Objection to a VAT Assessment: Deadlines and Stages Through to Appeal

An objection to a VAT assessment must be filed in writing, with supporting reasons, to the VAT Director within 30 days from the date the assessment notice was served on you (Section 82(a) of the Value Added Tax Law, 5736-1975). The Director must decide on the objection within one year from the date it was filed. If no decision is made within that period, the objection is deemed accepted. The decision on the objection may be appealed to the District Court within 60 days. A prerequisite for both stages: payment of the undisputed tax.

The law distinguishes between three types of decisions, each with its own procedural track. This distinction determines whether an objection may be filed at all.

Tax determination, assessment, and disqualification of books

Did you fail to file a periodic return? The Director determines the tax based on the volume of transactions or on an estimate. This is a "tax determination" under Section 76, and it cannot be challenged by objection or appeal. It is automatically voided once the return is filed — except for a person who claims they are not liable for tax at all, in which case the determination is treated as an assessment.

Did you file a return that the Director considers incomplete, inaccurate, or unsupported by proper books? The Director may assess the tax "to the best of judgment" (Section 77(a)). The assessment must be made within five years from the filing of the return, and up to ten years where the taxpayer was convicted or the offense was compounded due to false information or intent to evade tax (Section 77(b)). The assessment notice must state the reasons (Section 77(c)) and is served by hand or by registered mail (Section 80).

A decision that the books are inadmissible — for example, because an invoice was issued unlawfully (Section 77B) — does not go through the objection process. It is appealed directly to the court "as if it were a decision on an objection," within 60 days from the date the notice was served (Section 77B(c)).

An assessment may also be amended after it has been made. The Director may amend it on his own initiative or at your request within five years from the date it was made, but not later than seven years from the filing of the return — except in cases of conviction or compounding due to intent to evade tax (Section 79). An amended assessment is treated as an assessment for the purposes of objection and appeal, and therefore it too may be objected to.

The objection: Section 82

• The objection is filed in writing with supporting reasons, within 30 days from service of the assessment notice, or at a later date permitted by the Director for special reasons.

• If an agreement is reached, the assessment is amended accordingly. If not, the Director decides: to uphold the assessment, increase it, or reduce it.

• The person who prepared the assessment does not decide on the objection to it.

• No decision issued within one year from the date of filing? The objection is deemed accepted.

The appeal: Section 83 and the Regulations

A person who considers themselves aggrieved by a decision on an objection may appeal to the District Court. Under Regulation 2(a) of the Value Added Tax and Purchase Tax (Appeal Procedure) Regulations, 5736-1976, the notice of appeal must be filed within 60 days from the date the decision was served. The appeal is heard by a single judge in closed proceedings. Where the return is not supported by properly maintained books, the burden of proof lies on the appellant, and the court may confirm the assessment, reduce it, increase it, or set it aside.

The process begins on the day the notice was served, not on the date printed on it. These are the stages:

1. Record the date of service. The 30-day period for filing an objection is counted from that date.

2. Check what you received: a tax determination (file the missing return), an assessment under Section 77 (file an objection), or a decision disqualifying your books (appeal within 60 days).

3. Pay the undisputed tax. Without such payment, you cannot file an objection or an appeal (Section 85).

4. File a reasoned objection: what is wrong with the assessment, why, and what documents prove it. Missed the deadline? Ask the Director to permit a late filing and explain the special reason for the delay.

5. The objection is reviewed by someone other than the person who prepared the assessment. If an agreement is reached, the assessment is amended accordingly. If not, the reviewer decides on the objection and provides reasons.

6. A decision has been issued? Within 60 days of its service, file an appeal with the District Court. The Director files a statement of response within 60 days (Regulation 2(b)), and at least seven days before the hearing, a confirmation of payment of the undisputed tax must be submitted (Regulation 4(b)).

The notice of appeal must be accompanied by the documents on which it relies, including a copy of the decision on the objection, the periodic return, the assessment, and its stated reasons (Regulation 3 of the Appeal Procedure Regulations). It is advisable to gather these documents already at the objection stage.

For example: if the assessment notice was served on you on 2.11.2026, the 30th day for filing the objection is 2.12.2026. If the decision on the objection is served on 1.3.2027, the 60th day for filing the appeal is 30.4.2027.

What is written in the objection and in the reasons for the decision affects the subsequent proceedings. A court ruling in which a VAT assessment was set aside after its basis was changed at the objection stage illustrates why it is worth reading the reasons for the decision on the objection before deciding whether to appeal. Our firm provides guidance through these stages as part of representation in VAT assessment objections.

These mistakes relate to deadlines and formal requirements. They can be avoided before you even get to the substantive arguments.

• Counting the 30 days from the date on the letter rather than from the date of service.

• Filing a general objection without reasons. Section 82(a) requires an objection "in writing with supporting reasons."

• Filing an objection without paying the undisputed tax, causing the objection to run afoul of Section 85.

• Assuming that an objection can only reduce the assessment. The Director may also increase it.

• Filing an objection against a decision disqualifying books instead of appealing directly within 60 days.

• Relying on a 30-day appeal deadline found in outdated sources. Under the current version of the Regulations, the deadline is 60 days — and it is best not to wait until the last moment.

VAT objections and appeals at the firm are handled by Adv. and CPA Shlomi Vaknin, who served for approximately a decade as a national supervisor in the Professional Division of the VAT department at the Israel Tax Authority.