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E-Invoicing compliance in Israel: requirements & deadlines

The Israel Tax Authority (ITA) has announced that electronic invoicing will become mandatory in Israel from 5 May 2024. All B2B VAT-registered invoices above 25,000 NIS (approximately €6,250) must be submitted to the Israeli government. The ITA has joined this trend to reduce the VAT-gap and to prevent the issuance of fake invoices.

E-invoicing legal requirements and deadlines for Israel

Since January 2024 VAT-registered businesses in Israel can voluntarily submit their taxable customer electronic invoices resulting from B2B transactions to the ITA. However, this voluntary phase will end soon. Starting from 5 May, the Israeli Ministry proposed a 5-phased introduction for the mandatory submission of electronic invoices to the ITA.

At the moment, the legal requirement regarding E-invoicing in Israel is only applicable to domestic B2B transactions. B2G, B2C transactions and foreign invoices will not be affected by this legal requirement. However, like in many other countries, it is most likely that the success of B2B E-invoicing will determine if legal requirements for B2G and/or B2C will be applied in the future. This can also be extended with a legal requirement for foreign invoices.

As mentioned before, the implementation of the legal requirement will happen in 5 phases, starting with a threshold of 25,000 NIS. This threshold will decrease by 5,000 shekels annually. Therefore, in 2028, the threshold will be 5,000 NIS. The updated version of the timeline based on the invoice amount can be found below:

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SAP DRC Solution

SAP Document Reporting and Compliance (DRC) is an integrated solution within SAP that collaborates with both SAP ECC and SAP S/4HANA, ensuring long-term compliance with various country-specific legal requirements all over the world.

As part of its DRC solution, SAP currently enables businesses to be 100% compliant with the outgoing part of the Israeli E-invoicing legal requirements. So currently with the SAP DRC solution, Israeli companies are able to create customer E-invoices and submit them via the eDocument cockpit. However, in the future SAP will also cover the incoming part of the Israeli E-invoicing legal requirements.

Within the SAP DRC solution, the following steps are taken for a successful compliance with the ITA regulations:

  1. Creation of a SD or FI invoice (source document) in the SAP ECC or SAP S/4HANA system.
  2. The source document will automatically trigger the creation of an electronic document in the SAP eDocument Cockpit.
  3. The electronic document in the SAP eDocument Cockpit will be transformed into the required XML format when displaying the XML or submitting to the ITA via SAP DRC Cloud Edition.
  4. Once received, the ITA will first verify and subsequently validate the E-invoice. The result of the validation can be either an approval or a rejection. The result of the validation will automatically reach the eDocument Cockpit via the SAP DRC Cloud Edition connection. In the eDocument Cockpit, it is possible to display the validation (positive or negative) and monitor other E invoicing related actions.
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When submitting the E-invoice to the ITA, you should consider some mandatory data: the issuance date, invoice ID, VAT numbers of the vendor and customer, and the payment amount without VAT. In the future SAP will provide a validation of ITA allocation number match for supplier invoices.

How PIKON can help you

ITA recommends that all taxpayers who must be compliant with the legal requirements regarding E-invoicing begin preparations as soon as possible. Businesses should consider whether they can comply with the technical requirements of the new system and should analyze their invoice volumes.

With our Competence Center for Legal Requirements, we are a strategic partner who ensures that your SAP system and business processes meet different country-specific legal requirements all over the world in the long run. We have a team of experts that combine SAP expertise and in-depth knowledge of the end-to-end legal process and technical requirements of the Israeli and many other E-Invoicing regulations. We have gathered this experience through our many SAP Document Compliance and local implementation projects all around the world. Some examples are SDI in Italy, SII in Spain, CFDI and Complemento de Pago in Mexico, RTIR and EKAER in Hungary, XRechnung in Germany, the different legal requirements in Turkey, etc. We have also developed our own compliance SAP Add-Ons e.g. MTD VAT in the UK and the VAT Whitelist in Poland. Furthermore, we always keep an eye on new and changing legal requirements and inform our customers when action is needed. This ensures that your company doesn’t need to follow up on all the legal requirements yourselves, and you can concentrate on your daily business.

Web meeting e-invoicing Israel

If you have any questions, or if you would like to discuss how PIKON can help you with your business case, do not hesitate to leave a comment below or to request a web-meeting. I am happy to help you!

Tanja Nikolaus
Tanja Nikolaus
Customer Success Manager

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About the author
Hanna Makuch
Hanna Makuch
I am active as a SAP ERP Consultant at PIKON Benelux in Genk, Belgium. Besides my focus on the Finance and Controlling modules I also play a part in various Legal Requirement projects.

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