VAT Deduction on Gym, Transportation, and Pension Advisory for Employees: The Mobileye Ruling

The Jerusalem District Court ruled on 27.5.2025 that Mobileye is entitled to deduct input VAT on the construction of a gym, music room, and spa facility in its office building, as well as on external auditor services. The deduction of VAT on employee transportation and personal pension advisory services for employees was denied under Regulation 15A of the Value Added Tax Regulations. Mobileye was represented by Adv. Shlomi Vaknin and Adv. Ariel Epstein.

• The Jerusalem District Court, Hon. Judge Avigdor Durot.

• Appeal against a decision on an objection to an input tax assessment dated 4.8.2020, for the period from June 2015 to May 2020.

• Outcome: The appeal was partially granted. Of approximately NIS 2.08 million remaining in dispute, a charge of approximately NIS 686,000 was reversed: the gym, music room, and spa (NIS 218,000) and auditor services (NIS 467,839). The charge for transportation (NIS 933,367) and pension advisory services (NIS 462,868) was upheld. Each party bears its own costs.

• Full judgment (PDF)

Mobileye develops driver-assistance systems for accident prevention and operates primarily from Har Hotzvim in Jerusalem. During an audit, the Jerusalem VAT Director determined that some of the company's inputs constitute "employee-related inputs" and are therefore non-deductible. Four components remained in dispute: organized employee transportation from the central region, a proportionate share of the land and construction costs of areas designated as a gym, music room, and spa in the new building, pension advisory services for employees, and auditor services.

Even before the judgment, the Director reversed the charge on the rental and maintenance of dining halls and reduced the charge on dining hall areas in the new building. This followed the Amdocs ruling by the Supreme Court (CA 2180/21).

Regulation 15A of the Value Added Tax Regulations, 5736-1976 provides that input tax on an "employee-related input" is non-deductible, unless the input was sold to the employee and reported as a taxable transaction. Such an input is defined as an asset or service "such as a meal, accommodation, gift, or entertainment" intended for the employee's welfare. The court examined, for each expense, who is the direct and dominant beneficiary: the employee or the company.

• Employee transportation: Denied. Regular public transportation is available to Har Hotzvim, even if it involves transfers and walking. The court held that the company did not prove it was the direct and dominant beneficiary of the transportation, and that the desire to recruit employees from the central region does not convert the benefit into a business necessity. In the court's words: "The primary and dominant beneficiaries of this benefit are the employees."

• Gym, music room, and spa: Allowed. These areas constituted approximately 0.5% of the building's total area. The court held that a charge should not be based on architectural plans but rather on actual use, and that under the Amdocs ruling, a proportionate share of the building's cost does not constitute an "employee-related input."

• Pension advisory services: Denied. The advisory services were provided to employees on a personal basis and not as part of the routine management of pension contributions; therefore, the primary beneficiary is the employee.

• Auditor services: Allowed. The Director argued that these were due diligence services for Intel's acquisition of shares in 2017, a transaction not subject to VAT. The court found that the external auditor prepared working papers for an external review and did not conduct an independent due diligence examination.

This judgment continues the line established in the Amdocs ruling. Building costs, including areas used by employees for leisure or dining, are deductible as long as they represent a proportionate share of the building's cost and are not an input exclusively for the employee. Expenses where the employee is the primary beneficiary — such as transportation when public transit is available, or personal advisory services — remain non-deductible.

In January 2026, the Jerusalem District Court cited this judgment in the Teva case (TA 50845-06-22), similarly denying the deduction of input tax on employee transportation.

1. Map your employee benefit expenses by type: building and space costs, dedicated equipment, and personal services.

2. For transportation, document whether public transit is available during actual working hours. According to the ruling, transportation during a night shift or from a locality without regular public transit may qualify as a business necessity.

3. For leisure areas, rely on actual use rather than architectural plans, and keep measurements of the areas on record.

4. Received an input tax assessment on such expenses? Check the deadline for filing an objection. For more information, see our pages on VAT Refunds and Input Tax and Representation in Tax Assessments and Objections.