Israeli Shopper Fined VAT on Online Discounts and Free Gifts
An Israeli online shopper faced unexpected value-added tax charges on discounted purchases and free gifts because the merchant declared full list prices on the package, prompting clarification from the Tax Authority.
An online shopping order from the website KITCH has exposed a dispute over customs practices regarding discounts and promotional gifts. A customer named Yael was ordered to pay value-added tax despite final purchase totals remaining under the 75-dollar exemption threshold, after the Israeli Tax Authority based its calculation on original list prices and included complimentary gifts declared on the package.
Yael purchased cosmetics during a 28-percent Halloween promotion, receiving a storage box and a hair clip as complimentary gifts. Although she paid a total of 59.42 dollars, dropping well below the tax exemption limit, the package arrived with a customs declaration showing pre-discount list values totaling 111.86 dollars. The Tax Authority initially rejected her appeal, stating that gifts and certain discounts do not automatically exempt parcels from taxation unless proven to be general promotions available to all consumers.
The core issue stems from the supplier declaring full retail prices on the exterior packaging rather than the discounted amount paid by the consumer. Customs regulations stipulate that while general promotional discounts are recognized, personalized discounts, compensation vouchers, and loyalty points are excluded from tax calculations, and gifts are assessed based on declared value.
Following inquiries regarding the matter, the Tax Authority clarified that parcels can qualify for exemptions under promotional pricing provided that buyers submit documentary evidence proving the discounts and gifts were part of a store-wide event rather than personalized perks. Yael plans to submit promotional email screenshots to reclaim 118 shekels in incorrectly charged value-added tax.
