Israelis Face Unexpected VAT on Online Purchases Over $75 Threshold

Israeli shoppers making online purchases from overseas retailers may face Value Added Tax (VAT) even when their total order value, after discounts, falls below the $75 exemption threshold. This issue arises when the seller declares the original price of the goods before discounts on the customs declaration, causing the declared value to exceed $75. Such was the case for Yael, an Israeli woman who ordered cosmetics from KITCH. Despite presenting receipts showing the actual discounted price was under $75, she was charged 118 shekels in VAT for two packages.

The Israeli Tax Authority requires more than just a receipt to verify that discounts and free gifts were part of a general promotion available to all customers, not an individual concession. Yael had purchased hair care products with a 28% Halloween discount and received a storage box and a hairpin for free. The seller declared the pre-discount value on the package, leading to the VAT assessment. Yael's attempts to prove the actual cost were initially unsuccessful, with the authority stating that even free gifts could be subject to VAT if their value was declared.

For Yael's first package, the declared value was $111.86, with individual items listed at higher original prices, plus declared values for the free gifts. She had actually paid around $60. For the second package, the declared value was $91.87, while the actual cost was $62.74, again including declared values for free items. In both instances, VAT was calculated based on the higher, pre-discount prices and the declared value of gifts.

The Tax Authority clarified that gifts, even if free, can be taxed based on their declared value, and they reserve the right to reassess declared prices. While individual discounts or vouchers might not be considered, general promotional discounts are generally accepted. Yael's case was initially rejected because she did not sufficiently prove the discount and gifts were part of a universal promotion.

Following inquiries by Ynet, Yael plans to reapply for a VAT refund. She will include a screenshot of the store's promotional email for the Halloween sale as additional evidence. The Tax Authority stated that to process a refund, she needs to submit an application with her invoice and proof that the discount was available to all customers during the promotion. This could be a confirmation email detailing the promotion's terms or a direct confirmation from the supplier.