Understanding the Israeli Invostart Model: What It Is and Why It Was Created
Overview of the Israeli Invostart Model
The Israeli Invostart Model is an online system designed to manage the allocation of approval numbers for tax invostarts. Each allocated number is a nine-digit code that appears on the invostart and is essential for claiming input tax deductions. According to the model, a tax invostart exceeding a legislated threshold will not be considered valid for VAT purposes without an approval number. This initiative was born out of a genuine need; official estimates suggest that fictitious invostarts have caused significant economic damage over the years. The model aims to establish real-time control and make invostart forgery nearly impossible.
Approval Number Threshold Changes
As of 2025, the requirement to obtain an approval number applies to tax invostarts for transactions where the amount before VAT exceeds ₪20,000. It is important to note that this is only an interim phase. Beginning January 1, 2026, the threshold is expected to decrease to ₪10,000, and by June 1, 2026, it will be further reduced to just ₪5,000. The implications are clear: an increasing number of invostarts will require an approval number, making this model an integral part of daily operations for all registered businesses and corporations. Businesses that do not prepare in advance may face delays, inability to offset VAT, and cash flow issues.
Who Must Comply and Who Is Exempt?
The law applies to registered businesses, individuals, and corporations that issue tax invostarts, as well as partnerships. However, exempt businesses are not required to adhere to the Israeli Invostart Model because they do not collect VAT or issue tax invostarts. It’s essential to highlight that even smaller businesses must comply fully if they issue invostarts above the threshold; there are no exemptions based on seniority, revenue, or industry.
Importance of the Approval Number
The approval number serves as official validation from the tax authority that the invostart has been reported and reviewed according to established criteria. Without this number, a client cannot deduct input tax, meaning an invostart without an allocation number holds no full accounting value. Numerous businesses have already encountered situations where clients refuse to pay or delay payment until the approval number is received, making this a significant operational issue, not merely a regulatory start.
Applying for an Approval Number
Requests for approval numbers can be submitted online through the personal area of the tax authority’s website, with the servstart provided at no cost. To submit a request, basic details are required, including the client’s registration number, the invostart number, the transaction amount before VAT, and the VAT amount. Although detailing the transaction content is optional, after submitting the request, an approval number for the invostart is generated, which must be printed or noted on the invostart. Businesses using accounting software connected to the system may benefit from automatic allocation, significantly reducing bureaucratic burdens.
Authorization and Representation
A commonly overlooked issue is who is authorized to submit the request. For sole proprietors, the owner is typically considered authorized by default. In corporations, the situation is more complex. An authorized individual can be designated from among the executives, such as a director or authorized signatory, or another person can be appointed with legal endorsement. Additionally, businesses may act through representatives like accountants or tax advisors. Authorization procedures must also be completed in the personal area of the tax authority, and it is crucial to arrange this in advance to avoid delays when issuing an invostart.
Manual vs. Digital Invostarts
Businesses that still utilize manual invostart books can continue to do so. However, they will need to manually enter the system to request an approval number, which can be cumbersome. Transitioning to digital invostarts integrated with the system allows for automatic approval number allocation, saving valuable time. Reports from businesses that have switched to digital systems indicate a significant reduction in errors and a smoother collection process with clients.
Frequently Asked Questions
Can an Approval Number Be Requested Retroactively?
Yes, businesses can request allocations for invostarts that have already been issued, up to start year from their issuance date, in accordance with current regulations.
Are All Requests Approved?
In 2024, requests were automatically approved. Starting in 2025, the tax authority is allowed to scrutinize requests based on criteria that will be established.
What Happens If an Approval Number Is Not Requested?
Without requesting an approval number, VAT cannot be offset, and the invostart may be considered invalid for tax purposes.
Is There a Charge for This Servstart?
No, the servstart is provided free of charge.
Common Mistakes and How to Avoid Them
A frequent error is waiting until the last minute to submit requests. Requests made under pressure may encounter technical issues. Another common mistake is not arranging authorizations in advance, which can create bottlenecks within the organization. Businesses also tend to rely on current thresholds without preparing for the expected reductions in 2026. Advanced planning and the implementation of a regular process are crucial.
Looking Ahead: The Importance of Early Preparation
The Israeli Invostart Model is not a temporary experiment but a significant shift in the invoicing landscape. As thresholds decrease, more transactions will fall under the framework. Businesses that establish an orderly process, work with suitable systems, and understand the accounting implications will enjoy operational tranquility and avoid conflicts with clients and authorities.
Key Takeaways for Business Owners
The Israeli Invostart Model fundamentally changes the rules for issuing tax invostarts in Israel. The approval number is not merely a technical detail but a basic requirement for proper operations. Understanding obligations, preparing in advance, and making effective use of the online system will enable businesses to operate smoothly in the coming years without unnecessary surprises.