Detailed VAT Report (PCN874): Required for Turnover Exceeding NIS 500,000

A dealer (osek) whose annual turnover exceeds NIS 500,000 must file a detailed VAT report: a detailed periodic report in PCN874 format, specifying every invoice. A dealer that is not an individual — for example, a company — has been subject to this requirement from the report for September 2025, filed in October 2025. A dealer who is an individual is subject to the requirement from the report for the period 1/2026, and an individual who meets the relief conditions may request a deferral to 1 January 2027.

The expansion was approved by the Knesset in March 2025. Previously, the obligation under Section 69A(7) of the Value Added Tax Law applied only to dealers whose turnover exceeded NIS 1.5 million or NIS 2.5 million, depending on the conditions set out in that section. A dealer whose turnover does not exceed NIS 500,000 continues to file a standard periodic report, unless subject to the obligation for another reason — for example, a requirement to maintain books under the double-entry method.

The detailed report is filed alongside the periodic report. It itemizes the output invoices and input invoices for the period, invoice by invoice: the other party's dealer number, date, amount, and VAT. This enables the Tax Authority to cross-reference what the supplier reported as a transaction with what the customer claimed as an input.

The cross-referencing is directly linked to the Israel Invoice model. An input exceeding the allocation number threshold (NIS 5,000 before VAT from 1 June 2026) that is reported without an allocation number is rejected as a file transmission error. Therefore, anyone transitioning to the detailed report must verify that their suppliers' invoices bear a valid allocation number. For further details, see the article on Israel Invoices and Allocation Numbers.

• A dealer that is not an individual — for example, a company — with turnover exceeding NIS 500,000 files a detailed report starting from the report for September 2025. The reliefs described in the following section do not apply to companies.

• An individual dealer with turnover exceeding NIS 500,000 files from the report for the period 1/2026. The Tax Authority deferred the original date of 1 September 2025 for individual dealers in a notice dated 28 August 2025.

• An individual dealer who meets the relief conditions and has requested a deferral files from 1 January 2027.

• A dealer whose turnover is up to NIS 500,000 files a standard periodic report, unless subject to another obligation.

An individual dealer who began filing a detailed report before 28 August 2025 is not entitled to the reliefs.

The Tax Authority established two reliefs for individual dealers in a notice dated 28 August 2025, at the request of the Tax Advisors' Chamber and the Institute of Certified Public Accountants.

Under the first relief, an individual is not required to itemize invoices where the amount of each invoice before VAT does not exceed NIS 5,000. The individual reports their aggregate total, and for such input invoices enters the fixed number 777777772 instead of the supplier's dealer number.

Under the second relief, an individual may request from the regional VAT office that the obligation apply only from 1 January 2027. The condition is assessed based on the reports for 2025: at least 90% of the total amount of input invoices, or at least 90% of their number, were in invoices of up to NIS 5,000 before VAT each. The request is submitted with a declaration and, if necessary, supporting documentation.

1. Check the annual turnover against the NIS 500,000 threshold, and also whether the business is required to maintain books under the double-entry method.

2. Ensure that the accounting software generates a PCN874 file and that the authorized representative transmits it together with the periodic report.

3. Organize the recording of supplier invoices: correct dealer number, date and amount, and an allocation number on every invoice exceeding NIS 5,000 before VAT.

4. Individual dealers: check whether the 90% condition is met and whether it is worthwhile to request a deferral.

5. Address discrepancies flagged by the cross-referencing — such as an invoice the supplier did not report — as they arise, rather than after the fact.

A discrepancy between your report and the supplier's report may lead to an inquiry from the Tax Authority and subsequently to a tax assessment. For information on the process following an assessment, see Representation in VAT Assessment and Objection Proceedings. The firm's VAT practice is headed by Adv. and CPA Shlomi Vaknin.