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When we open an Ossek Patour in Israel, we have to ask ourselves a few questions.
To help you better understand the whys and wherefores, here's a list of interesting questions we've been asked.
Ossek Patour is a definition given by the Israeli VAT office. In Israel, any self-employed business is called an "Ossek" - literally "one who carries on a trade".
There are 2 types of independent Ossek: Ossek Patour and Ossek Mourché.
Ossek Patour means that the self-employed are exempt (Patour - פטור) from paying VAT on their income, up to the ceiling that is defined in the law (107,692 NIS on January 1, 2023).
Above this amount, the self-employed person will be subject to VAT, and will therefore change his status to Ossek Mourché.
Can an Ossek Patour also work as an employee?
Of course. Every self-employed person has the right to be an employee too.
However, you will need to declare the total amount of income earned at the various workplaces in your annual tax return.
Is opening an Ossek Patour at the TVA office enough?
No, after opening your Ossek Patour status at the VAT office, you'll also need to open Mas Ahnassa - income tax, and Bitouah Léumi - social security.
What does an Ossek Patour have to declare, and to whom?
Like any business, the Ossek Patour must declare its income and annual profit to 3 authorities:
- VAT Office, Annual declaration as Ossek Patour.
- Regular progress reports. Mas Ahnassa - income tax, and Bitouah Léumi - social security.
- Annual report (Doh Ishi - דוח אישי), submitted to Mas Ahnassa.
Why does the Ossek Patour have to keep invoices for expenses?
The lower your profit at the end of the year, the lower your tax bill.
So, even if you can't reclaim VAT as an Ossek Patour, it's worth keeping track of your expenses, which will enable you to reduce your tax liability.
How does an Ossek Patour keep his accounts?
An Ossek Patour must manage 3 different books of account:
- A receipts and expenses book, in which the company's income and expenses are recorded.
- Invoices (חשבונית עיסקה).
- Receipts (קבלות).
Is an Ossek Patour obliged to have a chartered accountant?
As with any business, we strongly recommend that you work with a chartered accountant. However, as an Ossec Patour, you are not obliged to have a chartered accountant, and you can try doing your declarations on your own.
If you choose to go it alone, however, it's strongly recommended that you visit your accountant at the end of the year, to show him what you've done over the past year. He or she will prepare the annual report for you, which is submitted to the Israeli tax authorities - Mas Ahnassa.
Can we go from being Ossek Patour to Ossek Mourché?
Of course. The moment you realize that you have exceeded the authorized income threshold (107,692 NIS for the year 2023), immediately consult your chartered accountant, who will go to the VAT office on your behalf and change your status.
Don't forget that failure to declare VAT (Maam) is a form of fraud that can result in criminal prosecution by the Israeli government. Criminal prosecution can result in imprisonment and a heavy fine.
As you can see, it's best not to play around with the Maam - VAT Office, or risk criminal prosecution for "VAT fraud".7
I've heard of the Atsarat Hon - הצהרת הון , what is it exactly?
The Atsarat Hon - הצהרת הון, is a declaration of assets. It is generally required of anyone opening a business as a self-employed status (Ossek Patour or Ossek Mourché), but also for any shareholder who holds more than 10% of shares in a limited liability company.
An Ossec Patour is therefore also obliged to make a declaration of assets, within 120 days of receipt of the request by the tax authorities.
The declaration must be made on personal assets & liabilities relating to the date requested.ALSO READ: The Ossek Patour guide
Does an Ossec Patour have to pay income tax?
Of course. Like all taxpayers in Israel, you must pay taxes on your income.
Your tax liability depends, of course, on the following question: Does your net taxable income reach the tax threshold?ALSO READ: How much tax do I have to pay in Israel?
What expenses can I claim as an Ossec Patour?
There is no exhaustive list of expenses that are recognized as Ossec Patour.
Each company has its own recognized expenses.
The most important thing to remember is this fundamental principle: if the expense incurred is necessary for the smooth running of your business, then it will be recognized as an expense in the eyes of the tax authorities. (For example: rental of premises, purchase of raw materials, electricity, travel expenses, etc.).ALSO READ: What expenses can you claim from home?
Accounting for an Ossek Patour is less complex than for an Ossek Mourche.
Nonetheless, you still need to file tax returns.
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