Exempt Dealer and VAT-Registered Dealer: Exempt from What?
Exempt Dealer and VAT-Registered Dealer are classifications for VAT purposes; being exempt does not mean exempt from all taxes.
An Exempt Dealer does not charge VAT on its ordinary transactions and does not deduct input VAT. It does not issue a tax invoice, but it records transactions and receipts. A VAT-Registered Dealer charges and reports VAT on taxable transactions and may deduct input VAT under the conditions. The exemption depends on an annual turnover ceiling and the type of activity; some professions may not be permitted to register as exempt even with a small turnover. Turnover means the revenues from transactions, not the profit after expenses. Income tax and National Insurance are separate matters. A small-business owner is an income tax track and is not another name for an Exempt Dealer.
A business received 10,000 ₪ and spent 4,000 ₪. For the educational distinction the turnover is 10,000 ₪ and the profit before tax adjustments is 6,000 ₪. Do not check the turnover ceiling based on 6,000 ₪.
Explain why an Exempt Dealer still needs to keep records and check other tax liabilities.
Official Information and Further Reading ↗Check your understanding
The exemption of an Exempt Dealer mainly relates to...
- all taxes in the country
- VAT
- municipal property tax (arnona)
Answer and explanation
VAT. This is a VAT classification, not a general tax exemption.
Is an Exempt Dealer allowed to issue a tax invoice?
- No
- Yes
- Yes if the customer requests
Answer and explanation
No. They issue documents appropriate to their status, not a tax invoice.
Continue learning
Transaction Invoice, Tax Invoice and Receipt — A transaction invoice documents a transaction; a tax invoice is a tax document; a receipt documents the receipt of payment.
What is an allocation number for an invoice? — An allocation number is a number from the Tax Authority in the context of Israeli invoices, in addition to the business's invoice number.
A Business: Sole Proprietor and a Limited Company (Ltd.) — A company is a separate legal entity; 'Ltd.' indicates limited liability of the shareholders under the law.