Can a foreign company reclaim Israeli VAT on business expenses?

A VAT-registered foreign company making taxable supplies in Israel can offset input VAT on Israeli business expenses against its output VAT liability in the standard way, filing bimonthly returns with the Israel Tax Authority (ITA). A refund arises when input VAT exceeds output VAT in any period.

A non-resident company that is not registered and makes no taxable supplies in Israel generally cannot recover Israeli VAT on purchases. There is no separate refund scheme for unregistered foreign businesses comparable to the EU's 13th Directive; recovery must go through registration and regular return filing. For more detail, see VAT in Israel for Foreign Businesses and Non-Residents: A Complete Guide.