Customs Drawback and Import Tax Refunds

A customs drawback is a refund of customs duties and purchase tax paid upon import, or a deferral of their payment, when the goods or products manufactured from them are exported from Israel. According to the Israel Tax Authority, drawback on manufacturing is granted to the exporter listed in the export declaration, against declarations of absolute export. For goods returned to the supplier unused, Section 156 of the Customs Ordinance requires that they be exported within 6 months of their release.

Send us your import and export declarations from the past year, and we will determine which track is right for you.

When import taxes were paid on goods that are ultimately exported from Israel, on their own or as part of a product:

• You import raw materials or components, manufacture products from them in Israel, and export the finished product.

• You purchase imported components or locally manufactured components in Israel and incorporate them into export products.

• A shipment arrived defective or non-conforming to the order, and you are returning it to the overseas supplier.

• You bring in equipment for repair, processing, or exhibition, and intend to re-export it.

• Your drawback claim was denied, or Customs issued an assessment notice following an audit of the drawback file.

• You want to switch from a post-payment refund to tax deferral at the time of import.

The Customs Ordinance establishes several refund tracks, each with its own conditions and required documents.

Goods returned without processing

Section 156 permits a full customs drawback on goods that are not in bulk and are exported within 6 months of their release, provided they were not used in Israel or the use only revealed the defect. Customs procedures from April 2026 add further details: the TFG (Foreign Trade Processing) officer at the customs house may extend the export period to up to one year, and the Senior Enforcement Division Manager at the Customs Administration may extend it to up to 3 years. The refund also includes purchase tax, but computer fees and security fees are not refunded.

Section 150(2) allows a refund or waiver of customs duties when, within 6 months of release, a defect or non-conformity with the terms of sale is discovered in the goods, provided the claim is filed immediately after discovery. According to the procedure, when goods are destroyed in Israel because they have been declared unfit for use, the destruction is carried out under the supervision of the authority that made that determination.

Drawback on raw materials for export products

Section 160 authorizes the Minister of Finance to prescribe by order a drawback on goods used for manufacturing in Israel. The orders under which the drawback operates are the Customs (Drawback on Goods Used for Manufacturing Products for Export) Order, 5729-1968, and the Customs (Drawback on Goods Used for Manufacturing Products Whose Import Is Exempt from Customs) Order, 5733-1972. The bookkeeping requirements are set out in the Customs (Drawback on Export) Regulations, 5727-1966.

The Israel Tax Authority administers the drawback through two tracks. Under the tax-percentage method, duties are paid upon import and refunded after export. Under the deferred-tax method, payment of tax on raw materials is deferred at the time of import. According to the Tax Authority, the refund is also subject to the trade agreements to which Israel is a signatory.

For drawback on raw materials used to manufacture export products, customs procedures require an annual claim to be filed by March 31 for the previous year's exports. A drawback may be claimed on components imported up to 5 years before the date the claim is filed, and on locally manufactured components up to 3 years before. Section 161 of the Customs Ordinance restricts payment of drawback claims without the Director's approval, and therefore filing deadlines should be verified before the export takes place.

Temporary admission without customs duties

Section 162(c) allows the Director to permit temporary admission without payment of customs duties for goods brought in for processing, repair, refurbishment, public display, or packing of export goods, which are subsequently exported from Israel. The Tax Authority offers a service for applying for conditional exemption import, to open a temporary or permanent import file.

Anyone who obtains a drawback to which they are not legally entitled commits an offense under Section 212(a)(2) of the Ordinance, and therefore documentation must link the import to the export.

The process begins with an eligibility assessment, followed only then by filing:

1. You send us the import and export declarations from the past 12 months, a list of raw materials, and a brief description of the manufacturing process.

2. Choose a track: Section 156 or Section 150(2) for a defective shipment, drawback under the orders for an exporting manufacturer, or temporary admission under Section 162 when the export is known in advance.

3. Open or update a drawback file at the Drawback Unit, at the Haifa Customs House or the Central Customs House depending on the region, and set up the books required by the Drawback Regulations.

4. File the claim through Shaar Olami (the Customs online portal), with the documents linking the import to the export. According to customs procedures, processing of the claim should be completed within one month of receipt of all documents. When a dispute concerns only part of the amount, the undisputed portion is refunded.

5. If the claim was denied, or an assessment notice was issued following an audit, appeal at the customs house within 30 days.

Drawback claims are handled by Adv. Udi Asa, who heads the Customs, Import and Export practice at the firm. In the Legal Department of the Customs and VAT Division at the Israel Tax Authority, from 2011 to 2022, he served as a legal referent for customs houses.