Israel VAT calculator

How to calculate VAT in Israel: the formulas

Since 1 January 2025 the standard VAT rate in Israel is 18%. Until 31 December 2024 it was 17%; to work with the old rate, choose Other rate in the calculator. Three formulas cover almost every case:

• Adding VAT: total including VAT = net amount × 1.18
• VAT inside a total: VAT = total × 18 ÷ 118
• Removing VAT: net amount = total ÷ 1.18

Example: adding VAT to a ₪2,500 quote

• VAT: 2,500 × 0.18 = ₪450
• Total including VAT: 2,500 × 1.18 = ₪2,950

Example: extracting VAT from a ₪1,000 payment

• Net amount: 1,000 ÷ 1.18 = ₪847.46
• VAT: 1,000 × 18 ÷ 118 = ₪152.54
• Check: 847.46 + 152.54 = ₪1,000

A common mistake is to take 18% off the total. ₪1,000 minus 18% is ₪820, but 820 × 1.18 = ₪967.60, not ₪1,000. VAT is charged on the net amount, so to reverse it you divide by 1.18.

Services to clients abroad: the 0% rate

If you are a freelancer or company registered for VAT in Israel and you invoice a client outside Israel, you usually do not charge 18%. Section 30 of the Value Added Tax Law, 1975 sets a zero rate for several kinds of transactions, including the export of goods and many services supplied to a foreign resident. A zero-rated invoice still goes through your VAT reporting; it simply shows VAT at 0%.

The zero rate for services is not automatic. The law and its regulations exclude some services, for example services connected to an asset in Israel, and the client's status and where the service is used both matter. The rules are detailed and have exceptions, so treat this as a starting point: confirm your case with your accountant or with the Israel Tax Authority before you issue a 0% invoice. In the calculator, 0% gives you the same figures as a zero-rated invoice.

The reverse applies when you work for Israeli clients: a VAT-registered business invoicing an Israeli client charges 18%, whether the client is a company or a private person.

Osek patur and osek murshe: who charges VAT

Israel has two main VAT statuses for self-employed people and small businesses. An osek murshe (licensed dealer) adds VAT to its prices, issues tax invoices and deducts the VAT it paid on business expenses. An osek patur (exempt dealer) does not charge VAT at all: under section 31 of the VAT Law its sales are exempt, and under section 47 only a licensed dealer may issue a tax invoice.

You can be an osek patur only while your annual turnover stays under a ceiling set in the law and updated every 1 January in line with the consumer price index, and some professions must register as osek murshe whatever their turnover. Two exceptions apply even to an exempt dealer: selling real estate, and selling equipment on which input VAT was deducted, are subject to VAT. Many olim and freelancers start as osek patur; if you do, the calculator is still useful for working out what a supplier's net quote will cost you once VAT is added.

VAT in Eilat: what is exempt

Eilat is a free trade zone. Under the Eilat Free Trade Zone (Tax Exemptions and Reductions) Law, 1985, some transactions there are VAT-exempt, and the exemption depends on who sells, not only on where:

• A sale of goods located in Eilat, by a business resident in Eilat, for consumption or use in Eilat, is exempt (section 5(c)).
• A service that an Eilat-resident business provides in Eilat is exempt (section 5(e)).
• A business that is not resident in Eilat and sells goods to an Eilat-resident business for its business in Eilat charges VAT at 0% (section 5(b)).

The exemption does not cover the goods listed in the law's second schedule, including private cars, motorcycles, cigarettes and tobacco products, and jewellery or watches worth more than $200. A business that is not resident in Eilat charges normal VAT on work done in Eilat, apart from the zero-rate cases set in the law. Choose 0% only when the transaction itself is exempt, and if in doubt, ask your accountant.

Rounding and invoices

VAT is calculated to the agora, two decimal places. The calculator rounds half an agora and above up. With several lines you can calculate VAT per line and add it up, or calculate it once on the total, and the two results can differ by an agora. The calculator's total is calculated on the sum of the lines and shows a note when the two differ. When removing VAT, it first rounds the net amount and then subtracts it from the total, so the two parts always add up to exactly what was paid.

One more invoicing rule: from June 2026, a business client can deduct the VAT on a tax invoice whose net amount exceeds ₪5,000 only if the invoice carries an allocation number from the Israel Tax Authority (section 38(a1) of the VAT Law). Invoicing software connected to your CRM can request the number without manual typing.

Sources

• Israel Tax Authority: current VAT rate, dealer registration and zero-rate guidance
• Value Added Tax Law, 1975: sections 30, 31, 38 and 47
• Eilat Free Trade Zone (Tax Exemptions and Reductions) Law, 1985: section 5 and the second schedule