Allocation numbers, explained

Guide · 4 minute read

Since 2024, some Israeli tax invoices need a number from the Tax Authority before they are worth anything to the customer. The rule is called חשבונית ישראל, the Israel Invoice model, and it is the largest change to day-to-day invoicing in decades. It is also widely misunderstood, mostly because the threshold keeps moving.

What the number is

An allocation number is issued by the Tax Authority for one specific invoice, in real time, before you send it. You submit the details of the invoice you are about to issue, the Authority returns a number, and that number is printed on the document.

The purpose is not to tax you differently. It is to make invented invoices unusable. Before the model, a fictitious invoice could support an input VAT deduction until somebody eventually cross-checked it, which in practice was rarely and late. Now the deduction depends on a number that only exists if the Authority saw the transaction as it happened.

Which invoices need one

Only tax invoices above a threshold amount, and only where the customer intends to deduct input VAT. Selling to a private individual, the question does not arise, because there is no deduction on the other side.

The threshold is the part that changes. It began at 25,000 shekels before VAT when the rule took effect in 2024, and it has been stepping down on a published schedule each year since. Whatever figure you learned when the rule started is almost certainly not the figure in force now, so check the current amount before you assume an invoice is below it. The direction of travel is clear enough that a business issuing invoices of any real size should expect to be inside the rule.

How you actually request it

There are two routes, and the difference matters more than it sounds.

The manual route is the Tax Authority portal. You log in, enter the invoice details, receive the number, and copy it onto the invoice you produced elsewhere. It works, it costs nothing, and it takes a few minutes per invoice. For a business issuing three large invoices a month, this is entirely reasonable.

The automatic route is invoicing software that requests the number through the interface the Authority provides, as part of issuing the document. You press issue, the request happens, the number lands on the invoice, and you never see the portal. For anyone invoicing weekly, this is the difference between a rule you comply with and a rule you keep forgetting until a customer complains.

Both routes need your business to be set up for digital identification with the Authority. Doing that once, before you need it, is much easier than doing it at the moment a customer is waiting for an invoice.

What happens without a number

The invoice is not void. You still made the sale, you still owe the output VAT, and the document still exists in your books. What is lost is the deduction on the other side: without the allocation number your customer cannot claim the input VAT, and the cost of your invoice to them rises by 18 percent.

In practice the missing number becomes their problem and then immediately yours. Business customers with a bookkeeper will reject the invoice and ask for a corrected one. Customers without a bookkeeper will pay it, claim the VAT anyway, and receive a query later, which is a worse outcome for everyone involved.

Practical consequences

• Invoicing became an online activity. You cannot issue a qualifying invoice from a laptop with no connection and reconcile later. The number is requested before the document is valid.
• Backdating stopped working. The request happens in real time, which is precisely the point.
• Credit notes and corrections need care. Cancelling and reissuing an invoice that carried an allocation number is a documented sequence, not a delete.
• Splitting an invoice to stay under the threshold is not a strategy. Two invoices for one transaction is an old trick with an obvious shape, and the model exists specifically to see shapes like it.

If you are choosing software right now

Ask whether allocation numbers are requested automatically, what happens when the Authority responds with an alternative, and whether the number appears on the copy the customer receives. A vendor whose answer is that you can enter the number manually has not implemented the feature, they have documented the workaround.

General information, not tax advice for your situation. The threshold changes on a published schedule, so confirm the current figure with the Tax Authority or your accountant. Next: the invoice checklist or Israeli VAT without the jargon.