VAT Attorney

A VAT attorney represents businesses before the VAT authorities and in court proceedings: during audits, in objections to assessments, in appeals to the District Court, in delayed refund cases, and in pre-transaction analysis. At our firm, this practice area is led by Adv. & CPA Shlomi Vaknin, who served for nearly a decade as a national inspector in the Professional Division of VAT at the Israel Tax Authority headquarters.

The first deadline to remember: an objection to an assessment notice must be filed within 30 days (Section 82(a) of the VAT Law). Send us the assessment notice or the inspector's letter, and we will review the applicable deadlines and available options with you.

Usually when a letter arrives from the Tax Authority — but ideally before that. These are the situations in which clients turn to us:

• You received an assessment notice under Section 77 of the Law, in which the inspector determined the tax "to the best of his judgment" rather than based on the returns you filed.

• The inspector notified you in writing that he is examining a specific issue in your returns — for example, the deduction of input tax on employee welfare expenses. Such a notice precedes a partial assessment under Section 77(d). What to do at this stage is explained on the VAT Audit and Withholding Tax Audit Assistance.

• You received a decision that your books are inadmissible because the Authority claims you deducted tax from invoices issued unlawfully (Section 77b). Such a decision must be appealed within 60 days. The entire process is explained on the Fictitious Invoices Attorney.

• You applied for a VAT refund, but it has not arrived because the Director ordered an examination of your books.

• A supplier did not obtain an allocation number for an invoice exceeding NIS 5,000 before VAT. Without the number, you cannot deduct the tax on that invoice (Israel Invoices).

• You are about to enter into a transaction whose VAT classification is unclear — for example, a service to a foreign resident that you intend to report at zero rate. The conditions are explained on the Zero-Rate VAT on Services to Foreign Residents.

• Your industry is facing a new position taken by the Tax Authority, and there is merit in approaching the Authority collectively rather than each business on its own.

A summons to a cautioned interrogation at the VAT Investigation Unit is a criminal proceeding, governed by different rules. What to do before and during the interrogation is explained on the Representation in VAT Investigations page, and when a case can be resolved through a monetary settlement (kofer) is explained on the Kofer Proceedings and Administrative Penalties.

Most disputes with the VAT authorities are civil in nature and are governed by Chapter XII of the Value Added Tax Law, 5736-1975. The tax rate stands at 18% as of January 1, 2025, which means that even a classification dispute over a single transaction can involve a substantial amount.

Assessment and Objection

• The Director may assess the tax to the best of his judgment when, in his opinion, the return is incomplete, inaccurate, or unsupported by proper books of account (Section 77(a)). The assessment must be made within 5 years of the filing of the return, or within 10 years in cases of conviction or monetary settlement (kofer) involving false information (Section 77(b)).

• The assessment notice must set out the reasons for the assessment (Section 77(c)). An assessment lacking clear reasoning makes it harder for you to object effectively, which is why this is the first thing we examine.

• An objection must be filed in writing, with supporting reasons, within 30 days of service of the assessment notice. The Director may permit a later filing for special reasons (Section 82(a)).

• The person who issued the assessment may not decide the objection against it (Section 82(e)). If the Director does not decide the objection within one year of its filing, the objection is deemed to have been accepted (Section 82(d)).

Appeal to the District Court

A decision on an objection may be appealed to the District Court (Section 83(a)), and the appeal is heard by a single judge. Where the return is not supported by properly maintained books, the burden of proof rests on the appellant (Section 83(d)).

Input Tax Deduction

• Input tax must be deducted within 6 months of the date the invoice was issued (Section 38(a)). The Director may extend this period, up to a maximum of 5 years (Section 116(a)).

• From June 1, 2026, input tax may not be deducted from an invoice exceeding NIS 5,000 before VAT unless the invoice bears an allocation number.

A VAT case is built simultaneously from two perspectives — legal and accounting. Here is how we handle an assessment case:

1. You send us the assessment notice, the correspondence with the inspector, and the returns for the relevant period. We calculate the final deadline for filing an objection and verify whether the assessment was issued within the statutory time limit and whether it is properly reasoned.

2. We review the books the way an inspector would, distinguishing between a legal dispute — such as the classification of a transaction or the applicability of Regulation 15A to employee expenses — and a factual dispute that can be resolved through documentation.

3. We file a reasoned objection within the 30-day period and manage the discussions with the official deciding the objection. The law allows the dispute to be resolved by agreement, in which case the assessment is amended accordingly (Section 82(b)).

4. If the decision on the objection is unacceptable to you, we file an appeal with the District Court. Where justified, the case proceeds to the Supreme Court, as in the Amdocs case.

5. After the case is closed, we adjust the reporting method going forward. Before a similar transaction, it is possible to request a tax ruling, so that the same issue does not arise again in the next audit.

Three cases that resulted in a court judgment. In all of them, the dispute was civil: what may be deducted, and at what rate a transaction is taxed.

Amdocs in the Supreme Court: CA 2180/21 (January 30, 2023)

The Netanya VAT Director disallowed Amdocs from deducting input tax on rent, electricity, and water expenses for areas used as employee dining rooms, arguing that they constituted part of a "meal" under Regulation 15A of the VAT Regulations. The Central District Court accepted the company's appeal, and the Supreme Court dismissed the Director's appeal: the place where a meal is served is not part of the meal. Adv. Shlomi Vaknin represented Amdocs in both instances. The Amdocs judgment.

Hagshama: Appeal against an assessment of approx. NIS 9 million allowed, TA 21657-11-19 (July 10, 2022)

The company provided hostess services to foreign cosmetics companies selling in duty-free shops and reported them at zero rate. The Director argued that the service was also provided to Israeli residents and was therefore subject to full tax. The Tel Aviv District Court held that the proviso of Section 30(a)(5) of the Law applied, because the consideration for the service was included in the value of the imported goods. The appeal was allowed on an assessment involving approximately NIS 9 million in tax principal, and the VAT Director was required to issue amended assessments. Adv. Shlomi Vaknin represented the company. The article on the Hagshama case.

Mobileye: Employee Benefits, TA 10835-01-22 (May 27, 2025)

The question was which employee welfare expenses are deductible. The Jerusalem District Court allowed the deduction of tax on the construction of a gym, a music room, and a spa facility in the company's new building, as well as on accounting services, and dismissed the appeal regarding employee transportation and pension consulting. Adv. Shlomi Vaknin and Adv. Ariel Epstein represented Mobileye. The Mobileye judgment.

Additional judgments, including real estate and urban renewal cases, are compiled on the Case Law and Precedents page.

VAT cases at the firm are led by Adv. & CPA Shlomi Vaknin, the firm's founder, together with his team. He served for nearly a decade as a national inspector in the Professional Division of VAT at the Israel Tax Authority headquarters, and subsequently spent 18 years as a senior partner at a leading tax law firm, before establishing the firm in 2024. As counsel to industry associations, he conducted negotiations with the Authority that led to sector-wide arrangements. He serves as co-chair of the VAT Committee of the Israel Bar Association and is a member of the Indirect Taxes Committee of the Institute of Certified Public Accountants in Israel.

Advs. Shlomi Vaknin and Ariel Epstein represented Mobileye and Aura, in a case concerning VAT on public infrastructure obligations of a real estate developer.