Per Diem

In Israel, per diem allowances for business travel are typically used to cover meals and other incidental expenses while traveling. While there is no specific government-set per diem rate, businesses commonly use daily allowances for domestic and international business trips. For a typical business trip, a company might allocate around $125 per day per person for travel expenses​ auditing.co.il

These allowances are often not taxable if the expenses are substantiated with receipts and documentation that prove the funds were used for legitimate business purposes​
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Mileage

Israel’s business travel mileage compliance allows for reimbursement of travel expenses, including fuel and vehicle use. The standard per diem for travel expenses is $125 per day per person, covering transport, accommodation, and meals. To claim deductions, businesses must document the travel’s business purpose and keep receipts. Additional expenses, such as exhibition fees, communication costs, and visa-related charges, may also be deductible. For detailed compliance rules, visit Auditing.co.il.

Paperless

In Israel, businesses can maintain digital records for all expenses, including receipts, invoices, and mileage reports. The records must be accurate and accessible, stored for at least seven years. Digital records must meet specific criteria set by the Israeli Tax Authority, including clear and authentic documentation to avoid potential tax issues​ auditing.co.il.

Meals, Benefits & Allowances

Meal allowances during business travel are typically reimbursed based on actual expenses or per diem rates, depending on the employer’s policy. In addition to meals, businesses may also cover incidental expenses such as taxis, lodging, and other business-related needs, provided they are well-documented​ auditing.co.il. Meal expenses during business trips are generally deductible from tax as long as they are properly substantiated and meet the business purpose criteria.

Generally:

• Per Diem Allowances: Israel sets daily per diem rates for domestic and international business travel, with tax-exempt limits.
• Meal Allowances: Employees can receive reimbursements for meals, but if meals are provided (e.g., at hotels or events), the per diem is adjusted accordingly.
• Tax Treatment: Excess reimbursements beyond tax-free limits are subject to income tax and social security deductions.

For the latest official rates, check the Israeli Tax Authority (ITA) website: taxes.gov.il.

Sales tax rates

Israel applies a 17% VAT on most goods and services, including business travel expenses. Businesses can recover VAT on travel-related purchases like hotels, meals, and transport if they are registered for VAT and the expenses are used for business purposes​
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As of January 1, 2025, Israel’s Value-Added Tax (VAT) rate has increased from 17% to 18%. This applies to most goods and services, including domestic transactions and imports. Certain sectors may still qualify for reduced rates or exemptions. For official details and further updates, you can refer to the Israeli Knesset’s announcement: Knesset Website.