GENERAL BACKGROUND

According to the Value Added Tax (VAT) Law, a foreign tourist shall be able to benefit from a zero rate of VAT on a vast array of services obtained during a stay in Israel. In addition, a special arrangement exists whereby a tourist may also request a VAT refund on purchases made during a stay.

Article 30(a)(8) of the Value Added Tax Law 5736-1975, together with Regulations 12(a), 12A(c) and 12B of the 1976 (5736) Value Added Tax Regulations, sets the rate of the tax at zero on tourist services acquired by a tourist in Israel. In other words, it removes the obligation for the payment of VAT by a tourist on certain services received during a stay. All this is conditioned though under the terms set down in Regulation 12 of the VAT Regulations.

It must be stressed however, that services a tourist procures during a stay, which are not detailed in the VAT Regulations (i.e. functions held by a tourist such as weddings, Bar Mitzvahs, etc.), are obligated to the full rate of VAT (currently 17%).

SERVICES ELIGIBLE FOR ZERO TAX RATE

The following is a list of services that a tourist is entitled to receive with a zero rate of VAT during a stay in Israel:

1)	Overnight accommodations at a hotel, including the following additional services, provided that the service is received inthe hotel in which the tourist stays overnight and that the invoice issued to the tourist specifies each service provided separately with its price:

food and drink;

use of the swimming facilities and related services;

laundry services;

room television rental;

use of sauna facilities and related services;

use of telephone, telex, and fax;

use of sports and health facilities;

office services - including document translation, letter composition, typing, etc.

2) rental of a private motor vehicle for self driving;

3)	sightseeing transportation, either in a private motor vehicle or bus (licensed for such purpose);

4) water cruise - from one place to another within Israel;

5) meals supplied directly or indirectly by a bus/cruise company;

6) flights - from one place to another within Israel;

7)	hospitalization (only at hospitals registered in accordance with the 1940 National Health Order);

8)	participation in an international meeting in which there are a minimum of 50 tourist participants;

9)	granting a foreign resident the right to use areas in an exhibition and accompanying services incidental thereto performed  by the grantor of the right.

DEALER PROCEDURES FOR ZERO VAT RATE ON SERVICES TO TOURISTS

As concerns the giving of tourist services, the zero tax rate will only be applicable by a service provider in Israel, when the following conditions have been met:

1.	The dealer holds an agreement or other written document containing the details of the transaction;

2.	The dealer holds a record of the tourist's name, permanent address and passport number;

3. An invoice has been issued detailing the type of service provided to the tourist;

4.	As regards touring transportation or rental of a private vehicle to a tourist, the invoice issued includes the vehicle license registration number and the name of the driver.

5.	As regards the supplying of meals during a bus sightseeing tour, the license registration number of the bus and the name of the company supplying the meal to the bus touring company must be specified in the invoice issued to the transporter.

  

6.	The price of the service given, method of payment, and currency in which it was paid for, is accounted for in the dealer's  invoice books.