TA 15803-02-18 Applause Application Quality Ltd. v. Tax Authority – VAT Director Petah Tikva
TA 15803-02-18 Applause Application Quality Ltd. v. Tax Authority – VAT Director Petah Tikva (Nevo 07.09.2020):
The appellant, Applause Ltd., appealed the Director's decision to charge it full-rate VAT on services provided to a foreign company. The appellant argued that said services are included in the value of imported services by the Israeli customers of the foreign company, giving rise to their tax liability, and that in accordance with the rationale of Section 30(a)(5) of the VAT Law — whereby zero-rate VAT applies to services insofar as they are included in the value of goods imported from abroad — this rationale should equally apply to a service provided to a foreign resident that is included in imported services from abroad subject to tax.
The Court accepted the appellant's position and held that, in principle, zero-rate VAT should apply to the appellant's services insofar as the service is included in the value of services imported by Israeli residents — the end customers of the foreign resident. However, since the appellant failed to present evidence of tax payment upon the importation of services by the Israeli end customers of the foreign resident, the Court dismissed the appeal.
