Plan contractor hiring in Israel

Engage the Israeli contractor through the business identity that will issue the bill, and agree the fee and payment schedule with that supplier. Israel recognises an individual, a partnership and a company as possible business suppliers. The practical distinction at onboarding is the supplier's VAT status: an osek patur, or exempt dealer, supplies different documents from an osek murshe, or authorised dealer. Record that status before configuring invoice approval. A request for the wrong document can leave a legitimate supplier unable to satisfy the customer's payment checklist. These business registrations address billing; they do not determine whether a working arrangement qualifies as self-employment.

Sources: Israel Tax Authority, new business VAT guide, 2026 figures

Cheshbonit iska

Transaction invoice

The transaction invoice records the supplier's charge for the service, including a transaction that is exempt from VAT. A dealer must issue one for each transaction or part of a transaction, and an authorised dealer can replace it with a tax invoice where the tax rules permit. Use it to connect the requested amount to the agreed work and billing period. The supplier's name and dealer number, the customer's details, the service description and the amount make that connection visible. Receiving this document does not by itself establish that the contractor has received the money.

Issued by: The Israeli business supplier issues it to the customer.

Sources: Value Added Tax Law, current consolidated text, Israel Tax Authority, new business VAT guide, 2026 figures

Cheshbonit mas

Tax invoice

The tax invoice is the authorised dealer's VAT document, and its timing can follow payment for a cash-basis service. Where VAT becomes due when consideration is received, the customer may not demand the tax invoice before paying that consideration or the relevant part. The invoice deadline is fourteen days after the tax point. Accounts payable should therefore distinguish approval of the commercial charge from collection of the final tax document. For a qualifying cash-basis bill, approve against the transaction invoice, record the payment, and follow up for the tax invoice within the supplier's issuing period.

Issued by: The authorised dealer supplies the tax invoice to the customer.

Timing: For cash-basis services, after receipt of consideration, subject to the statutory issuing deadline.

Sources: Value Added Tax Law, current consolidated text

Kabala

Receipt

The receipt confirms the exempt dealer's receipt of the payment and should be matched to the charge that was settled. An osek patur is allowed to issue receipts for money received and is prohibited from issuing tax invoices. That distinction matters when an overseas finance team uses a single document type for every supplier. Accept the appropriate local document, then reconcile its amount with the invoice and the payment record. If only part of the charge was settled, ask the supplier to clarify the remaining balance so a receipt for that part does not close the full invoice.

Issued by: The exempt dealer provides the receipt to the paying customer.

Timing: On receipt of the payment being acknowledged.

Sources: Israel Tax Authority, new business VAT guide, 2026 figures

A foreign customer's bill can qualify for Israeli VAT at zero percent, but the actual recipients of the service must fit the export rule. The foreign recipient must be outside Israel and have no business or activity there. The rule excludes an agreement under which the service is actually provided also to an Israeli resident in Israel, with a specific exception for services included in the customs value of goods. Other prescribed service exclusions also apply. Give the contractor the true customer and delivery facts, including any Israeli recipient, before accepting zero VAT; the overseas billing address alone cannot answer that question.

Sources: Value Added Tax Law, current consolidated text

What an invoice has to show

• Authorised-dealer wording and number on a tax invoice

  A tax invoice carries the words identifying the issuer as an authorised dealer, the dealer number and the tax-invoice designation. It also carries the serial number, date, supplier details, transaction description and the amount before tax, tax separately and total. These identifiers distinguish it from an ordinary request for payment. Check the dealer number against the vendor record and return an incomplete or inconsistent document to the supplier for correction. Use the document's actual status in the accounting record, especially where a supplier has recently changed from exempt to authorised registration.

  Sources: Israel Tax Authority, new business VAT guide, 2026 figures

• Zero-rated invoices are outside the allocation-number rule

  A genuinely zero-rated service invoice falls outside the allocation-number requirement for tax invoices. The absence of that number therefore does not make an otherwise correct zero-rated export invoice defective. Confirm the VAT treatment before making the number a mandatory approval field; the exception depends on the transaction actually qualifying for zero VAT. If the contractor charges positive VAT, have them resolve the invoice requirements for that transaction separately. The current allocation provisions run through 31 December 2028, subject to their earlier-expiry conditions.

  Sources: Value Added Tax Law, current consolidated text

Agree a billing schedule and due date that accounts for Israel's distinction between a transaction invoice and a cash-basis tax invoice. VAT on services generally arises when consideration is received and on the amount received. Exceptions include certain related-party, unpriced or non-money transactions and qualifying large service businesses. Ask the supplier which timing applies before imposing a tax-invoice-before-payment workflow. Put the agreed payment trigger, such as an accepted milestone or billing period, in the contract and arrange collection of the resulting tax document after settlement where appropriate. The tax-document issuing clock does not supply the customer's commercial payment term.

Sources: Value Added Tax Law, current consolidated text

The currency on the invoice

A foreign-currency-indexed fee can use the exchange rate agreed by the parties, so specify the conversion rule when linking a shekel payment to another currency. The Bank of Israel's representative rate becomes binding on that transaction only when the parties expressly adopt it. If using it, identify which day's rate applies and what happens when no rate is published that day. This is a contractual pricing decision. Have the contractor handle the conversion required for their own tax records separately, and reconcile the customer's payment against the currency and rate actually agreed.

Sources: Bank of Israel, representative exchange rates

Demanding an early tax invoice to fit the purchase-order process

An authorised dealer that issues a tax invoice early must include it in the relevant periodic VAT return even if the customer has yet to pay. A purchase-order process can therefore bring the supplier's tax reporting forward while leaving the money outstanding. Establish the accepted billing document when setting up the supplier, and align the approval process with the service's tax timing. If an invoice has already been issued, tell the contractor promptly about any dispute or payment delay so they can manage their reporting and any necessary correction.

Sources: Value Added Tax Law, current consolidated text

Changing from the individual to their company halfway through billing

A company supplier has its own registration records, signatories and bank-account evidence. Switching the billed entity without updating the agreement leaves the customer with documents referring to different suppliers. Resolve who is providing the service before processing the replacement invoice, then update the vendor record and supporting contract together. A familiar contact name is insufficient to explain why a different business is now billing. Keep the company documentation with the approved change so a later reviewer can follow the move from the original supplier to the new one.

Sources: Israel Tax Authority, new business VAT guide, 2026 figures