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Electronic invoicing, also known as e-invoicing, is gradually gaining acceptance in Israel.
The Finance Committee of the Israel government has approved the plan to reduce the use of fictitious invoices. This initiative was proposed by the Minister of Finance and the tax authority in Israel as part of the economic plan for 2023-2024. As part of the plan, the tax authority will operate a digital control system on transactions between business partners by assigning allocation numbers to invoices.
In accordance with the approved plan, starting from January 1, 2024, the tax authority will assign a unique number online to tax invoices exceeding NIS 25,000. The threshold will decrease over the next five years, reaching NIS 5,000 by January 1, 2028. From the beginning of the implementation of the program, invoices exceeding the threshold will need to obtain an allocation number from the tax authority. Tax invoice without an approved allocation approval number will not be eligible for tax returns.
Following the situation Israel, some companies in Israel will require additional time to comply with the requirements of the new e-Invoicing regulation. Therefore, the tax authority will allow the deduction of input tax through a tax invoice without an allocation number, until March 31, 2024. However, as the tax authority is already prepared for the implementation of the law, customers that are ready in time request allocation numbers as of January 1, 2024, will receive the allocation numbers and will even benefit from speeding up the handling of tax returns.
To fulfill comply with the Israeli e-invoicing regulation, the solution following process is delivered as part of SAP Document and Reporting Compliance
Implementation
If you're already using the electronic document processing framework for other countries, ensure that you have implemented all prerequisite SAP Notes necessary for the Israel solution. If you are implementing the electronic document processing framework for the first time, we recommend to start the implementation even before the full completion of the development of the Israeli requirements.
You can find the overview SAP Note for Israel here: 3392197 - Electronic Document Processing for Israel: Implementation Overview.
The SAP Document and Reporting Compliance solution is supported in SAP ERP, SAP S/4HANA, and SAP S/4HANA Cloud Private Edition for the new e-invoicing regulation for Israel, covering Journal entries (accounting documents), billing documents and real estate documents as source documents.
In SAP ERP, the following minimum SP levels are necessary: SAP ERP 6.0 - Enhancement Package 6 SP12, Enhancement Package 7 SP05, Enhancement Package 8 (no minimum SP level). In SAP S/4HANA, the minimum release is 1709.
For a troubleshooting guide and answers to frequently asked questions to help you in the implementation process, please refer to SAP Note 3431462 - Electronic Document Processing Israel Troubleshooting Guide
Integration with SAP Document and Reporting Compliance, Cloud Edition
The end-to-end process requires that you use the service of the cloud edition to manage the communication between your business system and the tax authorities.
For more information about the cloud edition, see What is SAP Document and Reporting Compliance, Cloud Edition?
Requesting a Token from the Tax Authorities
When you submit your first electronic document to the tax authorities in Israel, the electronic document comes back with the error Authorization failed. This is because you require a token from the tax authorities to exchange electronic documents with them.
To receive the token, you must follow the Redirect process.
Note: During the process of requesting the token, you'll be redirected to the website of the tax authorities in Israel to enter your credentials. However, you can only enter the website of the tax authorities with an Israeli IP address.
To read more about the Redirect process, see Requesting Token from the Tax Authorities.
Regulatory Change Manager
Staying compliant with new regulations is crucial. To ensure success, stay updated on any changes and comply accordingly with the use of Announcement of Legal Changes or Regulatory Change Manager where you can find the latest status of upcoming regulations, including Israel:
For the Israeli Electronic Invoicing regulation, please refer to the following to get the latest updates:
- SAP S/4HANA / SAP S/4HANA Cloud Private Edition / SAP ERP: link
- SAP S/4HANA Cloud Public Edition: link
If you have any questions or concerns, please feel free to contact us for more help.
Thank you for taking the time to peruse this blog.
For further information, read the documentation on the SAP Help Portal.
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