Self-employed status in Israel

independant business in Israel - cabinet Dray & Dray

Definition of legal structure :

The legal form of a self-employed company in Israel is similar to the self-employed status as we know it, i.e. the legal form is registered under the self-employed status of the individual person. The number of your structure will therefore be your Teoudate Zeoute number. There is therefore no "legal separation" between the shareholder and the legal structure.

Legal opening :

The self-employed status does not require any legal opening, as no legal structure is created as such. This means you don't need a lawyer, or to draw up articles of association or other partnership agreements. If you intend to employ staff, we strongly recommend that you draw up solid employment contracts, which will enable you to clearly define the relationship established, and the expectations expected from both parties.

Opening with tax authorities :

Opening the file with the tax authorities is very quick, but requires several administrative forms to be completed.

Tax and social security obligations :

The self-employed person will be subject to progressive taxation as well as payment of the bitouah leoumi (social charge) and the VATaccording to its status.

From a tax point of view, there are 2 types of self-employed person in Israel:

Ossek patour (invoicing without VAT), which can be applied to any self-employed person with annual sales of less than 100,491 Nis (current in 2020). (Except in exceptional cases - doctors, lawyers, etc.). See also : What trades cannot be registered as Ossek Patour? Ossek Mourchei (invoicing with VAT), which applies to any self-employed person with annual sales in excess of 100,491 Nis (current in 2020).

Ossek Patour:

He must submit an annual profit and loss statement summarizing income and expenditure to the mas ahnassa (Israeli tax office), together with the annual tax return. There is often no need to file monthly tax returns, but only at the end of the year. However, it is quite likely that the mas ahnassa, or the Bitouah Leumi, will require monthly instalments. It's important to point out that certain sectors of activity are not allowed to bill as Ossek Patour, such as lawyers, doctors and anything related to consulting services. See also Questions & Answers : The Ossek Patour

Osek Murshe :

  • He must declare his sales to VAT (maam) and the tax office (mas ahnassa) on a regular basis (generally every 2 months), making the various payments.
  • Unlike the Ossek Patour, the Ossek mourché can reclaim the VAT paid.
  • He must pay monthly installments to the bituah leoumi.
  • He may have employees, to whom he will pay a salary and declare them in accordance with Israeli law.

Balance sheet and annual declaration :

The self-employed person must submit an annual profit and loss statement summarizing income and expenses to the mas ahnassa (Israeli tax office) with the annual tax return. See also Understand how Israel's tax brackets work.



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