Israel Tax Authority recently published Tax Ruling 6033/25. This ruling addresses Value Added Tax (VAT) liability on repair services provided in Israel by an Israeli business to a foreign resident, within the warranty period for imported goods sold in Israel. This ruling supersedes any previous professional decisions that determined otherwise, and effective from its publication date.
In the case at hand, the foreign resident (a foreign company) sold products in Israel through Israeli distributors and additionally contracted with an Israeli business to provide repair services regards the goods distributed to the customers in Israel, during the warranty period. The consideration for the repair services was paid directly to the Israeli business by the foreign resident.
According to the tax ruling, repair services provided to a foreign resident under the circumstances described above and within the warranty period will be subject to zero-rate VAT in accordance with the provisions of Section 30(a)(5) of the Value Added Tax Law, provided that all conditions specified in the law, and in the Regulations regarding the law, are met. These include compliance with formal requirements, such as proper documentation of the transaction, appropriate record-keeping, presentation of an agreement confirming the transaction details and confirmation that the consideration paid to the Israeli business is included in the value of the goods imported and distributed to customers in Israel.
This tax ruling continues the principles established in the court decision (Tax Appeal 21657-11-19) which ruled that zero-rate VAT applies to services (including advertising, marketing, and sales promotion services) provided to a foreign resident, if the value of the services is included in the value of the goods.
Given the possibility of charging zero-rate VAT on these services, Israeli businesses can offer attractive services to foreign companies, strengthen business collaborations, and expand their business activities. Furthermore, the ruling provides clarity, legal certainty, and tools for proper business management.
Our firm’s tax team has extensive experience in guiding companies and individuals in taxation matters in general, and particularly in VAT and indirect taxation issues, including assistance with tax ruling requests and ongoing support in various proceedings with the Tax Authority. Our office will continue to update you on publications, and we are available to address any issues or concerns.
This memorandum contains general information only and does not constitute legal advice or a substitute for legal advice. This memorandum is provided as a service to our clients, with the clarification that each specific case requires separate discussion on its merits.
