VAT in Israel: A Guide for Foreigners and Non-Residents

1. The VAT Rate in 2026

The rate is set by ministerial order under Section 2 of the Value Added Tax Law, 5736-1975. It rose from 17% to 18% on January 1, 2025, and the 2026 budget left it there. Israel has one standard rate. There is no reduced rate for books, restaurants or hotels as in many European countries. Instead, some transactions are zero-rated and others are exempt.

To find the VAT inside a price that already includes it, divide by 1.18 and multiply by 0.18. A NIS 1,180 purchase contains NIS 180 of VAT.

2. Who Pays Israeli VAT

The end consumer bears the cost. A registered business (osek murshe) adds VAT to its sales, deducts the VAT it paid on business purchases, and remits the difference. Dealers with turnover up to NIS 1,775,000 (figure from September 2025) report every two months, and larger dealers generally report monthly.

Shoppers rarely see this calculation. Under Section 17B of the Consumer Protection Law, goods offered to consumers must display the total price in shekels. Between businesses, quotes are often given "plus VAT", so check which one you are reading, especially for lawyers, contractors and agents.

Being a foreigner does not by itself remove VAT. A visitor buying a coffee in Tel Aviv pays the same 18% as a resident. The reliefs below depend on your visa status, where you live, and what you are buying.

3. Tourist VAT Refund on Goods

Section 43B of the VAT Law gives a tourist the right to a refund on leaving Israel, for goods bought at an approved business. The tourist must leave with the goods and hold a valid tax invoice and the required refund document.

Who qualifies. The law defines a tourist as an individual in Israel on a transit or visitor visa, excluding visitors who are in Israel for temporary paid work. In practice that means B2, B3 or B4 entry status, shown by your passport stamp, Form 17 entry slip, or tourist declaration. Israel Airports Authority guidance limits the refund to non-Israeli citizens. The Israel Incoming Tour Operators Association says B1 work-visa holders and dual citizens are out, with one exception: a minor born abroad to Israeli parents, until age 18.

How to claim:

1. Buy from an approved store, usually marked with a sticker on the door or window.
2. At the till, show your passport and ask for both the tax invoice and the dedicated refund document. Check that your details and the goods are correct on both.
3. Keep the goods unused. They must be for personal use, in non-commercial quantities, and must leave Israel with you.
4. Before departure, go to the refund desk run by Milgam with your passport, goods, invoice and refund document. At Ben Gurion, goods going into checked baggage must be shown and the form stamped before check-in. The refund desk is in the Duty Free Hall.
5. Do it on the way out. Refund requests made after you have left are not approved. Desks also operate at several ports and land crossings, including Allenby and Taba.

Minimum purchase. The most recent published table we could find, calculated at the 18% rate, starts at NIS 400 including VAT, and that is the safe figure to plan around. Lower figures appear elsewhere: NIS 125 in Tax Authority material from 2019 and 2023, and NIS 186 in a government service listing we could not open to confirm. If a purchase falls under NIS 400, ask the store or Milgam (03-728-0123) before relying on a refund.

Excluded: tobacco, and food and drink, other than alcohol from wineries and shops approved for tourist sales. Services are outside this refund too (see the next section for hotels). Jewelry and valuables above NIS 20,000 must stay sealed in the store's bag until the refund clerk sees them.

You will not get all the VAT back. The operator keeps a percentage of the VAT being refunded, according to the association's published table:

Cash payouts cost a further 1.99% of the refund, and a bank transfer costs a flat NIS 30.99 per traveler. Worked example: on a NIS 1,180 purchase the VAT is NIS 180, the 10.5% fee is NIS 18.90, and a cash payout takes about NIS 3 more. You leave with roughly NIS 158.

4. Hotels, Car Rental and Tours at 0%

For the services below, a tourist does not claim anything back, because no VAT should be charged at all. Section 30(a)(8) of the VAT Law zero-rates:

• A tourist's hotel stay, plus listed extras billed by that hotel, such as food and drink, pool, laundry and sports facilities
• Self-drive rental of a private car
• Touring transport by private vehicle or bus
• Travel agency services given to a tourist
• Domestic flights within Israel
• Inpatient hospital stays

Under the VAT Regulations (Regulations 12 and 12B), the supplier must record your name, permanent address and passport number, and the hotel must itemize each extra on the invoice with its price. That is why reception asks for your passport and entry slip. An Israeli passport holder or a resident pays the 18% (outside Eilat).

A meal at an ordinary restaurant or a ticket to a museum is not on this list, so it carries normal VAT, and you cannot reclaim it at the airport.

5. Israeli Services for People Living Abroad

Section 30(a)(5) zero-rates services given to a foreign resident. This covers individuals as well as companies. An individual counts if he or she permanently lives outside Israel, and for this purpose the client must be outside Israel with no business or activity in Israel. Three limits catch people out:

• Israeli property. Regulation 12A(a) removes the zero rate for a service relating to an asset located in Israel, subject to narrow exceptions for items such as goods being exported. Expect 18% on a lawyer, broker or surveyor working on your Israeli apartment.
• A second recipient in Israel. There is no zero rate where the agreement is really to serve an Israeli resident or an Israeli company as well. A foreign parent paying for work that its Israeli subsidiary receives is the classic risk.
• Services used during a visit. Regulation 12A(c) removes the zero rate where the agreement is to serve another foreign resident during a stay in Israel, unless the service is on the tourist list above.

Hypothetical example. Anna lives in Berlin and buys an apartment in Haifa. Her Israeli lawyer quotes NIS 20,000 plus VAT for the purchase. Because the work concerns Israeli real estate, she should expect to pay NIS 23,600. In the same month an Israeli designer builds a website for her German business, working remotely with no Israeli recipient. That invoice can usually go out at 0%, as long as the designer keeps the contract and payment records that the regulations require.

6. The Osek Patur Threshold

An osek patur is a small dealer who charges no VAT. The test is annual turnover, not profit. The ceiling is NIS 122,833 for 2026, up from NIS 120,000 in 2024 and 2025. Older guides still quote the old figure.

• Invoices: an osek patur may not issue a tax invoice and does not collect VAT. It also cannot deduct VAT on its expenses.
• Reporting: one VAT turnover report a year, normally by January 31. Income tax and National Insurance still apply, since the exemption covers VAT only.
• Excluded professions: lawyers, accountants, doctors, real estate brokers and some others must register as osek murshe, even with low turnover.
• Going over the ceiling: contact the regional VAT office to change your classification. From then on you charge 18% and file periodic returns.

The foreign-national angle. The definition turns on turnover, not citizenship, but a VAT file gives you no right to work. A tourist visa generally does not allow it, so settle your status first. Under Section 60 of the VAT Law, a foreign resident who owes tax and has business or activity in Israel must appoint an Israel-resident representative within 30 days, and that representative is treated as liable for the tax. New immigrants and other residents should read our guide to self-employed tax in Israel for the income tax side.

Even a person who is not in business can owe VAT once. An occasional sale of a commercial nature counts as a "random transaction" (iskat akrai), and the seller is treated as a dealer for that sale.

7. Eilat: The VAT-Free City

The Eilat Free Trade Zone Law, 1985 gives these reliefs in Section 5:

• Goods located in Eilat and sold by an Eilat-resident dealer, for use or consumption there, are exempt.
• Services provided in Eilat by an Eilat resident are exempt. That covers Israelis and foreign visitors alike, including hotels run by Eilat dealers.
• Real estate located in Eilat is exempt on sale.
• Goods imported for use in Eilat are exempt from import VAT.

The Second Schedule lists goods that do not get the relief, including cigarettes and tobacco, jewelry and watches above US$200, most private cars and motorcycles, television screens, and stamps. An individual counts as an Eilat resident only after living there permanently for at least three consecutive months.

For tourists, the result is simple. Most Eilat prices already exclude VAT, so there is nothing to reclaim at departure. The exception is jewelry above US$200, which falls under the normal tourist refund if the store is approved. Goods that were relieved because they would be used in Eilat can lose that relief if they are used in breach of its conditions.

8. VAT on Property in Israel

• New apartment from a developer: 18% applies. Quotes to private buyers are normally VAT-inclusive, but confirm that in writing. Many contracts pass any future rate rise to the buyer. See our guide to buying from a developer.
• Resale between private individuals: no VAT, since the seller is not in business and the buyer is not a dealer. Other taxes, such as purchase tax, still apply.
• Private seller to a VAT-registered business: this can be a "random transaction" on which VAT is due, even for someone who has never been in business. Sale to a nonprofit or financial institution is similar, though a residential apartment sold to one of those is carved out. Under Section 43A the seller may deduct VAT paid on the purchase and improvements if holding a tax invoice.
• Commercial property: a sale by a business, or a lease by a registered landlord, carries 18%. A registered buyer or tenant using it for taxable activity can generally deduct that VAT.
• Residential rental: Section 31(1) exempts rental for housing for up to 25 years. The landlord charges no VAT and cannot reclaim VAT on renovations or agent fees. See our rental income tax guide.
• Short stays: the exemption excludes rental for hotel-style lodging. Owners of serviced or Airbnb-style units should read our short-term rental guide and take advice on how their operation is classified.
• Property in Eilat: exempt on sale, as set out above.

Hypothetical example. David, a Canadian resident, signs for a new Tel Aviv apartment at NIS 3,000,000 "including VAT". About NIS 457,600 of that price is VAT, and he cannot reclaim it, since he is not a dealer using the apartment for taxable business. He is a foreign resident, but no zero rate applies to buying Israeli real estate. Tourist relief covers neither the apartment nor his closing fees.

9. Imports and Online Orders

VAT applies to imported goods at 18%, generally collected on clearance. For parcels ordered from abroad, personal imports are VAT-free only up to a limit. The Finance Minister raised that limit by order twice in 2025 and 2026, but the Knesset cancelled the US$150 order in February 2026 and later cancelled a US$130 replacement, which brought the limit back to US$75. Because this has moved so often, check the current figure with the Tax Authority before you order. Customs duty is a separate question.

Registered businesses can generally deduct import VAT as input tax on their periodic return, if they hold the proper import documents.

10. Foreign Companies: Where to Go Next

This guide covers individuals. If your company sells goods or services into Israel, read our separate guide to VAT for foreign businesses, which deals with registration, the local representative, and filing. Our guide to VAT registration walks through the application itself. Get written advice before assuming that an Israeli customer will account for the VAT, or that invoicing a foreign parent makes the sale VAT-free.