“I am a VAT-exempt business. From the start of the year to October, my turnover reached NIS 115,000, and my orders suggest I will exceed the threshold before the end of 2026. How do I become VAT-registered?”
Do not wait until year-end to review the transition
The turnover threshold for 2026 is 122,833 ₪. In this case, the remaining amount before the threshold is NIS 7,833. Reaching NIS 115,000 is not itself an excess, but when continued activity is expected to cross the threshold, contact the firm to arrange reclassification in advance. The review concerns transaction turnover across all businesses of the same registered person, not profit after expenses.
How do we handle the transition?
- Gather the information: Send the firm an income file or receipts report from the start of the year, details of receipts, cancellations and credits, and a forecast of activity remaining until year-end. The firm checks turnover under the VAT rules applicable to the activity.
- Prepare the application: The firm compiles an income summary and supporting reports and contacts the VAT office handling the file to request reclassification. Further documents are attached as required.
- Confirm the effective date: Check the effective date of VAT registration and the treatment of transactions around the transition. If the threshold has already been exceeded, provide all information to regularize the position; do not assume tax always applies to the whole year or only to the excess.
- Update day-to-day procedures: Adapt document software, invoice types, pricing and reporting, and confirm the reporting period assigned to the file.
A VAT-exempt business does not routinely file periodic VAT returns. The income summary is used to check turnover and request reclassification. After the change, periodic returns are filed under the obligations assigned to the file; if the VAT office requires a return to regularize the position, the firm prepares it according to the instructions.
What changes after the transition?
- Documents and collection: Issue tax invoices in the circumstances and at the times required, and charge VAT on taxable transactions in accordance with the law.
- Reporting and payment: Report transactions and input VAT for the assigned periods and pay the balance. Plan cash flow so the VAT collected is available when payment is due.
- Expenses: Deducting input VAT requires a valid invoice, business use and the other statutory conditions. The transition does not automatically allow VAT on every earlier expense to be offset.
- Pricing: Review quotes and existing agreements to establish whether the agreed price includes VAT and how this affects profitability.
- Business identity: For an individual, the business registration number generally remains the same; reclassification does not create a new company. Also check whether Income Tax and National Insurance advance payments need updating.
VAT-exempt business thresholds: 2022–2026
| Tax year | Annual threshold |
|---|---|
| 2022 | 102,292 ₪ |
| 2023 | 107,692 ₪ |
| 2024 | 120,000 ₪ |
| 2025 | 120,000 ₪ |
| 2026 | 122,833 ₪ |
The amounts apply separately to each year. Certain professions and occupations must register for VAT even below the threshold. “VAT-exempt business” is a VAT classification; it does not provide a general exemption from Income Tax or National Insurance and is not the same as the “micro business owner” track.
Official sources
General information reviewed on 15 October 2026. The transition date, tax liability and required documents depend on the activity's circumstances and the law. Obtain an individual review with the firm before taking action.