Freelancers

Working as a freelancer in Israel offers freedom and flexibility, but also demands greater financial responsibility. Whether you are a freelancer, small business owner, or consultant, you must manage taxes, National Insurance, pension, and cash flow on your own. Understanding the difference between Osek Patur (exempt dealer) and Osek Mursheh (licensed dealer) is the starting point.

Our guides cover every financial aspect of self-employment in Israel, from registering with the authorities to smart tax planning and pension contributions.

Osek Patur vs. Osek Mursheh

An Osek Patur is someone whose annual turnover does not exceed a set threshold (approximately 120,000 NIS as of 2024). An exempt dealer does not charge VAT and does not file VAT reports, simplifying day-to-day management. An Osek Mursheh, on the other hand, must charge VAT (17%), file bi-monthly reports with the Tax Authority, and can offset VAT on business expenses.

The transition from Patur to Mursheh is automatic when you cross the turnover threshold, but you can choose to register as Mursheh earlier if most of your clients are businesses that can offset VAT.

Invoices and VAT

An Osek Patur issues a receipt only, while an Osek Mursheh issues a tax invoice (known as a green invoice). The green invoice allows the client to offset the VAT charged. Every income must be reported and all documents retained. VAT reports are filed every two months, and meeting deadlines is crucial to avoid penalties.

Deductible Expenses

Freelancers can deduct business expenses from their taxable income. Recognized expenses include office rent or a proportional share of your home, computer equipment and software, business travel, phone and internet (proportional share), vehicle expenses, professional insurance, professional training, and more. Accurate documentation is vital — keep every receipt and invoice.

Pension and National Insurance

Since 2017, freelancers have been required to contribute to a pension plan. The contribution rates are 4.45% of income up to half the average wage, and 12.55% above that. In addition, freelancers pay National Insurance and health insurance premiums at graduated rates. Pension contributions qualify for a significant tax benefit — partly as a deduction from income and partly as a credit against tax.