Ad hoc tax changes for overseas online orders cause confusion for Israelis about charges

Israelis shopping for cheaper clothing and household goods abroad from Amazon, Ali Express and other online sites woke up on Tuesday to a zigzag of decisions by lawmakers, leaving many in limbo whether they will have to pay value-added-tax charges on top of their already purchased orders from overseas.

Early Tuesday morning, an order from Finance Minister Bezalel Smotrich that let Israelis buy up to $150 of personal goods from overseas via popular online websites, exempt from 18% VAT, was revoked by lawmakers in the Knesset.

As a result, the measure, which came into effect in December and doubled the VAT-exempt amount, was returned to the previous threshold of $75.

That meant that people who had placed orders over the $75 dollar limit would face immediate VAT charges for the packages depending on the date and time they were cleared by Israeli customs. Customs is responsible for inspecting and classifying the packages that require VAT.

However, just a few hours later, Smotrich signed a new decree to expand the VAT exemption on personal imports from $75 to $130, which took effect at midnight Tuesday night. The new order caused more confusion and anger among Israeli consumers. Essentially, it means that online purchases above $130 would be liable to 18% VAT charges.

“In recent weeks, customers made online overseas orders in the range of $75 to $150 under the assumption that the VAT exemption would apply to them,” Nimrod Magidov, CEO of Red Box Parcel Ltd., told The Times of Israel. “Ordered packages are already on their way to warehouses or have arrived in Israel and once they are released from customs many customers will discover that they will be required to pay additional charges that they did not account for.”

“Since the threshold was doubled, we have seen an increase in the customers who ordered products in the $75 to $150 range, especially for purchases of shoes and sneakers, which have gone up by 25% to 30%,” said Magidov.

Magidov noted that many overseas orders by Israelis from the US have been delayed due to the massive snowfall and flight cancellations around the Northeast.

Magidov said that the problem is not the decision but in the immediate manner in which the VAT exemption changes are enacted.

“Such decisions can be made for one reason or the other, but they should be implemented in a gradual manner, with clear and sufficient notice to all parties,” said Magidov. “When a policy changes overnight, without planning and without a transition period, the one who is ultimately harmed and needs to pay is the Israeli consumer.”

The Israel Tax Authority said that it was examining various possibilities, including a transition period, but did not provide any further details.

With the expansion of the VAT exemption, Smotrich has been vowing to ease the rising cost of living. According to the Organization for Economic Co-operation and Development (OECD), Israel ranks fourth among developed countries with the highest comparable prices.

An examination by the State Comptroller in February 2025 found a price gap of 20% to 130% between a sample of products obtained through personal imports and identical products acquired via commercial imports in the local market.

Times of Israel staff contributed to this report.