VAT in Israel: What You Need to Know

VAT (Value Added Tax, known in Hebrew as מע״מ) is an indirect tax applied to all commercial transactions in Israel. Every registered dealer (עוסק מורשה) is required to collect VAT from customers and remit it to the Israel Tax Authority. Exempt dealers with annual turnover below approximately 120,000 NIS are not required to collect VAT and cannot deduct input VAT.

Reverse VAT calculation is needed when you have a price that already includes VAT and want to find the original pre-tax amount. For example, an invoice for 590 NIS including VAT contains a net price of 500 NIS and VAT of 90 NIS. This is especially useful for accountants, freelancers, and business owners analyzing expenses or verifying invoices.

The VAT rate in Israel has changed several times over the years. On January 1, 2025, the rate was raised from 17% to 18% under the 2025 state budget arrangements law. The rate of 17% had been in effect since 2015, and before that it ranged between 15.5% and 18%. The calculator includes an editable rate field so you can calculate using any historical or future rate. (Source: Israel Tax Authority)

Results are estimates for informational purposes only. Not professional advice. We recommend verifying with a qualified expert.

Frequently Asked Questions About VAT in Israel

What is the current VAT rate in Israel?+
The VAT rate in Israel is 18%, effective January 1, 2025. It was raised from 17% under the 2025 budget arrangements law. The 2026 budget kept the rate unchanged at 18%.
How do you calculate reverse VAT (extract VAT from a total)?+
Divide the total amount by 1.18. For example: 590 NIS including VAT, divided by 1.18, equals 500 NIS net and 90 NIS VAT. The calculator does this automatically in the Remove VAT field.
What is the difference between adding VAT and removing VAT?+
Adding VAT multiplies the net price by 1.18 to get the final price. Removing VAT does the reverse: dividing a gross price by 1.18 returns the pre-tax amount.
When did the VAT rate change to 18%?+
On January 1, 2025, VAT was raised from 17% to 18% under the 2025 budget arrangements law. The rate of 17% had been in effect since 2015. You can enter any rate in the calculator's editable rate field.
Is this calculator suitable for freelancers?+
Yes. Freelancers and registered dealers use the calculator to compute net versus gross prices in quotes, verify invoices, and calculate VAT amounts for monthly reporting to the Israel Tax Authority.
Can I change the VAT rate in the calculator?+
Yes. The rate field at the top of the calculator is fully editable. Click the plus and minus buttons to adjust, or type the desired rate directly. The default is 18%.
Are there VAT exemptions in Israel?+
Yes. Exports of goods and services are zero-rated (0% VAT). Freelancers and sole proprietors whose annual turnover is below the exempt threshold (~120,000 ILS in 2026) are classified as 'exempt dealers' and do not charge VAT. Most domestic goods and services are taxable at 18%.
How do I calculate VAT in Israel manually?+
To add VAT: multiply the net price by 1.18. For example, 100 ILS net becomes 118 ILS. To remove VAT from a gross price: divide by 1.18. For example, 118 ILS gross divided by 1.18 equals 100 ILS net. The VAT portion alone is the gross price minus the net price.

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