Israel's Tribunal for Indirect Business Damage Compensation has upheld an appeal by the company that owns the Galei Kinneret hotel in Tiberias, ruling that the Tax Authority exceeded its powers when it rejected the hotel's claim for damage from the Iron Swords war. The decision was published on 18 October 2026. Eligibility, the tribunal held, is tested against the VAT returns the business filed, and the Authority cannot replace them with a calculation of its own.
After the war broke out in October 2023, the hotel stopped its regular tourism business and housed evacuees from the border areas under a contract with the Ministry of Tourism. In May 2024 it filed a claim under the track that requires a drop of at least 25% in turnover. Its VAT returns showed a drop of 25.5%.
The Authority's alternative calculation
The Tax Authority did not accept that figure. It matched the dates the evacuees actually stayed at the hotel against the dates of the invoices issued to the Ministry of Tourism and the dates they were reported for VAT. Its calculation left out some income and added income that had been reported late, and arrived at a drop of only 23%. That fell short of the threshold, so the claim was rejected. The company's objection was rejected as well.
The hotel's revenue fell from NIS 59 million in 2022 to NIS 51 million in 2023 and NIS 31 million in 2024. The Ministry of Tourism paid it NIS 5.4 million for housing evacuees, so revenue from ordinary tourism fell even more steeply.
Why the tribunal sided with the hotel
The panel, attorney Tamar Steiner and accountant Baruch Barukhi, found that the law built the compensation mechanism on a simple formula that relies on businesses' VAT returns. The legislature deliberately gave up case-by-case review so the process would be quick and simple. These are rough tests. They do not claim precision, but they capture most of the businesses the legislature had in mind.
A VAT return that has not been lawfully disqualified carries a presumption of correctness. The Authority may depart from it only if the return was disqualified or if it demanded a correction through the procedure the law sets out. An alternative calculation outside that framework, the tribunal said, has no basis in case law or in the wording of the statute.
The tribunal also called the Authority's method one-sided. It adjusted the eligibility period but ignored transactions reported in that period for services delivered in September 2023, and ignored differences between how the base period and the eligibility period had been reported. A calculation like that distorts the turnover decline and breaks equal treatment: one business is measured by its own returns, another by figures the Authority builds for it.
The hotel will be compensated on the basis of the 25.5% drop shown in its VAT returns. The Authority was ordered to pay NIS 10,000 in costs.
Businesses rejected near the threshold
The decision matters most to a business whose compensation claim was rejected by a narrow margin, where the Authority arrived at a smaller decline than the business's own returns show. If your VAT returns show a drop above the threshold and the decision you received rests on a different calculation, there is now a tribunal ruling that treats the returns as the basis.
It is a ruling in a single case and does not by itself reopen decisions already issued to other businesses. Anyone in the middle of an objection or appeal can take it to the lawyer or accountant handling the case and check whether their situation is similar. Anyone who received a rejection recently should confirm the appeal deadline with their representative.
The ruling is also a reminder of how much weight the VAT return itself carries. When compensation follows what was reported, an invoice issued in the wrong month or income reported late can move the result above or below the line. Accurate reporting on time, by the date of the transaction, is what those numbers rest on.