The witness, Mr. Cohen: First of all, yes.
Adv. Feierstein: How?
The witness, Mr. Cohen: Because there are also loss-making transactions , that's the first thing.
Adv. Feierstein: Okay, so is it possible that a medical tourist comes to Israel to receive a service and the appellant paid more for his services than he paid her?
The witness, Mr. Cohen: Surely there could be such a thing, there were also cases where we didn't have tourists who came here for treatment died and the company didn't get the full value... And the company still had to bear the cost of transporting the body abroad, all at its own expense, because there was no one to talk to on the other side, and there was not a single such case(p. 17, s. 36 - p. 18, s. 11 of the minutes of the evidentiary hearing).
- With all due respect, beyond the fact that the accountant's claim was not proven, it does not explain a gap of more than NIS 350,000 between the inputs that were deducted and the transaction tax paid, and this without including the appellant's commission from the brokerage. Even if I accept that it is possible that in some cases the payment for the treatment was not ultimately received from the medical tourist, it is difficult in my opinion to provide a sweeping explanation from which it emerges that the appellant has been operating in a loss-making manner for years. It follows from this explanation that during the tax years in question, all of the appellant's transactions for treatments that do not include hospitalization were essentially losses, and there is no business logic in this.
- This is also reflected in paragraphs 21-28 and appendices 17-19 to CPA Cohen's affidavit, from which it emerges that the appellant must pay additional transaction tax. It should be noted in this context that the appellant did not present any clear calculation on the subject (including the "data appendix", which was unlawfully attached, as Appendix 1 to the appellant's summaries) and nowhere did the appellant state what she thought was the correct amount of tax that she thought she should pay (see p. 8, paras. 34-38 of the minutes of the hearing of June 4, 2025). While I did not find that the respondent's calculation was incorrect or essentially arbitrary, if the appellant wanted her position to be accepted, she should have attached a clear alternative calculation, which would stand in contrast to the respondent's calculation. She didn't do that, and it seems not for good reason.
- Had a true tax assessment stood at the appellant's feet, it would have easily been able to reach it. If the appellant, who has the burden on her, does not aspire to a true tax, there is no reason for the court to go to her in this matter.
- The appellant complains about the assessment calculation, but she did not attach any alternative calculation that can be addressed. The appellant attached at the summaries stage a document that was supposed to be a calculation, but this while expanding the façade and exceeding the number of pages allocated to it, in a manner that does not allow for reference. In any event, what is stated in the document has not been proven, and it is not clear how the appellant expects the court to accept what is included in it. and if, as stated, the respondent was expected to examine the invoices themselves, the appellant would have been expected even more to examine its invoices and pay the tax derived from them.
- Admittedly, as stated, I am of the opinion that the respondent's calculation is not perfect, but the appellant's position in the appeal is that she should not pay tax at all. In weighing this position against the respondent's assessment, I am of the opinion that the respondent's assessment is closer to the tax of truth that the appellant must pay.
- The appellant argues with respect to the profit rate from which the respondent deducted the transaction tax. The respondent determined the transaction tax from the gross profit and based on the cost of the sale, while the appellant argues that additional expenses should be added to the cost of the sale, in a manner that more simulates an operating profit. I am of the opinion that the respondent acted correctly, and as a rule, gross profit is the profit that correctly expresses the profit rate from which the transaction tax is derived. In value-added tax, the tax is imposed on the sale price to the consumer, i.e., on the turnover, and from this sum the inputs paid and reflect the cost of sale must be subtracted. Therefore, as a rule, there is no reason to reduce additional expenses that are not reflected in the cost of the sale.
- The appellant claims various expenses that should be added to the cost of the sale, such as marketing expenses and certain management expenses, because according to her, these expenses are necessary for her business. I am unable to accept the appellant's argument, which means that the difference between the gross profit and the operating profit is insignificant. The appellant's arguments are correct in principle with respect to any expense, but a distinction must be made between an expense that can be attributed to a specific tourist, and a general expense, which is intended for the purpose of the existence of the business (and see p. 13, paras. 19-37 of the minutes of the pre-trial hearing). In any event, as stated, if the appellant was interested in examining the matter as it is and proving that in the case at hand the gross profit leads to an absurd result, it should have examined its transactions and submitted a calculation based on the tax invoices themselves, similar to what was stated above in relation to the alternative calculation, which, as stated, was not submitted.
- However, in light of the aforesaid in relation to the manner in which the assessment was issued and the failure to examine the transactions on their merits, as well as in view of the appellant's claims of an absurd result due to the reference to the gross profit only, I found that 30% of the assessment should be reduced. Needless to say, this result benefits the appellant, who is already required to pay transaction tax in an amount less than the inputs it deducted for medical services, etc., and that it did not meet the burden on it (and which it would probably have had difficulty raising even if I had returned the matter to the assessment process). In addition, if the appellant had been faithful to her approach and returned the input tax that she deducted, since according to her, these are transactions that are subject to zero taxes on the appeal, in this case she would have borne a higher financial burden than she is obligated to do under the framework of this proceeding.
- It seems that the respondent also agrees with this, when he writes at the beginning of his summaries that "indeed, the assessment made by the respondent is different from the one detailed in the updated tax decision [2022], except that the different method of calculation, which in this case actually benefits the appellant, who 'enjoys' a lenient assessment that does not reflect all of its obligatory transactions, is not a reason for cancelling the assessment. The respondent has broad discretion as to how to make the assessment, and the appellant's arguments that due to the different method of calculating the assessment should be cancelled should not be accepted (at most, the calculation should be ordered to be made in an alternative way, but as will be explained in detail below, the alternative method will lead to the appellant being charged a larger sum)" (my emphasis – Y.S.).
- In addition, I am of the opinion that there was a slight error in the way the respondent calculated, with regard to the date of the deduction of the transactions that were reported and in respect of which tax was paid, from the reported gross profit. In its calculation, the respondent first deducted the reported transactions from the gross profit and only afterwards applied the ratio it found between the taxable and the non-taxable. In my view, however, the ratio should first be applied to the gross profit, and only afterwards should the transactions that were reported and for which tax was paid should be subtracted, out of the taxable portion. In other words, the total transactions that are responsible must first be found from the total transactions, and from this total, the reported transactions must be subtracted. On the other hand, the respondent deducted from all the transactions that were reported and only afterwards did he clarify which part was taxable at all. Thus, in effect, the respondent applied the ratio between the debtor and the exemption, even to transactions that were fully reported.
Thus, for the sake of illustration and with reference to the example in paragraph 12 above, the ratio of 42% must first be applied to the appellant's reported gross profit in the sum of NIS 21,891,886 (which results in NIS 9,194,592 transactions taxable), and then, from the total transactions found to be liable, the amount of transactions that were reported and in respect of which tax was paid (NIS 2,296,860 – NIS 9,194,592) must be deducted. Thus, the amount of the transactions that the appellant was required to report in 2018 is NIS 6,897,732 (instead of NIS 8,230,221).
- Before concluding, I will note that the appellant argued regarding the identity of the recipient of the service from the hospital, whether it is the appellant or rather the medical tourist, but this matter is not in dispute in the framework of the appeal at hand, and therefore, I do not intend to discuss it. As stated, there is no dispute regarding the deduction of inputs, and the dispute is only in relation to the transaction tax charge.
- In summary, I dismiss the appeal, while reducing the assessment by 30% and amending the calculation as stated in section 76 above. In light of the result I have reached and in light of the conduct of both parties: the respondent who did not present a consistent position, did not publish his decisions properly and issued an assessment based on a sweeping presumption; And the appellant, who admitted in practice that she did not pay the full tax that she should have paid and did not lift the burden imposed on her, even if only approximately, will bear relatively low expenses in the sum of NIS 30,000. This amount will be paid within 30 days, otherwise it will bear linkage and interest differentials starting today.
Granted today, November 06, 2025, in the absence of the parties.