Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

February 6, 2023

Israeli Supreme Court rules in favor of taxpayer for recovering input VAT on certain meal-related expenses

  • Value Added Tax (VAT) Regulation 15A disallows recovery of input VAT incurred with respect to services or assets such as meals purchased by a business for the benefit of employees.

  • An Israeli taxpayer offset the proportionate input VAT incurred with respect to electricity, rent, water, municipal tax and management fees, which were allocated to facilities related to employee meals.

  • The Israeli VAT authorities claimed that these items fall under Regulation 15A of the VAT Regulations and therefore are not recoverable, a claim that was overruled by both the District and the Supreme Courts, based on the definition of the term “meal.”

In October 2020, the Israeli District Court ruled in favor of Amdocs Israel Ltd. in a dispute revolving around the question of whether Amdocs was entitled to deduct the proportional part of the input tax in connection with the expenses of rent, electricity, water, property tax and management fees attributable to the dining/catering area, kitchens, storage and cooling rooms located in the buildings and complexes that it rented for its offices.

The VAT Authority ruled that Amdocs was not entitled to deduct these inputs and accordingly issued an input tax assessment of approximately NIS5 million, for the relevant proportion of input VAT. After the company's first instance appeal was rejected, it filed an appeal against the VAT Director's decision to the District Court.

The District Court’s decision, by Hon. Judge Bornstein, accepted Amdocs' appeal and stated, among other things, that "Regulation 15A must be applied to inputs that are distinctly and exclusively related to meals."

On 30 January 2023, after an appeal filed by the Israeli VAT Authority, the Israeli Supreme Court in a decision by the Hon. Justices D. Barak-Erez, A. Stein and H. Khabov, rejected the appeal in a short and decisive ruling, stated that after going back and considering the matters, the only option was to uphold the ruling of the District Court. The Justices also stated that the ruling is based on the interpretation of Regulation 15A and that they do not take a position regarding the possibility of changing the legal situation by way of amending the legislation, should the Tax authority seek to support such a change.

The ruling may have high significance in cases of deduction of input VAT where a "benefit to the employee" within the scope of Regulation 15A exists. Potential consequences on income tax and Social Insurance liabilities may apply as well.

Taxpayers should carry out a detailed examination of the consequences of the above ruling in all relevant cases.


For additional information with respect to this Alert, please contact the following:

EY Israel, Tel Aviv

Ernst & Young LLP, Israel Tax Desk, New York


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more