Starting January 1, 2026, the mandatory threshold for obtaining an Allocation Number through the Israel Tax Authority API was reduced from ₪20,000 to ₪10,000. On June 1, 2026, it will drop again to ₪5,000. Many businesses that previously worked only with other businesses and issued invoices of ₪6,000–₪9,000 “under the radar” are suddenly discovering that any invoice issued without an Allocation Number prevents the client from deducting VAT input expenses. The client calls, asks to cancel and reissue the invoice, and you lose working hours — and sometimes even the deal itself.
Thresholds — Who Is Required and When
- 1.1.2024 — 30.6.2025: Mandatory above ₪25,000 (excluding VAT).
- 1.7.2025 — 31.12.2025: Mandatory above ₪20,000.
- 1.1.2026 — 31.5.2026: Mandatory above ₪10,000.
- Starting 1.6.2026: Mandatory above ₪5,000.
The threshold applies to each invoice separately, not to the monthly total.
One transaction worth ₪5,500 requires an Allocation Number even if you issued five invoices of ₪3,000 on the same day.
How It Works Technically
When issuing an invoice, your management/accounting system sends a JSON payload with the invoice details to the Israel Tax Authority API. Within seconds, the authority returns a response: approval (an Allocation Number — a 9-digit number) or a rejection with a reason. The number is added to the invoice and embedded into the PDF as well. Without this number, a business customer is not allowed to deduct VAT.
Three Common Mistakes That Cause Allocation Request Rejections
- Exempt dealer on the client side
- Allocation Numbers are relevant only for B2B transactions. If the client is an exempt dealer or a private consumer, do not send the request for approval — it will fail.
- Incorrect company/VAT number or business not registered for VAT
- Make sure the number contains 9 digits and appears in the Israel Tax Authority’s active business registry.
- Connection outage
- The Israel Tax Authority gateway experienced several outages during 2025. In such cases, regulations allow a “disconnected mode” for up to 24 hours. The system issues the invoice with a “Pending Approval” status and must synchronize retroactively afterward.
How to Choose Software That Handles This Automatically
All major Israeli invoicing providers — Green Invoice, Hashavshevet, iCount, and Rivhit — are connected to the Israel Tax Authority gateway. The real difference between them is what happens when a request fails. A good system automatically updates the client that the invoice is pending approval, retries submission every 15 minutes, and alerts you on WhatsApp if 24 hours pass without approval.
Penalties
An administrative fine of approximately ₪22,000 per invoice, or 30% of the transaction value (whichever is higher). These penalties are significant, and enforcement has been active since 2024. Audit reports show a substantial increase in enforcement during Q1 2026 ahead of the threshold reduction to ₪5,000.
How Fullness Handles It
The financial management and accounting module of Fullness includes built-in integration with the Israel Tax Authority gateway: automatic submission when issuing invoices, smart detection of authorized businesses versus private customers, embedding the approval number into the PDF invoice, handling failures and disconnected mode, and maintaining a full 7-year archive in accordance with authority requirements.