Israeli taxman plans tax on digital products

The Finance Ministry in Israel is working on the draft of a new law that will require overseas businesses to register with the Israel Tax Authority and file tax returns, according to a weekend report in the newspaper Haaretz.

The draft includes international Internet companies who sell downloadable goods and services online in Israel, offer communications services or radio and television broadcasts, who will be required to charge value-added tax. That includes downloaded apps, software, music, games, television programs and films, online telephone and fax services, Web access ….and online gambling.

Haaretz uses Amazon as an example, noting that the ecommerce giant would have to charge VAT of 17 percent on Israeli orders for e-books, and that travel reservation companies would also have to charge VAT on their internet services.

Israel is not acting in isolation; an Organization for Economic Co-operation and Development tax initiative was launched last year in response to international governmental concerns about the growing volume of global ecommerce sales on which no taxes are currently being paid, particularly on products bought by consumers from sellers outside their home jurisdiction.

“In 2014, business-to-consumer e-commerce sales were estimated to exceed $1.4 trillion – an increase of nearly 20 percent from 2013. The OECD said B2C sales were expected to reach $2.4 trillion by 2018,” Haaretz reported.

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