Self-Invoice for Foreign Vendor

Self-invoice is an invoice that the company itself issues internally and is the one that reports the transaction to the tax authorities, both VAT on purchase, VAT on sales & payment (form 102).

According to the Israeli Tax Authority, a self-invoice to overseas vendors should be used as follows.

During the month, bills from foreign vendors will be entered and paid normally. One time per month, the company issues a self-invoice for all payments to foreign vendors that provide service or intangible assets (not suppliers who sold products).

Below are the steps that need to be taken to produce a self-invoice:

• Setup definitions

• Issue a customer invoice and making receipt

• Issue a supplier bill and making payment

Setup for Overseas Self-invoice

With the Israel Localization SuiteApp, it is possible to set up an overseas self-invoice.

To set up customer for overseas self-invoice:

1. Go to Setup > Company > Subsidiaries and click View next to the applicable subsidiary.

2. Ensure that the VAT Registration Number and Taxpayer ID fields have been populated.

3. On the Financial subtab, from the Terms list, select Immediate.

4. Note the Tax ID.

5. Click Save.

To set up the VAT code for overseas self-invoice:

1. Go to List > Relationships > Vendors.

2. Click the Edit link next to the applicable vendor.

3. On the Subsidiaries subtab, from the Tax Code list, select the correct tax code to define the default VAT on purchase self-invoice.

4. Click Save.

To set up vendor for overseas self-invoice:

1. Name the vendor. The name of the vendor should be the same as the Company name on the customer subsidiary record set up in ‘Setting up the Customer’.

2. Ensure the tax registration number should match the details populated on the subsidiary record.

3. Leave the Taxpayer ID empty.

To set up withholding tax definitions:

1. Go to Lists > Relationships > Vendors.

2. Click the Edit link next to the applicable vendor.

3. On the Israeli Tax Certificates subtab, clear the כלול בדיווח מס במקור box.

4. Click Save.

To create an offset account:

1. Go to Setup > Accounting > Manage G/L > Chart of Accounts > New.

2. From the Type list, select Other Current Liability.

3. In the Name field, enter Self Invoice.

4. Fill in the relevant fields, and then click Save.

To define item for self-invoice:

1. Create a new Item of the Non-inventory Item for Sale type.

2. From the Account & Income Account list, select the Self Invoice account.

To set up the VAT code:

1. Check that the following VAT codes are set up

   • VAT on purchase self-invoice

   • VAT on sales self-invoice

   • VAT not to report

2. Go to Setup > Accounting > Tax Codes, and then click the New Tax Code button.

3. Click Israel.

4. Create a new VAT code: VAT not to be reported which is available for both transactions and inputs. This guide refers to the use of the above VAT code. Fill out the fields as follows:

   ערך	שם שדה
   IL- מע"מ לא לדיווח	Tax Code
   IL- מע"מ לא לדיווח	Description
   0%	Rate
   IL Subsidiary	Subsidiary
   Default Tax Agency IL	Tax Agency
   IL_VAT	Tax Type
   Both	Available on

To create a customer overseas self-invoice:

1. Go to Transaction > Sales > Create Invoices > List.

2. Select the Customer set up in Setup for Overseas Self-invoice.

3. Ensure that the customer invoice and vendor bill date, currency, VAT periods, amounts and invoice number are the same.

4. Enter lines with each of the Vendor numbers of the overseas vendors paid during the month.

5. Select the item created in To define item for self-invoice: ensure the correct tax code is populated.

6. Re-add the same item, and select Self-Invoice Sales Tax. Set the amount as a minus amount.

7. The last line which offset the invoice balance should use Zero Percentage Sales VAT. At the end of the process the total invoice is zero and fully paid.

To create a vendor bill for overseas self-invoice:

Example of the second option to close customer invoice through payment:

1. Go to Transaction > Payables > Enter Bills.

2. Select the vendor created in Setup for Overseas Self-invoice.

3. Add the Vendor Bill number to match the Invoice number created in the previous procedure To create a customer overseas self-invoice.

4. Click the Expense subtab, and on the first line do the following:

   1. From the Account list, select the offset account.

   2. In the Amount field, enter the sum of all payments or payments per line.

   3. From the Tax Code list, select VAT on purchase self-invoice.

   4. Click Add.

5. On the second line, do the following:

   1. From the Account list, select the offset account.

   2. In the Amount field, enter the gross amount, including VAT, which should be a negative value (-).

   3. From the Tax Code list, select VAT not to report. At the end of the process, the vendor bill total is zero (0) and fully paid.

   4. Click Add.

6. Click Save.

Links to external sources in Hebrew:

Event	NetSuite Transaction	Line #	Debit	Credit
Self Invoice	AR Invoice		Accounts Receivable		117
		1		Self Invoice Account		60
		1		Self Invoice VAT (Sale)		10.2
		2		Self Invoice Account		40
		2		Self Invoice VAT (Sale)		6.8
	Customer Payment		Self Invoice Account		117
				Account Receivable		117
	Bill	1	Self Invoice Account		100
		1	Self Invoice VAT (Expense)		17
		2	Self Invoice Account		-117
		2	VAT (not for reporting)		0
				Accounts Payable		0

• Rami Arie, Attorney + CPA: mo.ralc.co.il

• Israeli Tax Authority: misim.gov.il

When using the Vendor Bill Form in Israel, ensure that you use the IL Vendor Bill custom form.

On the IL Custom subtab, you can select the tax period that the VAT is related to, and the ILS Tax Amount. The Exchange rate can also be overridden to change the default exchange rate.

Israeli Bank Information is derived from the vendor level.

General Notices