Tax Ruling 8933/25 and Medical Tourism: An Article in Calcalist

In February 2025, the Israel Tax Authority published Tax Ruling 8933/25 regarding the VAT rate applicable to hospitalization services for tourists. In a March 2025 article in Calcalist, Adv. (CPA) Shlomi Vaknin and Adv. Eliya Elbaz argue that the ruling is inconsistent with the VAT Law, imposes impractical requirements on medical tourism companies, and could severely harm an industry that has been nearly paralyzed since the outbreak of the war.

Section 30(a)(8)(g) of the VAT Law provides for zero-rate VAT on the hospitalization of a tourist and on ancillary services. According to the ruling, the hospital or physician issues the invoice to the tourist personally rather than to the medical tourism company, and the company is not entitled to deduct input tax. The authors argue that this disregards the commercial reality: the company selects the medical service provider, enters into a contract with the provider and pays the provider, while the provider has no contractual relationship with the tourist.

Under the auxiliary tests set out in CA 41/96 Cassuto, the recipient of a service is the dominant beneficiary — the party for whose benefit and by virtue of whose engagement the service is provided. The authors also cite CA 8272/16 Y.M.S. Investments and VAT Case 53560-11-21 Neve Gad, in which their firm represented the developer and the court held that a developer who pays for the residents' representation is the service recipient. They contend that, following the ruling's logic, a physician working with an HMO would likewise have to issue an invoice to the patient — resulting in excess tax collection.

The ruling provides that the VAT on the commission retained by the tourism company shall be determined according to the ratio between zero-rate invoices and full-rate invoices it received. According to the authors, this has no basis in the law, which prescribes zero-rate VAT on tourist hospitalization regardless of how invoices are issued. They add that this requirement is impossible to implement, since under the same ruling the invoices are issued in the tourist's name and never reach the company's accounting records.

According to the article, most medical service providers refuse to issue zero-rate invoices to tourists because their contractual relationship is with the companies, and the ruling is already generating disputes within the industry. The authors describe companies on the verge of bankruptcy that face tax assessments, and call on the Israel Tax Authority to amend the ruling so that it aligns with case law on the identity of the service recipient and with the provisions of the law.