The Israel Tax Authority – Customs Administration recently announced a change regarding the annual importer’s affidavit on valuation matters (hereinafter: “Importer’s Affidavit”). The main change is a shift from a separate affidavit for each supplier to a single annual affidavit covering all of the company’s import activities. Under the current system, importers are required to submit a separate affidavit for each supplier from whom they import goods in import declarations exceeding $5,000. The new reform significantly simplifies the process, allowing most importers to submit a single annual affidavit that applies to all their suppliers. It should be noted that the reform’s effective date has been postponed until further notice.
However, there is a significant exception within the reform. In cases where the effective tax (including customs duty and purchase tax, but excluding VAT) exceeds 6%, the importer will be required to submit an additional specific affidavit for the particular supplier, in addition to the general affidavit.
The new system will include an automatic control mechanism that will check, at the draft stage of the importer’s affidavit, whether an additional specific affidavit is required and will provide an alert accordingly.
Approved importers will not be eligible for exemption from the new importer’s affidavit. However, for importers who are Authorized Economic Operators (AEO), the exemption will continue to apply.
The new amendment also brings significant changes to the identification and submission process for affidavits. The new system offers a central identification method—the National Identification System—which will be the default. For this purpose, directors are required to delegate authority (power of attorney) to employees who will be authorized to submit the affidavit.
It is important to emphasize that not every company employee is authorized to submit an affidavit. Authorization is limited to senior officers such as the CEO, the company’s legal counsel, the CFO, or the import manager – all provided they are authorized to sign on behalf of the company.
Public companies or importers from the Palestinian Authority, who cannot use the regular identification system, will be able to use an alternative process. In this process, they will fill out the form without identification, print it with a handwritten signature, and submit it to the customs broker for filing.
The content of the affidavit itself has undergone significant changes and now includes two main parts: an updated business questionnaire and a new additional questionnaire. The business questionnaire has been substantially reworded to facilitate understanding and prevent confusion. Special emphasis has been placed on the issue of buying commissions, which were previously excluded from the affidavit and are now explicitly included.
The new additional questionnaire focuses on two main topics: the transfer of goods to the Palestinian Authority and the use of virtual currencies. In any case where a positive answer is given in the questionnaire, the importer is required to provide a free-text description of the specific cases and relevant suppliers. This requirement reflects the need for increased transparency and more precise tracking of goods and funds movements.
The Tax Authority has set a transition period of about two months, intended for technical adjustments, employee training, updating procedures, and a renewed review of import-related work processes.
Below is a brief overview of the issues addressed in the first part of the business questionnaire.
The first question concerns restrictions on the sale or use of the goods. The importer must report any restrictions imposed by the supplier, except for restrictions required by Israeli law (such as requirements of the Standards Institute or the Ministry of Health) and geographical restrictions. In the case of special restrictions, such as a requirement to sell only to approved customers or only through a website, this must be explicitly stated.
The second question examines whether the sale or price of the goods is subject to conditions that materially affect the transaction value.
The third question relates to expected proceeds from the sale of the goods, especially in cases where the importer pays the supplier a percentage of its sales in addition to the base price.
Question four deals with special relationships between the importer and the supplier. The definition of special relationships includes a wide range of connections, such as employer-employee relationships, joint control, family ties, or holding 5% or more of the shares. It is important to note that exclusive distribution relationships alone are not considered special relationships.
Question five focuses on additional payments beyond the base transaction price. It includes sub-questions regarding commissions and brokerage fees, buying commissions, container costs, packaging and labor costs, royalties and license fees, and other aspects such as kosher certification, warranty, and transport and insurance (the “other” section). It is important to distinguish between buying commissions, which are not part of the customs value, and other commissions, which are included.
Questions six and seven address services or production means provided by the importer to the supplier, and financing arrangements between the parties. The importer must report the provision of services or production means at a discounted price or free of charge, as well as financing and interest arrangements.
The final questions relate to the existence of written agreements and understandings between the parties, and to discounts granted on the transaction price. It is particularly important to note discounts that do not appear explicitly on the supplier’s invoice.
In any case of doubt regarding how to answer the questionnaire, it is recommended to consult with professionals. This is especially true for complex issues such as royalties, special relationships, and discounts, as inaccurate answers may affect the customs value of the goods and the accuracy of the entire report.
The new importer’s affidavit pays special attention to the issue of transferring goods to the Palestinian Authority, as part of a dedicated follow-up questionnaire. In this questionnaire, the importer is required to attest whether the imported goods are intended for transfer to the Palestinian Authority territories. The affidavit refers to three main possibilities: full transfer of the goods to the Authority, partial transfer, or no transfer at all. In the case of partial transfer, the importer must specify the scope and nature of the transfer, including whether it is occasional or involves a specific type of goods regularly intended for transfer to the Authority.
Another topic addressed is the ability to identify goods intended for the Palestinian Authority. The questionnaire examines whether the goods intended for the Authority can be identified by special marking, color, packaging, or other identification. Clear identification of the goods assists in supervision and control processes and facilitates transit procedures at checkpoints.
The importer is also required to provide detailed information about the customers in the Palestinian Authority to whom the goods are intended. The information includes the customer’s name, ID number or corporation number, and other relevant details.
The content in this update is provided for informational purposes only and is not intended to be comprehensive. It does not serve to replace professional legal advice required on a case by case basis.
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