Summary
In the midst of a security and economic crisis, the Israel Tax Authority published a tax ruling (8933/25) that deals a devastating blow to Israel's medical tourism industry. The ruling requires medical service providers to issue invoices directly to the tourist, thereby preventing tourism companies – which are the actual paying and organizing parties – from deducting input VAT. This move contradicts established business practice, artificially inflates the cost of services, and may lead to the collapse of numerous companies in the industry.
The legal analysis in this article challenges the Authority's position and relies on the "service recipient" tests established in case law. The author emphasizes the legal precedent led by our firm in the "Neve Gad" case (represented by Adv. Shlomi Vaknin), where it was held that a developer who pays on behalf of a third party (residents) is entitled to deduct input VAT because it is the dominant beneficiary of the service. This rationale must equally apply to medical tourism companies, as they are the ones contracting with the hospitals and bearing the economic risk.
The article exposes the absurdity of the ruling, which creates a tax distortion, unlawful enrichment of state coffers, and an administratively impossible chaos to implement. The conclusion is clear: without amending the ruling and aligning it with court decisions (such as the legal achievements of our firm), a vital industry that generates foreign currency for the state faces a real threat of extinction.
