Issuing an invoice as a self-employed person in Israel: which document when

1. First: exempt dealer or licensed dealer

An exempt dealer (עוסק פטור) does not charge clients VAT and does not reclaim VAT on expenses. A licensed dealer (עוסק מורשה) charges VAT, passes it on, and reclaims VAT on expenses. The status is set with the authorities, and changing it changes the documents you issue.

If you are not sure of your status, it is on the confirmation of your VAT file and in correspondence with the Tax Authority.

2. Exempt dealer: a receipt

An exempt dealer issues a receipt for each payment received. It carries no VAT and states the dealer's name and number, the date, what was paid and the amount.

When you ask for payment up front you can issue a non-receipt document such as a quote or transaction invoice, but it does not replace a receipt when the money arrives.

3. Licensed dealer: three main documents

A licensed dealer has three options, and the right one depends on when payment arrives:

• Tax invoice: when you sell and have not been paid yet, for example a business client who pays at month end.
• Receipt: when payment arrives against a tax invoice already issued.
• Tax invoice-receipt: when the client pays on the spot, the common case in salons, clinics and studios. One document covers the sale and the payment.

4. What must appear on the document

The details normally required on a valid document:

• Business name, dealer or company number and address.
• The client's name, and for a business client its number too.
• Issue date and a gapless serial number.
• A description of what was sold, the quantity and the price.
• For a licensed dealer: the amount before VAT, the VAT and the total.
• The payment method, for a receipt.

5. Gapless numbering, original and copy

Numbering must run without gaps. An issued document is never deleted; one issued by mistake is cancelled with a credit note.

The first document handed to the client is the original, and every further print or send is marked a true copy. Good software does this by itself.

6. Common mistakes

What the accountant tends to find, and so worth preventing:

• A receipt where a tax invoice-receipt was needed, or the reverse, for a licensed dealer.
• Deleting a document instead of crediting it.
• Adding VAT to a price that already includes it, or forgetting to add it.
• Issuing the document days after payment, which scrambles the order of dates.

7. How long to keep them

Tax documents, including copies of what you issued, are kept for seven years. It helps if the system keeps them for you and you can download them when needed.