E-Invoicing in Israel: How Invoice Clearance Works and Ensures Compliance

E-Invoicing in Israel

Israel’s Tax Authority (ITA), under the new “Invoice Law” and associated regulations, has rolled out a national Continuous Transaction Control (CTC) based e-invoicing / invoice clearance system. The system aims to fight fraud and improve VAT compliance by requiring certain B2B invoices to be pre-cleared with the ITA. The mandate changes how businesses issue, report, and validate invoices across the country.

The rule requires that for B2B transactions above certain thresholds, suppliers submit invoice data to the ITA via its SHAAM platform before issuing the invoice to the buyer. The ITA validates the invoice in real time and returns a unique “allocation number.” Only a cleared invoice with that allocation number is considered valid for VAT deduction by the buyer.

E-invoicing is not strictly mandatory in the sense of requiring structured electronic invoice exchange across the board. But the clearance / pre-reporting requirement effectively makes the use of the system mandatory for many B2B invoices. This blog explains how the system works in Israel, the thresholds and timeline, technical process, benefits, and how providers like Flick Network can help companies comply with the law smoothly.

What Is E-Invoicing / Invoice Clearance in Israel

In Israel, “e-invoicing” under the current framework refers to the requirement for certain B2B invoices to be pre-cleared (submitted) to the ITA via its SHAAM system before they are issued to the customer. The supplier must send invoice details via API or web portal in a prescribed JSON format. The ITA validates the data, and when accepted, assigns an “allocation number.” Only after the allocation number is received can the invoice be delivered to the buyer.

For invoices below the threshold, suppliers may continue issuing invoices in paper, PDF, or other electronic formats; clearance is not mandatory. Once cleared and allocated, the invoice must include the allocation number; this makes it valid for VAT deduction by the buyer.

Invoices simply scanned or copied from paper do not meet the “cleared invoice” requirement. Structured data (JSON) submission and clearance are essential.  

Israel E-Invoicing Timeline and Important Dates

The rollout of the invoice clearance requirement in Israel is phased to allow businesses to prepare. According to current ITA rules:

• 5 May 2024 — Clearance requirement becomes mandatory for B2B invoices over NIS 25,000 (pre‑VAT).

• 1 January 2025 — The threshold is adjusted to NIS 20,000.

• 1 January 2026 — The threshold is reportedly revised to NIS 10,000.

• 1 June 2026 — The threshold is said to further change, applying to invoices from NIS 5,000 (pre‑VAT) and above.

Who Must Follow Israel’s E-Invoicing / Clearance Rules

The clearance requirement applies to:

• Taxpayers engaged in B2B transactions between VAT-registered businesses.

• Invoices above the relevant threshold amount at the time.

For invoices below the threshold, businesses may continue issuing invoices in traditional formats (paper, PDF), without prior clearance.

At present, B2C and B2G e-invoicing is not mandatory under the clearance mandate, though B2B is strictly under scope.

Technical Rules and E-Invoicing Process in Israel

Here are the key technical requirements and process steps under the current Israeli’s system:

• Invoice Data Submission: The supplier needs to submit the metadata of the invoice to the ITA through SHAAM in a structured JSON format prior to raising the invoice with the buyer.

• Real-time Clearance: ITA verifies the data presented to the online system in real time. On acceptance, it issues a unique allocation number, which has to be reflected on the invoice before dispatching it to the buyer.

• Digital Signature: In case the invoice is issued electronically and not on paper, a digital signature might be required to ascertain authenticity.

• Archiving: Cleared invoices and their metadata must be stored for audit and legal compliance in accordance with Israeli record-keeping rules.

• Invoice ID: Every invoice shall carry a unique internal Invoice ID along with the allocation number returned by the ITA.

Benefits of E-Invoicing / Clearance in Israel

Using the clearance-based e-invoicing system in Israel offers multiple benefits:

• Fraud Prevention: Pre-clearance removes the possibility of fraudulent invoices.

• Transparency and Auditability: Each invoice is validated in real-time, creating complete traceability.

• Efficiency and Standardization: JSON invoice submission reduces manual work and streamlines reporting.

• Compliance Assurance: Cleared invoices guarantee VAT deduction eligibility for buyers.

• Flexible Formats: After clearance, invoices can still be issued in paper or PDF as long as they include the allocation number.

Consequences for Failing to Comply with E-Invoicing / Clearance in Israel

If a business issues a B2B invoice above the threshold without clearance:

• The buyer cannot deduct input VAT on the invoice:
   The invoice becomes invalid for VAT deduction because the ITA did not approve it. This creates a direct financial impact on the buyer and can affect the overall tax position of the business.

• This may cause financial losses or denial of VAT claims:
   When the invoice is not cleared, the buyer loses the right to claim VAT on the transaction. This leads to a higher cost of the purchase and can affect cash flow and profit on the buyer’s side.

• It may trigger audits or penalties:
   A non cleared invoice can draw the attention of the ITA and increase the chance of an audit. The business may face penalties if the authority identifies repeated or intentional non compliance.

• Rejected invoices may cause operational delays and require resubmission:
   A rejected invoice must be corrected and sent again to the ITA for clearance. This slows down the billing workflow and can delay payments, reconciliation, and reporting for both the supplier and the buyer.

How to Prepare for E-Invoicing / Clearance in Israel

Here are the steps businesses should take now:

• Assess Your Systems: Ensure ERP or billing tools can connect with SHAAM and generate JSON invoice data.

• Choose a Solution Provider: Partner with a provider experienced in Israeli compliance, like Flick Network.

• Integrate and Test: Submit test invoices, confirm mapping, and validate the end-to-end clearance workflow.

• Staff Training: Teach teams how to submit invoice data, wait for allocation numbers, and issue invoices correctly.

• Archive Records: Store cleared invoices in accordance with legal retention rules.

• Monitor Threshold Changes: Track upcoming changes in invoice thresholds.

How Flick Network Helps Businesses with E-Invoicing / Clearance in Israel

Flick Network provides a compliance-driven invoicing platform tailored for businesses in multiple jurisdictions, including Israel. For Israel, Flick Network offers:

• Pre-Clearance Integration: Automatic submission of the invoice data to the SHAAM system so the supplier can complete clearance without manual steps. The system ensures every required detail of the invoice reaches the ITA accurately and on time.

• Allocation Number Handling: Automatic retrieval and placement of the allocation number on the invoice. This helps the supplier complete the clearance process and deliver a valid invoice to the buyer without extra effort.

• Invoice Archiving and Tracking: Secure storage of the cleared invoices and the related logs so the business can meet audit and legal requirements. The platform keeps a full history of the activity on each invoice for easier tracking.

• ERP and Billing Integration: Connection with existing ERP or billing systems to reduce manual work. This integration allows a smooth flow of the invoice data into SHAAM and back into the business system after clearance.

• Compliance Updates: Flick monitors changes in regulations and threshold updates so the business stays aligned with the current requirements of the ITA. This removes the risk of outdated processes and helps the business maintain continuous compliance.

Conclusion

Israel’s shift toward a clearance-based e-invoicing system under the “Invoice Law” is a major step in strengthening VAT compliance. From May 2024 onward, B2B invoices above threshold amounts must be pre-cleared and include an allocation number to remain valid for VAT deductions.

Businesses that prepare early by integrating suitable software, training staff, and setting up archiving processes will experience a smooth transition. Platforms like Flick Network manage generation, clearance, allocation numbers, archiving, and compliance end-to-end, reducing disruption and ensuring full regulatory alignment.

FAQs

1. What is the Israel Tax Authority invoice clearance system in Israel?
    It is a system where suppliers must submit B2B invoice data to the ITA for validation before issuing the invoice. The ITA returns an allocation number that must be included for VAT deduction eligibility.

2. Who must comply with the e-invoicing clearance mandate in Israel?
    VAT-registered businesses issuing B2B invoices above the threshold must submit data for clearance.

3. What happens if a business issues an invoice above the threshold without clearance in Israel?
    The buyer cannot claim input VAT on the invoice, increasing audit and penalty risks.

4. What is the required invoice format for clearance in Israel?
    Invoice data must be submitted in structured JSON format to the SHAAM system. After clearance, the invoice may be issued in any format as long as it includes the allocation number.

5. How long should cleared invoices be stored in Israel?
    Cleared invoices and metadata must be archived digitally in line with Israel’s legal record-keeping requirements.