Allocation Number for Tax Invoices: The Current Rule
From 1.6.2026, an authorized dealer (osek mursheh) who receives a tax invoice exceeding NIS 5,000 before VAT may deduct the input tax shown on it only if it bears an allocation number issued by the Israel Tax Authority. This is the "Israel Invoices" model, established under the Economic Efficiency Law (Legislative Amendments to Achieve Budget Targets for Fiscal Years 2023 and 2024), 5783-2023. The threshold is set in section 38(a1) of the Value Added Tax Law, and the obligation to request an allocation number appears in section 47(a2).
The allocation number is a 9-digit number that the supplier receives online from the Israel Tax Authority when issuing the invoice. The VAT rate has been 18% since 1.1.2025, so a NIS 10,000 invoice (before VAT) without an allocation number represents NIS 1,800 in input tax that the buyer cannot deduct. Because the buyer bears the loss, the verification burden effectively falls on the buyer.
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Threshold Scale: From NIS 25,000 Down to NIS 5,000
The threshold was reduced in four stages. At each stage the amount is measured before VAT, and the obligation applies to any invoice whose amount exceeds the threshold:
From 5.5.2024: above NIS 25,000. The model was originally due to take effect on 1.1.2024, but the Israel Tax Authority postponed enforcement twice because of the war.
In 2025: above NIS 20,000.
From 1.1.2026: above NIS 10,000.
From 1.6.2026: above NIS 5,000.
Under the original 2023 plan, the threshold was not due to reach NIS 5,000 until 1.1.2028. In March 2025 the Knesset Finance Committee approved an accelerated reduction, and accordingly the current threshold, per Israel Tax Authority publications, is NIS 5,000.
From 1.7.2026 the obligation also applies to transactions between dealers registered in the same VAT group (ihud oskim) under section 56 of the Law. This was clarified by the Israel Tax Authority in a notice dated 27.5.2026.
Who Requests an Allocation Number and for Which Invoices
The allocation number is requested by the dealer who issues the invoice. Accounting software connected to the Tax Authority's service requests it automatically; those who work with a manual invoice book or unconnected software use the online application "Request for a Tax Invoice Allocation Number." According to VAT Implementation Directive 01/2025, the request is required when all four of the following conditions are met:
The invoice amount before VAT exceeds the threshold in effect on the date of issuance.
The invoice includes a VAT component.
The customer is registered as an authorized dealer (osek mursheh).
The customer requested an allocation number.
An invoice that includes only exempt transactions or zero-rated transactions does not receive an allocation number. A sale to a private individual does not require a number, because the buyer does not deduct input tax. A dealer may request an allocation number even for an invoice below the threshold.
What Happens to the Buyer When There Is No Allocation Number
The buyer cannot deduct the input tax on that invoice, and the VAT paid to the supplier becomes a cost.
The problem is usually discovered when filing the detailed VAT report. The system cross-references the inputs against supplier reports, and an input above the threshold reported without an allocation number is rejected as an error. When the error results from a supplier mistake—for example, an incorrect dealer number for the customer—the supplier requests a new allocation number for the same invoice with the correct details.
In an assessment where input tax was disallowed due to an invoice lacking an allocation number, it is advisable first to verify the facts: what was the threshold on the invoice date, whether the customer requested a number, and whether the supplier applied for one. For guidance on disallowed inputs, see Input Tax Deduction and VAT Refunds.
When the Tax Authority Refuses: Hearing, Objection, and Reverse Charge
Since 2025, the Israel Tax Authority may refuse an allocation-number request where it has reasonable grounds to suspect that the invoice will be issued unlawfully. The supplier receives an online notice stating the grounds for refusal and a hearing date, together with four options:
Cancel the request.
Proceed with the transaction without an allocation number. The buyer will not be able to deduct the tax.
Transfer the tax liability to the buyer ("reverse charge"), provided the buyer is registered as an authorized dealer.
Submit an online inquiry to the Tax Authority's control room for review of the invoice.
Under the reverse-charge mechanism, the supplier receives a special allocation number and issues an invoice at zero-rate VAT. The buyer issues a self-invoice bearing the same allocation number, reports and pays the output VAT, and deducts the input tax to the extent permitted by law. This way the buyer preserves the right to deduct even when the supplier's request was denied.
The hearing is scheduled within two business days of the notice. If the director decides not to allocate a number, the decision must be delivered within one business day after the hearing concludes; if it is not delivered, the request is deemed approved. The decision may be challenged by filing an online objection. Where the refusal is based on suspicion of fictitious invoices, it is advisable to seek counsel before the hearing; see also Representation in VAT Investigations. For the civil and criminal proceedings in cases of suspected fictitious invoices, see Fictitious Invoices Attorney.
What to Verify with Your Suppliers
Register for the Tax Authority's digital services even if the business only receives invoices. The Tax Authority recommends this so that the buyer can verify that the allocation number is genuine.
Verify supplier invoices using the "Verify Supplier Invoice Details Based on Allocation Number" service: enter the number and confirm that the invoice details match what the supplier reported.
Establish a procedure under which any invoice exceeding NIS 5,000 before VAT that lacks an allocation number is returned to the supplier before the VAT component is paid.
Add a clause to supplier contracts making payment of the VAT contingent on receipt of a lawfully issued tax invoice bearing an allocation number.
Ensure that the accounting software is up to date and requests the allocation number automatically.
For groups registered as a VAT group (ihud oskim): verify intercompany invoices from 1.7.2026 onward.
The firm's VAT practice is headed by Adv. and CPA Shlomi Vaknin, who served for nearly a decade as a national supervisor in the professional division of the VAT department at the Israel Tax Authority.
