Purchase Tax and Excise

While everyone talks about VAT and customs duties, the real threat to the profitability of importers and local manufacturers often lies inpurchase tax andexcise duty. These are indirect taxes imposed at particularly high rates on specific products: vehicles and spare parts, fuels, alcohol, tobacco, electronics (such as batteries and phones), and more. The calculation of these taxes is complex and frequently based on the "TMA method" (percentage markup addition) – a theoretical estimate of wholesale profit that is often disconnected from reality. An error in calculating the TMA, or an incorrect classification of alcohol concentration or fuel type, can lead to astronomical tax charges and erode your entire business margin.

The Purchase Tax Law and the Fuel Excise Law grant the Tax Authority broad collection powers, but also provide avenues for reducing the tax burden:

1. Challenging the TMA: It is possible to demonstrate that actual profit is lower than the statutory TMA and demand to pay tax based on the true "wholesale price."

2. Conditional Exemption (Tamsir): Products used as raw materials for industry may be exempt from purchase tax, provided they meet the regulatory supervision requirements.

3. Excise Refund (Heshbon): Tax refund on fuel (diesel) used for industrial production, agriculture, or public transportation. Proper management of reporting is the key to receiving the refund.

Our firm specializes in representing vehicle importers, energy companies, and beverage importers in complex cases before the Tax Authority and the Fuel Administration. We know how to challenge customs determinations regarding product valuations (for tax calculation purposes) and how to obtain classifications that reduce tax rates (for example: classifying a vehicle as "work equipment" rather than a "private vehicle"). Additionally, we defend clients in criminal proceedings involving excise and purchase tax offenses, and assist in settling past liabilities.