What You need to know about Self-Invoices in Israel
and Implementing Tax Decision 6369/18
The reaction to the term “Self-Invoice” in Israel can be anything from a shrug of the shoulders to burying one’s head in their hands. This informati
on sheet explains the purpose of the Self-Invoice and when the Self-Invoice needs to be generated.
Purpose of the Self-Invoice
The purpose of the Self-Invoice is to provide a way to
report VAT for certain entities one does business with who do not report VAT to the Israel Tax Authority because they are not registered businesses in Israel.
When Self-Invoices Need to be Generated
A recognized business in Israel is registered, among other government bodies, with both the Israel Tax Authority and the VAT Authority. In order to create a recognized expense, a business must record a Tax invoice, which includes the expense and the VAT required to be paid and reported.
When suppliers in Israel do business with Israeli customers, they generate a Tax Invoice that is sent to the customer. The customer registers the supplier’s invoice in their bookkeeping system as a Tax Invoice. Both companies include the same tax invoice in their VAT reporting to the Tax Authority.
There are times when a Business will receive services from entities who are not registered businesses in Israel. Three common examples are:
- The Purchase of goods and services from overseas
- Business A rents office space from a private person
- Business A hires a person as a guest lecturer
In the case of the supplier being an Israeli, that person will provide Business A with a request for payment but does not have the ability to provide a tax invoice to Business A for payment. Business A will then create a Self-Invoice, which allows Business A to register a recognized taxable expense in its bookkeeping system, and report the VAT. The expense will be paid to the supplier of the service and be recognized as a valid taxable expense for Business A.
In the case of overseas goods and services, there will be a valid Invoice received from the overseas supplier. However, the overseas supplier will not add VAT to their invoice. Where the invoice is for tangible assets, VAT will be added by the Customs Authority prior to the goods being released from Customs after arrival in Israel. But where the Invoice is for services, VAT will not be recorded.
Tax Decision 6369/18 provides the ability of creating a monthly centralized “Self-Invoice” for all services invoiced and paid to an overseas supplier. The recognized taxable expense is recorded in the bookkeeping system using the invoice from each overseas supplier. Therefore, the purpose of the Centralized Self-Invoice is VAT reporting only.
Tax Decision 6369/18 states that in the event the Self-Invoice needs to be printed, it should include the following statement in Hebrew “This Centralized Self-Invoice is based on TAX Decision 6369/18”. Details of the month and services provided should also be included.
The Israeli localization for JD Edwards EnterpriseOne uses the standard Accounts Receivable and Accounts Payable applications in conjunction with Israeli VAT reporting to enable businesses to easily create, report and track both types of Self-Invoices.
This document is created as a guide to understanding Self-Invoices. It in no way replaces the guidance and opinion of the Business’ CPA or Tax Advisor.
Please consult with your CPA for a full explanation of the Self-Invoice and as to which Overseas Services if any fall within the category of Tax Decision No. 6369/18 and what back up documentation should be kept along with the Self-Invoice.