Working in Israel for an employer abroad
You've been offered a job opportunity to work from Israel for a company based in France, the USA, the UK or elsewhere in the world.
The overseas employer doesn't care where you work, as long as the job gets done. However, the way you are paid when working from Israel for an employer abroad needs to be thought through.
It's easy to pay taxes in the wrong place.
When an employee in Israel works for an employer abroad, the salary is taxable in Israel (the place where the employee performs his or her share of the work).
So receiving a pay slip from abroad means you've paid taxes in a country where you shouldn't have (!).
What's more, you'll always have to pay your taxes in Israel, as Israeli law has a "priority right of taxation". This means that you may have to pay tax twice, in accordance with the international tax treaties to which Israel is a signatory.
So, if receiving a foreign payslip isn't the ideal way to get paid, what's the best way to get paid in Israel when working for a foreign employer?
Several options are available, depending on your situation.
1. Register as a self-employed worker in Israel. (Ossek Patour or Ossek Mourche)
An Ossek is a self-employed person. This means that you are registered with the tax authorities as the head of your own business.
Registration is done via your Teoudate Zeoute. This allows you to issue invoices to your foreign "employer", periodically billing them for the services you provide. You will be paid in full, without any tax or deduction at source in your employer's country. However, as a business owner, you will be responsible for declaring your income and paying your taxes in Israel (don't worry - it's easy if you have a chartered accountant in Israel following you).
As an Ossek, you can either register as an Ossek Patour or an Ossek Mourche. An Ossek Patour is designed for small businesses and requires fewer declarations to the tax authorities. However, you will be limited to an annual turnover of around 100,000 ILS. If your income exceeds this, you'll need to register as an Ossek Mourche.
If you choose the Ossek option, you'll probably have to pay for the services of an accountant. However, as an advantage, you'll be able to save on your tax bill by deducting your business expenses.
How much tax will I have to pay as an Ossek?
It's natural to start thinking at this point - how much tax will I have to pay as an Ossek. In the end, the most important thing is to know how much you have left after all the taxes.
You can use our Israel income tax simulator - it only takes 2 minutes and you'll get the answers you're looking for.TAX SIMULATOR : ONLINE SIMULATION OSSEK MOURCHE / PATOUR.
2. Work via a חברת כוח אדם (société de portage).
A portage company in Israel acts as an intermediary between you and your employer. They will act as your employer and give you a monthly salary with an Israeli payslip (תלוש). They will be responsible for all taxes and deductions before paying you the net salary. In return, they will invoice the overseas employer for the services you provide.
Although this option gives you the chance to work without any tax reporting responsibilities, the חברת כוח אדם will take a percentage of your salary as profit. For short-term jobs, this is an excellent solution as it avoids registering with the tax authorities.
However, for jobs that will last more than a few months, it's probably more profitable financially to register as an Ossek.
The costs of portage companies in Israel vary, generally between 8 and 20% of your gross salary.
Did you know?
An employee of a foreign employer could recognize his foreign travel expenses and thus reduce his tax liability.
Please do not hesitate to contact us for further information.Foreign travel - tax expenses recognized in Israel
3. Foreign company registered with the Israeli tax authorities as an employer
Israel provides a registration system enabling foreign companies to operate in Israel. In doing so, the foreign entity will receive a 9-digit Israeli identification number (usually starting with the digits "5600").
This enables registration with the tax authorities and the possibility of employing Israeli workers via an Israeli wage declaration. Alternatively, the foreign entity could incorporate an Israeli daughter (subsidiary)/sister company through which it will employ its Israeli workers.
This option is generally recommended for foreign employers with several employees working in Israel.
Of course, we will have to comply with the "transfer pricing" prerequisites set out by the OECD.
Note Israel: foreign entities with a "permanent establishment" in Israel may be required to register and pay Israeli income tax or corporation tax on profits generated by Israeli operations. If a foreign entity has employees working in Israel, this can sometimes be considered a "permanent establishment".
Contact our team for advice if this concerns you (simply send us a message in the form at the bottom of this page).
In a nutshell:
When you work in Israel for an employer abroad, you must ensure that you pay your taxes correctly:
- Register in Israel as Ossek Patour or Ossek Mourche.
- Work via a "société de portage" (חברת כוח אדם).
- Ask your employer to become a registered Israeli employer.
If you have any further questions or need help registering in Israel, please contact us via the form below and we'll be happy to help.
Your questions - our advice
- Does it involve an Ole Hadash?
- What about the Bitouah leoumi?
- Who will have the right to deduct tax at source?
- What expenses are authorized for an employee in Israel?