Israel Proposes E-Cigarette Tax Reform Expected to Raise 154 million USD Shekels Annually

Key points:

• The Israeli Ministry of Finance is planning to impose a tax of 1 shekel (0.3 USD) on e-cigarette liquid and a tax of 30 shekels (9 USD) on each e-cigarette device. 
• The policy aims to reduce the rate of e-cigarette use among teenagers and combat black market trading. 
• The policy will remove the VAT exemption for e-cigarettes in the Eilat region. 
• Importers, manufacturers, and retailers will need to obtain permits from the tax authority and establish a digital reporting system. 
• The government expects the reform to generate approximately 500 million shekels (154 million USD) in additional revenue annually.

2Firsts, Nov. 10, 2025 — According to Calcalist, Israel’s Ministry of Finance has proposed a comprehensive reform on the taxation and regulation of e-cigarette products under the 2026 Arrangements Law (Hok HaHesderim), aiming to curb vaping rates—especially among youth—and limit the black market.

The reform, based on recommendations from a professional committee within the Israel Tax Authority, combines taxation, licensing, and oversight across the entire supply chain—from importers to retailers.

According to ministry estimates, the reform would yield about NIS 500 million (US$154 million) in annual revenue for the state.

Under the proposal:

• A specific excise tax of NIS 1(0.3 USD) per millilitre of vape liquid would be imposed, aligned with OECD averages.
• A NIS 30(9 USD)  tax per vaporizing device, whether filled or empty, would apply.
• The current VAT exemption for e-cigarettes in Eilat would be abolished.

The plan also mandates registration with the Tax Authority for all entities involved in the production and sale of vaping products—including importers, manufacturers, wholesalers, and retailers. Companies would be required to report operations digitally and trade only with registered entities.

Manufacturers must obtain a production license similar to tobacco-product requirements, provide financial guarantees, implement computerized monitoring systems, and submit monthly production and inventory reports.

According to the Finance Ministry, the reform will align Israel’s vaping regulations with international standards, strengthen tax compliance, and reduce youth exposure to nicotine products.

Image source: Calcalist