As part of the recently intensifying fight against fictitious invoices, a stricter measure initiated by the Tax Authority will take effect next week: As of June 1, 2026, every transaction exceeding 5,000 shekels will require prior approval from the Tax Authority, through receipt of an online approval number for the transaction in real time.
The new measure, recently approved by the Knesset after delays due to opposition from the business sector, will tighten the gradual framework of the “Israel Invoices” reform, which is intended to eliminate fictitious invoices that represent fabricated transactions or artificially inflated amounts.
Ahead of the lowering of the threshold and the dramatic expansion of the circle of businesses required to deal with the new and stricter requirement, we compiled the most urgent questions about the reform’s implications and practical implementation, with the assistance of CPA Yoram Schiffer, a partner at the accounting firm Ziv Schiffer & Co., which manages the online invoicing software invoice4u.
How do you generate an allocation number?
There are two ways. The manual route is carried out in the personal area on the Tax Authority website and requires entering details: the invoice number and date, the customer’s authorized dealer number, the transaction amount and VAT, and a description. The second option is to join a digital invoicing service. In that case, an initial connection must be made between the online invoicing system and the Tax Authority, after which the request will be sent automatically when the document is issued, and the applicant will need to monitor error or refusal alerts.
When does an invoice actually require an allocation number?
The obligation applies when the conditions defined on the page are met — an amount before VAT above the threshold and a relevant VAT component — and when the document is of the appropriate type: a tax invoice or tax invoice-receipt. Documents such as a transaction account or delivery note are not “documents that require an allocation number” and therefore do not fall into the mandatory category. The determining amount is before VAT. In other words, the transaction base is checked without VAT. For example, if the amount before VAT is 4,900 shekels, no allocation number is needed even if the total after VAT exceeds the threshold. This is one of the most common sources of confusion.
How does this affect businesses?
First, the main difficulty lies in registering for the personal area on the Tax Authority website. The process is even more cumbersome for limited companies, which are required to involve a lawyer to complete it. Second, it is certainly possible that after review, the system will block the option of allocating an invoice to a certain transaction, and the customer will lose eligibility to deduct VAT. Experience shows that many suppliers forget to request an allocation number, and the customer discovers this only after the fact.
What does a business do if it is denied an allocation number?
It can cancel the transaction, carry out a “reverse charge” in which the customer reports and pays the VAT, contact the Tax Authority for clarification, or file an objection and legal appeal.
Can a transaction be “split” into two invoices to avoid reaching the threshold?
Operationally, several invoices can be issued, but if this is an artificial split of the same transaction intended to bypass a regulatory obligation, it will be considered improper conduct.
What is a fictitious invoice and why is the state fighting it?
It is an invoice that does not reflect a real transaction, or one issued by a party that is not involved in it. It allows the buyer to deduct input VAT without VAT actually having been paid.
How does the allocation number mechanism affect the phenomenon of fictitious invoices?
Invoices above the legal threshold now require real-time online approval from the Tax Authority as a condition for deducting VAT. The requirement is intended to block the serial distribution of fictitious invoices, since every document undergoes review before being entered into the customer’s system.
Could there be a situation in which a citizen buys a refrigerator or a new kitchen and the Tax Authority says the transaction is not approved?
The invoices law is intended to prevent fraud, scams and the presentation of fictitious invoices only in business-to-business transactions. A purchase by a private citizen in a store will always be approved, provided the citizen has enough money, there is no issue with the credit card and there are sufficient funds in the bank account.