Success Stories: How Israeli Companies Are Benefiting from E-Invoicing Implementation

The Israeli government is adopting the CTC (Continuous Transaction Control) model in their invoicing system to enhance tax and business operations. This model will allow tax authorities to approve e-invoices in real-time, allowing quicker transactions and payments.

The Israel Tax Authority (ITA) released specifications, including the implementation timeline. The new CTC mandate will roll out in various phases, starting May 2024 to January 2028.

Each phase will target a wide range of businesses based on the value of an invoice before VAT.

A voluntary phase began on 1 January 2024, and the first mandatory phase will commence on 5 May 2024. The first phase will target businesses transmitting invoices over NIS 25,000 (approximately $6,211).

The government will roll out the final phase for invoices exceeding NIS 5,000 (about EUR 1,220) before VAT in January 2028.

This post will discuss how businesses in Israel will benefit from the new e-invoicing mandate. We'll also discuss how e-invoicing works in the country, its characteristics, and its implementation timeline.

How e-invoicing works in Israel

The e-invoicing process in Israel is pretty straightforward. The government offers two distinct transmission methods. Companies in Israel can send invoices manually through the ITA’s web portal or an API (Application Programming Interface).

Introducing a CTC model will allow you to send an invoice to the tax authority and receive feedback almost immediately. After verifying the details of your invoice, the tax authority will approve it and issue an allocation number for verification.

The invoice issuer must add the allocation number to the tax invoice for it to be valid. The number allows taxpayers to deduct input VAT.

All parties involved can use the allocation number to access detailed information about an invoice on the tax authority portal. ITA’s e-invoicing system requires invoices to be transmitted in JSON format.

However, buyers and suppliers can exchange invoices in XML (eXtensible Markup Language) or PDF/A-3 (Portable Document Format/Archive version 3) between them.

For such structured formats, you must embed the appropriate digital signature.

What is the implementation timeline for e-invoicing in Israel?

The Israel Tax Authority altered the implementation timeline slightly early this year, pushing the date for the first phase from 1 January 2024 to 5 May 2024.

Here are the details for each phase:

January 2024. The Israeli tax authority has allowed around four months of voluntary e-invoicing on the new system, giving companies adequate time to familiarize themselves with it and the latest guidelines.
5 May 2024. As of 5 May 2024, any invoice issued in Israel with a value of over NIS 25,000 (approximately $6,211) must be transmitted electronically.
1 January 2025. All invoices with a value of over NIS 20,000 must be e-invoices.
1 January 2026. All invoices valued over NIS 15,000 must adhere to the new e-invoicing mandate.
1 January 2027. All invoices with a value of over NIS 10,000 should be electronic.
1 January 2028. This will be the last phase requiring invoices over NIS 500,000 to be electronic.

What are the characteristics of e-invoice in Israel?

To help businesses in Israel shift to electronic invoicing, the government has released guidelines and standards that taxpayers must adhere to. These help ensure compliance and easy transition.

The technical specifications for the new e-invoicing system were released in July 2023.

Let us discuss the characteristics of e-invoicing in Israel:

Format

When using the web portal to approve invoices, you must submit them to the ITA in JSON format. JSON is newer than XML and is gaining popularity among ecommerce businesses and digital services. It is also easy to read.

When issuing invoices between buyers and suppliers, you can use the XML or PDF format. However, you must include a digital signature before transmission.

A reputable e-invoicing provider like Storecove can help ensure you generate invoices in the required format.

Information required

For an electronic invoice to be approved by the Israeli Tax Authority, it has multiple entry fields that must be filled, including:

Unique invoice number: Your invoice must have the unique allocation number assigned to it by the tax authority. Buyers are at liberty to reject invoices without a unique allocation number.
Description of goods or services: Each invoice must clearly describe the goods or services in question.
Invoice date: Every invoice must include the dates when the invoice was generated and issued.
Quantity: Mention the number of items in your invoice and list them by indicating numbers.
Unit prices: Despite having the total price of a group of items or services, you must include the cost of each before summing it up.
Payment amount: An invoice should have a breakdown of the final invoice amount, including discounts, taxes, and any other charges.
VAT amount: VAT-registered businesses must include VAT details in the invoice, including the rate and total input VAT, among other critical information.

Allocation number

The Israeli Tax Authority approves every invoice before transmission to the buyer and provides a unique allocation number. The tax agency issues a number that acts as a unique identifier to be included in the invoice before sending it to the buyer.

The number helps transacting parties access the details of the invoice and monitor its progress on the ITA web portal.

Digital signature

A digital signature is only mandatory when sharing invoices with buyers and suppliers. PDF and XML e-invoices must contain the allocation number and the digital signature.

Archiving

According to the technical specifications released by the Israeli tax agency, business owners must store invoices for at least 7 years.

The documents must be secure and easy to access in case of an audit. It is highly recommended for businesses to invest in a reliable ERP system with secure data storage.

How are Israeli companies benefiting from e-invoicing implementation?

Israeli businesses can enjoy multiple benefits from using electronic invoicing, including:

Eliminating paper invoicing

Many businesses still use paper invoicing due to reasons such as resistance to change or lack of funds to go digital.

Electronic invoicing requires an initial investment, but that’s just about it. With a reliable ERP system, you can eliminate costs associated with generating, issuing, and storing paper invoices.

Going digital also means your business aligns with sustainability goals, which can enhance your reputation.

Eliminating the need for paper minimizes your contribution to deforestation and carbon emissions associated with printing and mailing paper.

Quicker payments

The continuous transaction control model is one of the most impactful digital transformations. It facilitates near real-time monitoring of transactions, helping reduce errors and omissions.

The Israeli tax agency will approve taxable invoices faster, allowing businesses to complete transactions quicker. This will increase cash flow, a pillar of any company’s financial processes.

Enhancing business operations

Traditional paper-based invoices are time-consuming to generate. They involve manual data entry, printing, and mailing, which are labor-intensive.

An electronic invoicing system allows business owners to create, issue, and receive invoices in minutes. The new CTC model will enhance business operations and increase productivity by reducing invoice processing times.

Strengthening business relationships

The ITA web portal allows buyers and suppliers to monitor invoices and verify their details, creating a high level of financial transparency among businesses.

Faster invoice delivery helps reduce payments, which strengthens supplier and customer relationships.

Enhancing tax compliance

Having invoices approved by the tax authority before issuing them to the buyer means you are less likely to make mistakes when filing your taxes. If you do, the invoice will be rejected, and you will have the chance to find and fix your mistakes.

Increasing accuracy

Electronic invoicing guarantees high accuracy, especially when using an API. Automating e-invoicing processes makes generating invoices with large volumes of data easy without making errors.

When using the ITA web portal manually, there is still a chance of making mistakes.

Takeaway: Adopte e-invoicing in Israeli for enhanced business operations

Israel is among the countries that have recently adopted electronic invoicing. The government is using this mandate to help curb tax evasion and ensure compliance by all taxpayers.

Mandatory e-invoicing in Israel began on 1 January 2024 with a voluntary phasing and will end on January 2028. Every phase states the minimum value of an invoice to be issued through the new e-invoicing system.

The new e-invoicing system is not only advantageous to the government, but businesses will also enjoy numerous benefits, including reduced costs, increased accuracy, and better business relationships.

Are you among the thousands of businesses in Israel looking to adopt the new e-invoicing system? At Storecove, we can help you generate and issue invoices that comply with ITA’s guidelines.

More information about E-Invoicing in Israel?

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