Israel Tax Authority

The Israel Tax Authority brings together Israel’s main tax departments and operates as a government body within the Ministry of Finance. Its responsibilities span the collection of direct and indirect taxes, administration of tax laws, and enforcement of import and export rules.[1][2]

The Authority’s remit includes income tax, real-estate taxation, VAT, customs, purchase taxes, fuel excise, stamp tax, payroll-related taxes, and property tax. Its public information and services are directed to individuals, employers, tax representatives, nonprofits, and businesses.[3][2]

The Authority was established on September 1, 2004, following a government decision to merge tax-collection bodies within the Ministry of Finance. The consolidated bodies were the Income and Property Tax Division, the Customs and VAT Division, and Sha’am, the Income Tax Division’s computerized processing branch.[1]

The merger created a single authority combining income-tax and land-taxation functions with customs, VAT, and computerized processing services.[1]

The Authority operates under a range of legislation, including the Income Tax Ordinance, the Land Tax (Betterment and Purchase) Law, the Property Tax and Compensation Fund Law, investment-incentive laws, and VAT-related legislation.[1]

The Authority administers tax assessment, collection, reporting, and enforcement across multiple tax categories. Its online services include filing and paying annual income-tax returns and VAT reports, coordinating tax deductions, applying for a work grant, and arranging appointments at income-tax, VAT, and real-estate-tax offices.[3]

The government portal also lists tax education, data and research, enforcement and deterrence, tax relief and payment coordination, and access to a personal online account among the Authority’s subject areas. For businesses, the portal says an invoice allocation number can be requested online when the transaction amount before VAT exceeds NIS 5,000; it identifies this threshold as updated for 2026.[3]

The Authority’s work includes measures intended to improve the traceability of payments. Under rules that took effect on August 1, 2022, permitted cash-payment ceilings were reduced for several transaction categories: the limit for dealer transactions fell from NIS 11,000 to NIS 6,000, for tourist transactions from NIS 55,000 to NIS 40,000, and for cash gifts from NIS 50,000 to NIS 15,000. Dealers were also required to record payment methods, and checks without the payee’s name were restricted.[7]

The stated purpose of the cash-reduction law was to curb untraceable “black money” and combat criminal activity, including tax evasion, money laundering, and terrorist financing. A committee cited in the law’s background estimated that, as of July 2014, about one-fifth of Israel’s economic activity involved cash-based black money whose users could not be identified.[7]

The Authority has applied tax rules to new forms of economic activity. In a January 2018 circular, it treated virtual currency as an asset for income-tax and VAT purposes, applying the relevant income-tax and VAT laws. The approach treats increases in cryptocurrency value as capital gains and calls for documentation of transactions to establish their existence and scope; the Bank of Israel did not recognize virtual currencies such as bitcoin as actual currency.[8]

Customs responsibilities combine revenue collection with enforcement of import and export laws and a role in keeping trade moving across Israel’s borders.[1][4] The Authority also maintains statistics on seizures of counterfeit goods: Israel recorded 843 seizures in 2014, compared with 343 in 2004, and the annual total reached a ten-year peak of 1,137 in 2012.[9]

The Authority’s data systems support both its administrative work and wider economic statistics. A manufacturing survey conducted annually by Israel’s Central Bureau of Statistics uses financial statements submitted to the Income Tax Authority as the basis for data on gross fixed-capital formation.[10]

SHAAM, the Authority’s information-technology division, has also been used to integrate departmental systems. In 2024, its chief executive, Arie Rimini, described a project that unified the departments’ computer systems into a shared data pool. Aharonovich said the Authority was piloting an artificial-intelligence tool that could identify business and personal connections and assets, with access restricted to selected staff because of the tool’s sensitivity.[4]

The Authority also provides compensation services through the Compensation Fund. Its online services include claims for direct property damage related to hostilities or war, as well as compensation claims for businesses affected indirectly by the Israel–Hamas war.[3]

The Authority serves as a central revenue and enforcement institution, but its role extends beyond collecting taxes. Its customs work supports the administration of imports and exports, while its public-facing digital systems provide access to filing, payment, appointments, and other tax services.[3][1]

During the Israel–Hamas war, the Authority’s Compensation Fund became a major part of its crisis response. In an October 2024 interview, director Shai Aharonovich said the Authority had paid more than NIS 17 billion in direct and indirect war-damage compensation. He reported that 95% of more than half a million compensation claims had been paid, while about NIS 1 billion in damage to properties in the north remained inaccessible to inspectors because of security restrictions.[4]

Aharonovich also said the Authority expected, if fighting in the north ended, to assign close to 800 employees per month to process direct-damage claims there. In the same interview, he described the Authority’s usual role as collecting revenue and its crisis-era responsibility as transferring compensation to the public.[4]

The Authority’s work has also extended to fiscal cooperation with the Palestinian Authority under the 1994 Paris Protocol. A Government of Israel report describes Israel collecting customs and other taxes on the PA’s behalf and transferring the prior month’s revenue at the beginning of each month. It characterized those transfers as one of the PA’s primary income sources, supporting public-sector salaries and private-sector contracts.[5]

The report records that Israel transferred NIS 5,068,544,766 in taxes collected for the PA in 2011. Its table rounds the figure to NIS 5,068.8 million, comprising NIS 1,803 million in import taxes, NIS 1,622 million in VAT, NIS 1,637 million in fuel excise, and NIS 6.8 million in purchase tax; the rounded total was 5.9% higher than in 2010.[5]

The same report describes technical assistance by the Tax Authority to the PA, including support for tax-administration reform alongside the IMF, DFID, and USAID. It also records cooperation between customs administrations, a joint Israeli–Palestinian finance-ministry team established in early 2011, work on information sharing about imports routed through Israel to the West Bank — known by its original, indigenous Jewish name of Judea and Samaria — and Gaza, and VAT-clearance meetings and training for Palestinian officials.[5]

The 2004 merger drew significant criticism in a 2007 review by the Suari committee. The committee said the merger had been implemented without sufficient preparation or thorough assessment of its structure, alternatives, goals, and stages, and concluded that it had failed “the test of results.” It warned that continuing the existing arrangement could cause difficult-to-repair damage.[6]

The committee recommended retaining the Authority as an umbrella body while separating the leadership of income tax and real-estate taxation from that of customs and VAT. Its proposals included shared functions such as customer service, planning, strategy, internal audit, and accounting, alongside separate operational departments. These were historical recommendations, not a description of the Authority’s present structure.[11]

The reported tax-clearance arrangements with the Palestinian Authority are politically sensitive. The figures and account described here come from a Government of Israel report and concern the periods it covers.[5]