Sector-Wide VAT Arrangements

A sector-wide VAT arrangement is a rule that prescribes for an entire industry how tax is calculated, when reports are filed, or how transactions are documented, rather than examining each business individually. Some arrangements are established by legislation. For example, a used-vehicle dealer who purchased a vehicle from a private individual pays VAT only on the difference between the sale price and the purchase price (Section 5 of the VAT Law and Regulation 2 of the VAT Regulations). Other arrangements are set through positions published by the Israel Tax Authority.

If you are an association or a business in an industry to which such a position applies, send us the position along with your current reporting method, and we will review what applies to you.

Usually when the Israel Tax Authority changes its position on an issue that recurs across many businesses. These are the situations in which clients turn to us:

• The Tax Authority published a position paper that reclassifies a common industry practice. This happened in August 2026, when it was determined that check discounting constitutes a sale transaction subject to VAT.

• A tax ruling issued to one business begins to affect an entire industry, such as Tax Ruling 8933/25 in the medical tourism sector.

• You are a used-vehicle dealer, and the VAT authorities claim that some of the vehicles were purchased from a registered dealer who was entitled to deduct input tax, and therefore the margin-based tax calculation does not apply to them (Regulation 2(b)).

• The tax assessor is examining several businesses in the same industry on the same issue, and the answer given to one of them will affect all the others.

• Businesses in the industry have operated for years according to an accepted practice, and now demands are being made to pay VAT under a different interpretation.

• A professional association is considering approaching the Tax Authority's management to establish a uniform rule for a recurring issue among its members.

The Value Added Tax Law, 5736-1975, and the VAT Regulations include several mechanisms that establish rules for an industry or a type of transaction. These are the main ones.

Tax Calculation on the Margin

• The Minister of Finance may prescribe categories of artworks and used assets for which the tax, when sold by a person whose business it is to sell them, is calculated on the difference between the sale price and the purchase price. A person who pays tax on the margin may not deduct input tax on those assets (Section 5(a) of the Law).

• Under this section, the margin-based calculation was established for used private cars, motorcycles, and ATVs sold by a dealer whose business is buying and selling used vehicles (Regulation 2(a)). The calculation does not apply to a vehicle purchased from a registered dealer who was entitled to deduct the input tax on it (Regulation 2(b)).

• Separate regulations establish a similar calculation for the sale of used furniture and for the sale of coins, medals, and gold bullion.

Who Pays and When

• In the sale of metals of types specified by customs tariff items, the buyer, if a registered dealer, is the one liable for the tax rather than the seller (Regulation 6G of the Regulations).

• In the sale of goods, the tax liability generally arises upon delivery to the buyer (Section 22(a) of the Law). For certain types of transactions, including the leasing of property and the extension of credit, the liability arises only upon receipt of the consideration and on the amount actually received (Regulation 7(a) of the Regulations).

Positions Published by the Tax Authority

• The Israel Tax Authority publishes position papers that set out how it classifies certain activities. A position paper is neither a statute nor a court ruling, but tax assessors act in accordance with it.

• A position published under Section 67D of the Law is published only after the Israel Bar Association, the Institute of Certified Public Accountants, and the Institute of Tax Consultants have been given a reasonable opportunity to submit their arguments. A taxpayer who adopts a contrary position, where the tax benefit exceeds NIS 2 million in a single year or NIS 5 million over a period of up to four years, must report this within 60 days of the end of the tax year.

Working with the Tax Authority on behalf of an industry begins with gathering facts from several businesses:

1. You provide the Tax Authority's position or letter, along with sample transactions and reports from several businesses in the industry. We identify what is common to all of them and what depends on the specific circumstances of each business.

2. We examine whether the issue has a basis in the Law, the Regulations, or case law, and whether the Authority has already adopted a position. Shlomi served for nearly a decade as a national assessor in the VAT Professional Division at the Tax Authority's headquarters and is familiar with how such positions are formulated within the Authority's management.

3. We draft a position paper on behalf of the association, including a proposed uniform rule: how the tax is calculated, what must be documented, and when reports are filed.

4. We conduct the discussions with the Tax Authority's management. When an agreement is reached, we assist the businesses in the industry with its implementation.

5. When no agreement is reached and a business receives an assessment following the position, we represent it in an objection to a VAT assessment and on appeal, building the arguments with the industry as a whole in mind.

This practice area is led by Adv. & CPA Shlomi Vaknin together with his firm's team. Before founding the firm in 2024, he led discussions on cross-industry VAT issues with the Israel Tax Authority as counsel for associations in the economy, resulting in the application of sector-wide arrangements to numerous entities across various industries. Prior to that, he served for nearly a decade as a national assessor in the VAT Professional Division at the Tax Authority's headquarters.

Today he serves as co-chair of the VAT Committee of the Israel Bar Association and as a member of the Indirect Taxes Committee of the Institute of Certified Public Accountants. These are two of the professional bodies that the Tax Authority must give a reasonable opportunity to submit arguments before publishing a position under Section 67D.