash voucher and in the payment order issued to him in that context.
(b) The provisions of subregulation (a) shall not apply to –
(1) double tax, which may be imposed under section 144 of the Law;
(2) in respect of aforesaid goods, the tax on which may be collected by the owner of the bonded warehouse under insurance or under an indemnification contract.
Deduction of input tax by petty dealer
13. (a) In any return period a petty dealer may deduct all the input tax in respect of that period.
(b) If, in a certain return period, input tax – together with excess input tax from previous return periods that can be deducted as said in subregulation (c) – exceeds the tax due from the petty dealer, then the excess shall not be refunded, but shall be credited to the dealer's account at the Value Added Tax Directorate.
(c) The dealer may deduct the amount that stands to his credit from the tax due from him for subsequent return periods.
(d) If a petty dealer proves to the Director's satisfaction that he is liquidating his business, then he is entitled to the refund of input tax that has not been deducted.
Refund of excess tax
13A. (a) If an authorized dealer=s input tax for a given return period exceeds the tax due from that dealer for that period, then the excess shall be refunded to him as specified in subregulation (b). (b) (1) In order to receive any excess input tax that is refundable under this regulation or under any other statute, or any other
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amount that is refundable under section 105(c) of the Law (hereafter: the excess), then the dealer or his representative – if a representative was appointed for him under the Law – must inform the Director, at the time of registration under section 52 of the Law, of the particulars of the bank account to which the excess shall be credited.
(2) (a) If the notification said in paragraph (1) was not delivered, or if any change occurred in the particulars of the bank account, then the dealer or his representative, as the case may be, shall make notification thereof on a notification form on bank particulars prescribed by the Director.
(b) A notification of the bank particulars shall be presented to a branch of one of the banks enumerated in Schedule Three, and shall be certified by the bank, or shall be entered directly by the representative – within the meaning of that term in section 143A of the Law – into the automated processing service's computer of the Ministry of Finance,
(c) The excess shall be credited to the bank account stated in the notification on bank particulars within 30 days or from the day on which they were entered into the computer said in subregulation (b); if all the particulars were not included in the notification, or if they were in error, then the excess shall be credited to the bank account 30 days after the particulars were completed or corrected.
Input tax on vehicles must not be deducted
14. (a) The tax imposed on the sale of a private vehicle to a dealer, or on the importation of a said vehicle by a dealer shall not be deductible.
(b) The provisions of subregulation (a) shall not apply in the following instances:
(1) repealed
(2) the importation or acquisition was –
(a) by a dealer, the main part of whose business is the sale of vehicles, including the sale of used private vehicles, in respect of vehicles which are used and are intended to be used only for their sale in the course of business;
(b) by any other dealer, if the vehicle is used only for one of these:
– driving instruction in a driving school;
– vehicle rentals, on the part of a person whose business is the rental of vehicles;
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– for the transportation of passengers in the course of business by a person whose business is the transportation of passengers;
– for excursions and area tours by a person whose business is the organization of aforesaid excursions and tours.
Input tax in dwelling unit
15. A dealer shall not be entitled to deduct input tax on the acquisition of his own dwelling or its construction, in whole or in part, and also not input tax on services rendered to him for purposes of its acquisition or construction, if the dwelling also serves or is also intended to serve as his place of business.
Input tax on benefits
15A. (a) In this regulation –
"input", in respect of an employee – an asset or a service, such as a meal, housing, gifts or entertainment intended for the enjoyment, profit, welfare or benefit of an employee or of members of his family;
"employee" – includes a person who shares in the ownership of the business or is one of its Directors.
(b) Input tax, incurred by a dealer on inputs for his employee, is not deductible, unless it is proven to the Director's satisfaction that the input was sold to the employee or rendered to him as a service, and the sale or the service is included in the dealer's periodic return as a taxable transaction, the price of which was set in accordance with the provisions of section 10 of the Law.
Input tax on hospitality
16. Input tax on hospitality shall not be deductible, except for input tax on hospitality extended to a person from abroad.
Input tax on import by an agent for personal imports
16A. Input tax paid on the import of goods imported under an import entry in the name of an agent for personal imports shall not be deductible, if the goods are imported as personal imports for individuals; for the purposes of this regulation, "agent for personal imports" and "individual" – as defined in the Free Import Order 5738-1978.
For own use
17. When use by the dealer himself is a transaction liable to tax, then the dealer shall issue an invoice in his own name, at the time set in section 46 of the Law.
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Inputs for business and other purposes
18. (a) Without derogating from the provisions of this Chapter, input tax on the acquisition of assets or on the receipt of services that are to be used in transactions, in respect of which input tax is deductible (hereafter in this regulation: for business purposes), and also for use in transactions in respect of which input tax is not deductible or for other purposes (hereafter in this regulation: non-business purposes) shall be deductible in the proportion of the use for business purposes to all uses.
(b) When the use for non-business purposes is not delimited, the following rules shall be followed:
(1) if the Director set the proportion of use for non-business purposes, his decision shall be deemed an assessment and shall be complied with, as long as no different provision was prescribed;
(2) if the Director did not set the proportion, and most of the use of the asset or the service is for business purposes, then the dealer may deduct two thirds of the input tax;
(3) if the Director did not set the proportion, and most of the use of the asset or the service is for non-business purposes, then the dealer may deduct one fourth of the input tax. (c) Repealed
19. Repealed
CHAPTER SIX: RETURNS Return period for purposes of section 67
20. (a) In these regulations –
"Registration Regulations" – the Value Added Tax Regulations (Registration) 5736-1976;
"determining year" – a period of 12 consecutive months, which ended on August 31 of the preceding tax year.
(b) A dealer=s return period for the purposes of section 67 of the Law shall be one month, beginning with the first of the month.
(c) (1) Notwithstanding the provisions of subregulation (b), a dealer's return period shall be two months, if his business turnover in the determining year did not exceed NS 835,000 (according to KT 5768, p. 1380 – Tr.), the two month periods shall begin on the first of January, March, May, July, September and November.
(2) The amount said in paragraph (1) shall be adjusted on September 1 of each year in the manner said in regulation 25(b), and it shall be rounded to the nearest NS 5,000.
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(3) If a dealer was active only during part of the determining year or if his turnover for the determining year is not known because of some other reason, then his business turnover shall be calculated as said in regulation 14 of the Registration Regulations.
(4) If a dealer registered under the Registration Regulations on or after March 1, 1987, then his business turnover for the purposes of paragraph (1) shall be set according to the business turnover declared by him on the registration form and the return period shall be in effect until December 31, 1987.
(5) Notwithstanding the provisions of paragraph (1), the Director may allow a dealer – on conditions which he may prescribe – to submit periodic returns as said in subregulation (b). (d) If the Law is first applied to a dealer not on the first of a certain
month, then the first return period shall be the period from the day on which the Law is first applied to him until the end of that month or the end of the two months, all as the case may be.
(e) In the definition of "dealer's turnover" in section 1 of the Law, and in regulation 14 of the Registration Regulations, "preceding tax year" shall everywhere – for purposes of these regulations – be deemed to read "determining year".
21. Repealed
Return period of dealer in precious stones and of dealer resident in Eilat
21A. (a) The return period of a dealer whose transactions are exempt of tax under section 33 of the Law, or of a dealer resident in Eilat, as defined in the Eilat Free Trade Zone Law (Tax Exemptions and Reductions) 5745-1985, whose transactions are exempt under sections 5 or 6 of the said Law, shall be the tax year, but if he performed a transaction liable to tax, then he shall report it in a periodic return, as said in regulation 20.
(b) If the return period of a person is once a year, under subregulation (a), then he shall submit his return for the preceding tax year within 75 days after the end of the tax year.
Exempt from submitting returns
22. The following are exempt from submitting returns:
(1) a dealer, all of whose transactions are as said in section 31(1) or (2) of the Law;
(2) a petty dealer exempt of tax under section 31(3) of the Law. Submission of return
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the number of copies prescribed by the Director, and he may prescribe different forms for returns in which there is an input tax excess; the dealer shall fill out all required particulars on the return and shall sign it personally in the place therefor, and if he cannot sign in person then the return shall be signed by the dealer's representative, stating the representative's name and position and the fact that the dealer authorized him to sign the return in his name; if the dealer is a body of persons, then the name and position of the signatory shall be stated next to the signature.
(b) (1) The periodic return shall be submitted, together with the payment derived from it, if any, to a branch of one of the banks said in Schedule Three, during customary banking hours;
(2) submission of the return shall be acknowledged by the cashier's signature and the bank's stamp on the return and its copy, or on the stub of the return, as the case may be; the signature and stamp on the copy or on the stub shall be proof that the return has been received, and if
