VAT Deduction on Employee Dining Rooms: The Amdocs Ruling at the Supreme Court

The Supreme Court on January 30, 2023, dismissed the appeal of the Director of VAT Netanya and held, as did the District Court, that rent, electricity, and water costs for areas used as employee dining rooms and kitchens are not part of a "meal" under Regulation 15A, and therefore the input tax on them may be deducted. Only inputs that are clearly and exclusively related to the meal itself are non-deductible. Adv. Shlomi Vaknin represented Amdocs in both instances.

• The Supreme Court, Justices D. Barak-Erez, A. Stein, and H. Kabub.

• Prior instance: TA 22467-09-17, District Court of the Central District in Lod, judgment dated December 17, 2020.

• Assessment in dispute: approx. NIS 5 million (principal).

• The judgment on the Israel Tax Authority website

Amdocs leased office buildings and allocated areas within them for dining rooms, kitchens, and storage and refrigeration rooms. The company deducted the input tax on the entire rent. The Director of VAT Netanya issued an input tax assessment of approximately NIS 5 million on the proportionate share of rent and maintenance attributable to those areas. He argued that the areas are part of a "meal" provided by the employer to its employees, and therefore constitute a non-deductible employee benefit. The objection was denied, and Amdocs appealed to the District Court.

The District Court divided the inputs into two categories. Inputs exclusively related to the meal — such as raw materials, kitchen equipment, cooking labor, tables, chairs, tableware, and cleaning — are part of the "meal," and Regulation 15A applies to them. Inputs paid for the premises where the meal is served — namely the proportionate share of rent, electricity, water, and management fees — are not an "input on account of an employee" and are deductible.

The Court explained that every workplace has areas not used for work itself, such as seating corners and kitchenettes, and the drafter of the regulations did not intend for a portion of the rent to be attributed to an employee benefit on their account. The Supreme Court adopted the judgment in a brief ruling and dismissed the State's appeal.

Under this ruling, the cost of the premises is deductible while the cost of the meal is not. An employer that maintains a dining room or kitchenette may deduct the input tax on their proportionate share of the building's rent and maintenance expenses. There is no deduction for food, catering, equipment, and dining room furniture, unless the meal was sold to the employee and reported as a taxable transaction.

In 2025, the Jerusalem District Court applied the same principle to the construction costs of a gym, music room, and spa, in the Mobileye ruling, a case in which Advs. Shlomi Vaknin and Ariel Epstein served as counsel.

In the Amdocs case, the District Court also held that the VAT Director may not impose an output tax liability within a decision on an objection to an input tax assessment. This holding was relied upon in 2024 in the Ram Pal ruling, which struck down the reverse maneuver: a new input tax assessment within a decision on an objection to an output tax assessment.

1. Check whether any input tax assessment you received denied a deduction for rent or maintenance of dining or break areas. Under the Amdocs ruling, that portion is deductible.

2. Separate in your books the building expenses from the meal-related expenses (food, catering, and equipment), so that the proportionate calculation is clear.

3. If an assessment has already been issued, file an objection on time. For more information, see our pages on VAT Refunds and Input Tax and Representation in Assessment and Objection Proceedings.