Globes on the Mobileye Ruling: Gym VAT Deductible, Shuttle Services Not

Globes reported on 27.5.2025 that the Jerusalem District Court ruled that the shuttle services Mobileye arranges for its employees constitute a personal benefit, and therefore the company is not entitled to deduct the VAT on them. On the other hand, the court held that VAT may be deducted on the construction of spaces for a gym, music room, and spa facility in the company's new building. According to the article, Mobileye was represented in the appeal by Adv. Shlomi Vaknin and Adv. Ariel Epstein.

Regulation 15A of the VAT Regulations addresses input tax related to employees, such as meals, housing, gifts, or entertainment, and allows the employer to report it as a taxable transaction and deduct the tax, or to forgo the deduction. In 2020, the Jerusalem VAT director issued assessments to the company that included, among other items, approximately NIS 933,000 for shuttle services, approximately NIS 463,000 for a pension arrangement, and approximately NIS 1.8 million for land and construction of spaces for employee welfare. In the objection proceedings, the director added approximately NIS 468,000 for invoices from the accounting firm Kesselman & Kesselman. Following the Supreme Court's Amdocs ruling, the director removed the charge for dining hall spaces, and the charge for land and construction was reduced to approximately NIS 218,000.

According to the article, Mobileye argued that approximately 58% of its employees live outside Jerusalem, and that the shuttle services from Ramat Gan, Givatayim, Kfar Saba, and Ashdod are a necessary recruitment tool rather than a benefit. The company further argued that the pension advisory services do not constitute an employee-related input, and that the accountants' invoices were issued in their capacity as statutory auditors. The VAT director argued that the employees are the primary beneficiaries of the shuttles and the leisure facilities, and that the invoices were related to a due diligence review prior to Intel's acquisition of the company, which is not a taxable transaction.

• Shuttle services: Appeal dismissed. Regular public transportation is available from all the locations from which the shuttles depart, and the judge wrote that the employees are "the direct and dominant beneficiaries of the shuttle services."

• Pension advisory: Appeal dismissed. The services constituted personal advice to employees rather than routine management of pension contributions.

• Gym, music, and spa facilities: Appeal granted. The judge rejected the authority's position that the company should have charged the employees for the cost of the land and construction.

• Accountants' invoices: Appeal granted and the deduction was allowed.