Israel: Expansion of mandatory e-invoicing model

The Israel Tax Authority (ITA) on December 7, 2025, published a new regulation detailing the expansion of its mandatory electronic invoicing (e-invoicing) model.

The regulation—first drafted in March 2025—is now confirmed and lowers the transaction thresholds for requiring an allocation number, expanding the value added tax (VAT) compliance obligations.

The core regime, which began in 2025, already required suppliers to obtain a unique "allocation number" from the ITA for business-to-business (B2B) tax invoices exceeding NIS 20,000. The customer’s ability to deduct input VAT is conditional upon this number being added to the invoice. The new rules expand this system to cover lower-value transactions.

Key compliance points

• Mandatory allocation numbers: To deduct input VAT on applicable transactions, customers must receive an invoice containing an ITA-issued allocation number.
• New phased thresholds: The e-invoicing mandate is based on the transaction amount, not company revenue. The new lower thresholds for B2B invoices (excluding VAT) are:
  • NIS 10,000 from January 1, 2026
  • NIS 5,000 from June 1, 2026
• Clearance model: For transactions exceeding these thresholds, the supplier must request the allocation number from the ITA's central platform. Only after successful validation and assignment can a compliant tax invoice be issued.
• Real-time scrutiny: The ITA will continue its practice of reviewing requests in real-time. It can deny an allocation number if an invoice is deemed irregular, triggering a formal hearing and review process.

Required actions for businesses

• System integration: Enterprise resource planning (ERP) and accounting systems must be able to connect to the ITA's platform via API to automate the request and receive allocation numbers. A manual web portal exists but is not suitable for high-volume invoicing.
• Process adaptation:
  • Accounts receivable: Taxpayers need to integrate the allocation request step into their standard invoicing workflow for transactions falling under the scope of the mandate.
  • Accounts payable: Taxpayers must also implement a mandatory check to verify the presence and validity of the allocation number on incoming invoices before claiming input VAT when necessary.
• Digital authorization: Taxpayers need to register for the ITA's digital services and formally authorize personnel to manage the allocation process on the company's behalf.

For more information, contact a KPMG tax professional:

Philippe Stephanny | philippestephanny@kpmg.com

Ramon Frias | ramonfrias@kpmg.com