Every product imported into Israel must be classified under an appropriate customs tariff Heading, in accordance with the Customs Tariff and Purchase Tax Order. The customs tariff Heading is effectively the product’s “code” within the customs tariff. It may determine the rates of customs duty and purchase tax applicable to the product, as well as the approvals, licenses and standards required for its importation.
Most import taxes in Israel are levied as a percentage of the value of the goods. Customs duty or purchase tax, for example, may be imposed at a specified rate based on the product’s value. Alongside these ad valorem taxes, there are also specific taxes calculated according to the quantity, weight, volume or another characteristic of the product – such as a tax based on the alcohol content of a beverage – although these are less common.
Rules of origin and certificates of origin
Israel is a party to a wide range of free trade agreements which, subject to certain conditions, provide an exemption from customs duty or a reduced rate of duty for products imported from various countries and trading blocs. Israel has entered into such agreements with, among others, the United States, Canada, Mexico, the European Union, the EFTA States, the Mercosur States, Colombia, the United Kingdom, Ukraine, South Korea, Vietnam and the United Arab Emirates.
Import regulations and compliance
Many products require an approval or import license, or must comply with regulatory requirements, as a condition for their importation into Israel. For example, telecommunications equipment and certain technological products may require approval from the Ministry of Communications; food, food supplements, cosmetics and medical products may be subject to the supervision of the Ministry of Health; agricultural produce and products of animal or plant origin may require approval from the Ministry of Agriculture; and vehicles and certain spare parts are subject to requirements imposed by the Ministry of Transport.
Seizure and forfeiture of goods
The Israel Customs Authority is authorized to seize and, in certain circumstances, forfeit goods in a wide range of situations. One of the most common cases involves a passenger passing through the green channel (lane) at Ben Gurion Airport without declaring an item brought into Israel from abroad.
Personal and commercial imports
Since accessible online shopping platforms such as Amazon, AliExpress and eBay entered our lives, almost all of us have, to some extent, become importers. Today, at the click of a button, a product can be ordered from almost anywhere in the world and delivered directly to our doorstep. To encourage personal imports, the State has granted an exemption from import taxes for parcels valued at no more than US$75 – a threshold that was previously higher.
Many customs tariff Headings provide for a tax exemption or a reduced rate of tax, subject to compliance with certain conditions even after the goods have been released from Customs. A prominent example is the importation of a taxi, which benefits from a significantly lower tax rate than that imposed on a private or commercial vehicle. While a taxi is subject to purchase tax at a rate of 8%, the same vehicle model, when intended for commercial use, may be subject to purchase tax at a rate of 83%.
Where raw materials are imported into Israel and import taxes, such as customs duty and purchase tax, are paid on them, and those materials are subsequently used to manufacture products that are exported abroad, the import taxes paid may be refunded, subject to the conditions prescribed by law. This refund is known as “drawback”.
Retroactive customs assessments and duty demands
Under the Indirect Taxes Law (overpaid or underpaid tax), 1968, the Israel Customs Authority is authorized to conduct post-release audits and demand the retroactive payment of import taxes in respect of goods imported several years earlier – generally up to five years retrospectively.
Financial disputes between customs brokers, freight forwarders, freelancers and importers
Many freight forwarding companies and customs brokers engage “freelancers” to attract new clients and expand their customer base in the fields of international freight forwarding and customs brokerage. In practice, the freelancers perform a marketing and business development role, while the professional services are provided to the clients by the freight forwarding company or customs broker. Accounts are then settled between the company and the freelancer in accordance with the terms agreed between them.
Trade remedies (anti-dumping duties)
Every few years, a complaint is lodged by a local manufacturer alleging that imported products are being sold in Israel at dumped prices and are causing injury to the domestic industry. Where the relevant conditions are met, the Trade Remedies Commissioner at the Ministry of Economy and Industry may initiate an investigation in accordance with the rules of the World Trade Organization (WTO) and the Trade Levies and Safeguard Measures Law, 1991. At the conclusion of the proceedings, a decision is made as to whether a duty should be imposed on the imports in order to protect domestic production.
Purchase tax on domestic production
Purchase tax, imposed under the Purchase Tax (Goods and Services) Law, 1952, is an Israeli indirect tax which, as a general rule, applies equally to imported goods and domestically manufactured goods. Today, the tax is imposed on a relatively limited range of products, including motor vehicles, certain vehicle parts, alcoholic beverages and tobacco products.
Fuel excise is an Israeli indirect tax imposed on fuel and on certain substances capable of being used as fuel substitutes, including various types of oil. In recent years, the Israel Tax Authority has extended the application of the fuel excise regime to certain fuel substitutes. One of the purposes of this arrangement is to combat the practice of blending fuel with other substances, or using substitutes, in order to avoid payment of the tax.
In the past, Israel’s import regime required importers to present laboratory test results and standards approvals as a condition for the release of products subject to mandatory standards. Over the years, this policy changed, with greater reliance being placed on importers and, in appropriate cases, consignments being released on the basis of the importer’s declaration that the products comply with the applicable standards requirements.
Environmental financial sanctions
In recent years, the Ministry of Environmental Protection has intensified its administrative enforcement activities. The Ministry is authorized to impose financial sanctions for breaches of various environmental laws, including infringements that may sometimes be perceived as merely “technical”, such as failing to submit a report on time or failing to enter into a required contractual arrangement.
Additional legal services
The firm provides a wide range of notarial services, including the authentication of signatures on various types of documents; the execution of a will before a notary in accordance with the Inheritance Law, without the need for it to be signed before two witnesses; the notarization of parental consent for a minor to travel abroad without being accompanied by his or her parents; certification of the accuracy of translations into or from English and Arabic; certification of true copies of original documents; and other notarial services.
The firm provides services for the preparation and registration of enduring powers of attorney. An enduring power of attorney is a legal document that enables a person to determine in advance who will be authorized to manage his or her affairs, and how that person should act, if the individual becomes unable in the future to understand those matters and make decisions concerning them independently.