Israel’s clearance regime: Full steam ahead despite challenges

This article was last updated on January 12, 2026 to reflect the accelerated timeline and the operational procedures confirmed by the VAT Execution Directive 01/2025, published on December 7, 2025.

Summary

• Israel has successfully concluded its initial e-invoicing pilot.

• The pilot phase formally commenced in May 2024 and ran through December 2024

• This phase specifically targeted high-value B2B transactions, applying only to invoices exceeding NIS 25,000 (~EUR 6,100) to limit initial friction while testing system load.

• The Israel Tax Authority (ITA) has officially accelerated the rollout of its Continuous Transaction Controls (CTC) regime.

• This accelerated timeline was formalized in VAT Execution Directive 01/2025, published on December 7, 2025, which provides the legal framework for the new deadlines and operational procedures.

• The mandate requires real-time integration between business systems and the ITA's SHAAM e-invoicing platform.

Israel’s journey towards implementing a comprehensive clearance regime has significantly accelerated. With the latest NIS 10,000 threshold now active (since January 2026), the country has successfully passed all but one of its major milestones. Despite the complexities and challenges inherent in such an ambitious project, the Israeli Tax Authority (ITA) remains committed to its accelerated timeline, with businesses in Israel now focusing their preparation on the final key deadline in June 2026.

Israel’s e-invoicing pilot phase completed

Israel's e-invoicing pilot phase, which ran from May to December 2024, was successfully completed. That initial phase targeted invoices exceeding NIS 25,000 (~EUR 6,100) and served as a crucial testing ground for both the ITA and businesses. During that period, the ITA assessed the system’s functionality, gathered feedback from participants, and made any necessary adjustments before the regime's broader application.

To comply, businesses were required to ensure that their invoicing systems were capable of generating and transmitting invoice data in real-time. Upon submission, the ITA provides an allocation number, which must be included on the final invoice and in the VAT report. While the seller performs the real-time request, the number is essential for the buyer to claim input VAT deductions. Failure to meet these requirements could result in delays or rejection of invoices, impacting cash flow and compliance status.

Full implementation of e-invoicing

The Israeli Tax Authority (ITA) has officially confirmed the accelerated completion of its CTC rollout. The new timeline, first announced in March 2025, was formalized with the publication of VAT Execution Directive 01/2025 on December 7, 2025.

Following the successful completion of the pilot phase (NIS 25,000) and the first mandatory phase (NIS 20,000), the e-invoicing regime is now proceeding rapidly to its final threshold. The mandatory invoice value threshold decreased to NIS 10,000 before VAT on January 1, 2026 (advancing the original 2027 plan). The final acceleration point will see the threshold further decrease to NIS 5,000 before VAT on June 1, 2026 (advancing the original 2028 plan).

This means the scope of compliance is expanding much sooner than initially projected, requiring more businesses to be fully integrated. Reviewing and ensuring your invoicing systems are scalable and flexible enough to handle the increasing volume of e-invoices is now a critical, immediate priority.

Full implementation timeline overview (all values excl. VAT)

• Pilot phase: May 2024 – December 2024 (invoices above NIS 25,000)

• Mandatory phase 1: January 1, 2025 (invoices above NIS 20,000)

• Mandatory phase 2: January 1, 2026 (invoices above NIS 10,000)

• Mandatory Phase 3 (final): June 1, 2026 (invoices above NIS 5,000)

Technical updates and industry collaboration

A key obligation under the new regime is the real-time integration of business systems with the ITA’s Sherut HaMihshuv HaAutomati (SHAAM) - the Automated Processing Service - e-invoicing platform. Businesses (sellers) must connect their accounting software via API or the ITA’s online identification system to request 9-digit allocation numbers before issuing invoices exceeding the thresholds. This clearance step is performed by the seller, but the subsequent allocation number is essential for the buyer to claim input VAT deductions, making compliance a critical, shared obligation that affects the legal validity of the invoice for both parties.

In response to feedback from software providers and businesses, the ITA has released a number of updates to the "Israel Invoice Model Description - API's" document with detailed integration guidelines, including:

• Allocation number requests via API, online application, or integrated accounting software;

• The real-time ITA review process with formal rejection handling, hearings, and appeals; and

• Data transmission protocols and error resolution procedures.

These clarifications address practical implementation challenges, ensuring smoother technical rollout across the ecosystem.

Key operational details from the VAT Execution Directive 01/2025

Officially published on 7 December 2025, VAT Execution Directive No. 01/2025 formalizes the accelerated timeline and provides essential operational clarifications for businesses. In addition to confirming the new thresholds (NIS 10,000 from January 1, 2026, and NIS 5,000 from June 1, 2026), the Directive addresses important procedural aspects of the clearance system:

• VAT deduction requirement: The Directive confirms that while the seller performs the real-time allocation number request, the number itself is mandatory for VAT-registered dealers (the buyer) to claim an input VAT deduction for invoices above the threshold.

• Verification process: Recipients can verify the allocation numbers via the ITA’s official portal or API, which allows for better integration into Accounts Payable systems.

• Special cases and appeals: The document provides detailed rules for managing special circumstances. These include what happens when an allocation number is refused, acceptable alternatives, the seller's right to appeal the decision, and the consequences for the buyer if the seller fails to request the required number.

Invoice distribution and record-keeping responsibilities

Once an invoice has been approved and the allocation number has been received, businesses must include this number on the invoice and distribute it to the relevant parties. However, even with the shift to a clearance model, the obligation to maintain proper records remains. Invoices must still be distributed in PDF format (with a digital signature) or on paper to ensure that all documentation is compliant with existing regulations.

Stay informed with Banqup

As Israel moves forward with its clearance regime, we are committed to keeping you informed of any significant developments. We will continue to provide updates on the ITA's progress and offer guidance on how to navigate the changing landscape.

For those operating in Israel, now is the time to ensure your business is prepared for the changes ahead. Stay tuned for further updates and insights as we continue to monitor the evolution of Israel’s e-invoicing journey.

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