Is a Luxury Work Vehicle a "Private Vehicle" for VAT Purposes: A Calcalist Article

A dealer (osek) may not deduct VAT on the purchase or import of a "private vehicle" under Regulation 14 of the VAT Regulations. In October 2024, the Israel Tax Authority published Position Paper 01/2024, according to which the electric Hummer is similar to the vehicles listed in the Schedule to the Regulations and is therefore classified as a private vehicle. In a Calcalist article from February 2026, Adv. (CPA) Shlomi Vaknin and Adv. Ehud (Udi) Asa argue that the classification is not grounded in the language of the Regulations or in professional criteria.

According to the article, the Regulation establishes an irrebuttable presumption that a private vehicle is not used for business purposes, except for a narrow list of dealers specified in Regulation 14(b). The courts have interpreted it strictly and dismissed appeals by dealers who used the vehicle exclusively for business purposes. The authors refer, among other sources, to Tax Appeal 2296/95 Shidurei Keshet. They argue that the same strict interpretation should apply to the Tax Authority as well.

The definition has two parts. The first refers to vehicle categories under the Traffic Regulations, up to 3,500 kg, but the Ministry of Transport switched to the European classification system back in 2005 and the definition was never amended. The second is a Schedule added in 1997 and last updated in 2003, under which a vehicle included in it or one that is "similar in essence or identical to it" is classified as a private vehicle even if it exceeds 3,500 kg.

The Position Paper justified the classification based on the level of amenities and comfort and on the vehicle's marketing for leisure use. According to the authors, it does not rely on customs classification, engineering criteria, or the type of driver's license required, and it appears that the price and exterior appearance were the decisive factors. They add that the paper prejudices those who purchased such a vehicle before its publication, and that since then, internal guidelines have also been issued extending the definition to additional heavy vehicles. Dealers only discover this during audits, when an assessment is issued against them.

The authors propose updating the Regulations and the vehicle list in the Schedule so that they reflect the current vehicle market and classification system, rather than establishing a classification through a position paper. According to the article, their firm is acting on behalf of vehicle owners to have the issue adjudicated by the courts.