Israel – Self-Employment

How does self-employment work for expats in Israel?

The framework for self-employment in Israel is clearly defined and reasonably accessible, though it is closely tied to your immigration and residency situation. The Hebrew term for a self-employed person is atzmai (עצמאי). Before you can begin trading or billing clients, you are required to register with the Israel Tax Authority (Mas Hachnasa) and the VAT office (Ma’am), and to update your records with the National Insurance Institute (Bituach Leumi).

To qualify, you must be at least 18 years old, hold a valid Israeli identity document or an appropriate visa and residency status if you are a foreign national, possess a valid tax identification number, and be legally authorised to work. Visitors on tourist visas are generally barred from operating as self-employed individuals — you will ordinarily need a work visa, a temporary residency permit, or permanent residency (which includes citizenship or eligibility under the Law of Return) before you can register.

Foreign citizens are additionally required to submit VAT form 22, which contains a signed undertaking from an Israeli representative who accepts responsibility for that individual’s conduct as a foreign business operator. This document may require notarisation by a senior Israeli lawyer, and the requirement applies even to those registering as Osek Patur who are not liable for VAT. The concept broadly parallels sole trader registration in countries such as Australia or Germany, but Israel imposes this extra representative requirement on foreign nationals, making local professional support especially valuable.

Every payment received for goods or services must be recorded and reported to the Israel Tax Authority, Bituach Leumi, and the VAT authorities — regardless of whether you are a full-time freelancer, an employee running a side business, or carrying out occasional consultancy work.

What are the different self-employment and business structures available in Israel?

Israel provides several main structures for freelancers and entrepreneurs. The most suitable option depends on your anticipated turnover, the nature of your profession, your preferences regarding liability, and your longer-term ambitions.

Osek Patur (Exempt Dealer)

Sole traders in Israel operate under one of two primary designations: Osek Patur (exempt dealer) or Osek Murshe (authorised dealer). Osek Patur is intended for smaller enterprises with annual revenue below the NIS 120,000 threshold; it carries an exemption from VAT and involves lighter reporting duties. The word “Patur” translates as “exempt” in Hebrew — a common misconception is that Osek Patur status means exemption from all taxes, but it refers exclusively to VAT (Ma’am). Income tax (Mas Hachnasa) and national insurance contributions (Bituach Leumi) still apply.

Certain professions — among them architects, doctors, teachers, and lawyers — are ineligible for Osek Patur registration regardless of their earnings and must instead register as Osek Murshe.

Osek Murshe (Authorised Dealer)

In contrast to Osek Patur, Osek Murshe requires businesses to collect and remit VAT on their sales. A defining feature of this status is that there is no upper revenue cap — businesses may generate unlimited turnover. The registration process is more involved: in addition to enrolling with the VAT department, individuals must open a tax file with the Income Tax department, update their status with Bituach Leumi, register with approved invoicing software, and establish a pension fund.

Osek Zair (Small Business Status)

Introduced in 2024, Osek Zair is a tax status — not a separate registration category — available to self-employed individuals whose annual turnover falls below NIS 120,000. It delivers meaningful tax relief by permitting an automatic 30% deduction on income without requiring receipts for business costs, so that income tax is only calculated on 70% of revenue. This considerably reduces the administrative complexity of tax filing for smaller operators.

Private Limited Company (Ltd.)

Limited liability companies are a widely favoured structure in Israel, prized for the protection they offer shareholders and the flexibility they provide in running a business. There are generally no restrictions on foreign ownership — an individual or foreign corporation may own 100% of an Israeli company. Israel actively welcomes foreign investment and imposes no general limits based on nationality or sector. This makes the Israeli Ltd. conceptually comparable to a UK limited company or a French SARL, with the important advantage that private companies are not legally obliged to have a locally resident director or co-owner.

Partnership

Under the Partnership Ordinance, a partnership is formed when two or more persons agree to enter into a joint business arrangement. The personal liability of partners is unlimited unless they participate as limited partners within a limited partnership. Foreign entrepreneurs tend to favour the Ltd. structure over partnerships, largely because of the exposure to unlimited personal liability.

Branch or Representative Office of a Foreign Company

A company incorporated abroad may establish a branch or local presence in Israel, provided it registers as a foreign company with the Companies Registrar within one month of commencing operations. Most overseas entrepreneurs choose to incorporate a new Israeli limited liability company (subsidiary) rather than operating through a foreign branch, as an Israeli subsidiary carries limited liability and local legal standing while still being available for 100% foreign ownership. Branches of foreign companies remain a valid option but tend to involve more complex accounting and liability considerations.

How do you register as self-employed in Israel?

The registration process is fairly straightforward but does involve several government bodies — spanning tax, VAT, and social security — and requires you to decide between Osek Patur and Osek Murshe. The following step-by-step guide sets out what is involved.

1. Confirm your right to work. Verify that your visa or residency status legally entitles you to work on a self-employed basis in Israel. If you are not certain, contact the Israeli Population and Immigration Authority or a licensed Israeli immigration lawyer before taking any further steps.
2. Create an account with the Israel Tax Authority. Register a username and password on the Israel Tax Authority’s online portal. If the portal does not accept your identification details, you will need to attend a local Tax Authority branch in person. You can call 02-565-6400 to find out which branch is responsible for your area.
3. Register with the VAT Office (Ma’am). Submit your registration application to the VAT office. Foreign nationals must produce VAT form 22, which contains a signed declaration from an Israeli representative accepting responsibility for that person’s dealings as a foreign business operator. This document may need to be notarised by a senior Israeli lawyer, and this requirement applies even to those registering as Osek Patur. Once your application is approved, you will receive a certificate confirming your atzmai status.
4. Open a tax file with the Income Tax Department (Mas Hachnasa). Visit the Mas Hachnasa office and go to the department for oved atzmai, where you will complete the required forms. You will be allocated a file number and arrangements will be made for advance income tax payments (mikdamot).
5. Register with Bituach Leumi (National Insurance Institute). Following registration, you will need to set up monthly advance payments (mikdamot) for Bituach Leumi. The amount will be calculated based on your projected revenue and any other employment income you may have.
6. Set up approved invoicing software. Israeli legislation requires self-employed individuals to issue formal receipts and record income digitally. Every time you receive payment for a product or service, you must issue a receipt and log the transaction. For those just starting out or receiving fewer than ten payments per month, Sumit offers a capable free plan.
7. Consider pension contributions. If Osek Zair status represents your sole source of income, you may be required to make contributions to a pension account. Your accountant or tax adviser can confirm the correct minimum contribution based on your earnings.

There are no registration fees for Osek Patur or Osek Murshe. Ongoing costs include tax advance payments, national insurance contributions, bookkeeping or accountancy fees, and VAT payments where applicable. Always verify the current registration requirements with the Israel Tax Authority, as procedures are subject to change.

How do you set up a company in Israel as an expat?

Incorporation in Israel can move quickly — typically within days or a couple of weeks where all documents are ready. Every company operating in Israel must register with the Registrar of Companies (Ministry of Justice) and the Tax Authorities (Ministry of Finance). The following step-by-step guide covers the process of incorporating a private limited company (Ltd.) as a foreign national.

1. Choose a company name. Your chosen name must be unique and must be registered in both Hebrew and one other language. While Hebrew and Arabic are Israel’s official languages, the Registrar will generally accept corporate documents in other languages in practice. However, the Articles of Association must be translated into Hebrew for filing purposes.
2. Prepare your incorporation documents. To register a company with the Companies Registrar, you must submit Form No. 1 (the application to register a company), a Memorandum of Association establishing the company’s corporate identity, principal objectives, shareholder liability, and shares issued, and Articles of Association setting out the rules governing the company’s conduct. The shareholders’ declaration must be verified by a lawyer licensed to practise in Israel.
3. Appoint directors and shareholders. Full foreign ownership at 100% is permitted. At least one director must be appointed; there is no requirement for private companies to have a resident director. Foreign directors and shareholders are permitted and will need to provide passport copies for identification.
4. Provide a registered Israeli address. The company must have a registered address in Israel. An Israeli law firm can supply this if needed — typically the lawyer or accountant handling your tax compliance. The registered office address must be lodged with the Registrar.
5. Submit the application and pay the registration fee. The company registration fee is currently approximately NIS 2,244 (confirm the current amount with the Registrar of Companies). Once registration is complete, the Registrar will issue a Certificate of Incorporation and a nine-digit company number.
6. Register for tax and VAT. To comply with Israeli tax law, companies must register with the Israel Tax Authority and Bituach Leumi, at which point a Tax Identification Number is issued. Companies must also register with the VAT Department of the Israel Tax Authority before starting business operations. A foreign entity conducting business in Israel must appoint a local VAT representative who is permanently resident in Israel and will take on responsibility for all VAT matters; that representative will be treated as the person liable for VAT.
7. Open a corporate bank account. The company must hold a corporate bank account at a locally registered bank, which can be one of the principal Israeli commercial institutions. As a foreign national, be prepared for rigorous anti-money laundering checks and detailed enquiries into the source of your funds and the nature of your business. Foreign owners without an Israeli identity number will be assigned the appropriate identifiers during this process.
8. File annual financial statements. All companies doing business in Israel must file audited annual tax returns and financial statements within five months of the close of their fiscal year. Companies must also submit the annual report to the Registrar and pay the annual fee — NIS 1,306 if paid by 31 March, or NIS 1,734 from 1 April (as of 2025); verify the current figures with the Registrar of Companies.

For the most up-to-date requirements, consult the Israeli Registrar of Companies and the Invest in Israel portal operated by the Ministry of Economy and Industry.

Can you work as a digital nomad in Israel?

Israel does not currently offer a dedicated, standalone digital nomad visa of the kind seen in Portugal’s D8 visa programme or Georgia’s Remotely from Georgia scheme. That said, various routes are available to location-independent workers depending on their nationality, potential eligibility to immigrate under the Law of Return, and the character of their work.

Many nationalities are permitted to enter Israel without a visa for stays of up to 90 days as tourists. Performing remote work for clients or employers based entirely outside Israel during such a stay occupies a legal grey area. Although you are not technically employed within Israel, you are generating income while using Israeli infrastructure — and doing so without proper registration exposes you to potential penalties from the Israel Tax Authority. Anyone planning to work in Israel beyond a brief visit should obtain both immigration and tax advice before travelling.

The Government of Israel introduced an Innovation Visa programme to attract entrepreneurial talent from abroad. Under this scheme, participants may remain in Israel for up to 24 months and apply for support through the Tnufa Programme — the early-stage startup initiative — to develop their innovative concepts. Should the project evolve into a company, entrepreneurs may request support from the Innovation Authority and, upon receiving approval, can obtain an expert visa to work within the company for up to five years. This programme is administered by the Israel Innovation Authority; consult their official website for current availability and eligibility conditions, as these may have been updated.

For those who qualify to immigrate to Israel under the Law of Return, aliyah — immigration as a Jewish person or close relative — provides a complete pathway to residency and the right to work. New immigrants (olim) receive a range of entitlements, including the right to work in any capacity, self-employment included. Israel has long extended tax benefits to new immigrants and veteran returning residents; these individuals benefit from a ten-year exemption from Israeli tax on income derived from foreign sources, calculated from the date they become a tax resident.

Israel supports a lively co-working scene, with spaces such as Mindspace, WeWork, and Urban Place found in Tel Aviv and Jerusalem. These venues offer not only practical workspace but also valuable opportunities to connect with fellow entrepreneurs, technology professionals, and other digital nomads. Tel Aviv’s tech hub consistently features among the world’s leading startup ecosystems, making it a compelling base for digital entrepreneurs regardless of which visa route they pursue.

What taxes and social contributions apply to self-employed expats and business owners in Israel?

Israel applies a progressive income tax system to individuals and a flat corporate tax rate to companies. Self-employed individuals are personally responsible for income tax, national insurance contributions, and — where registered as Osek Murshe — VAT. Grasping these obligations from the outset is essential: unlike employment taxation in many other countries, where an employer automatically withholds tax at source, every one of these responsibilities rests directly with you as a self-employed person.

Income Tax

Israel’s personal income tax operates on a progressive scale across multiple brackets. Osek Patur is liable for income tax (Mas Hachnasa) as well as Bituach Leumi. Because the Osek Patur annual threshold is relatively low, tax liabilities at modest income levels tend to be limited. Every business owner is required to file a tax return once a year. Tax forms are typically issued in February of the following tax year and must be submitted by 30 April. Consult the Israel Tax Authority for the current income tax brackets and rates, which are revised periodically.

Corporate Tax

Limited liability companies are subject to corporate tax on their taxable profits. As of 2024, the standard corporate tax rate in Israel stands at 23%. This applies to the company’s net earnings, reducing the amount available for distribution to shareholders. Dividends paid out to shareholders attract withholding tax in addition to this, so business owners should plan their remuneration arrangements with a qualified Israeli accountant.

VAT (Ma’am)

The standard VAT rate as of 2025 is 18%. Once your annual turnover exceeds NIS 120,000, you must register as Osek Murshe and charge VAT on your sales. Below this threshold, Osek Patur status carries a VAT exemption. One area that frequently catches new freelancers off guard is VAT: once registered as Osek Murshe, you are obliged to add 18% VAT to all client invoices.

National Insurance (Bituach Leumi)

As a sole trader, you must register with Bituach Leumi and take responsibility for all bookkeeping, financial reporting, and annual tax returns. You must also make compulsory monthly or quarterly advance payments covering both income tax and national insurance. Contribution rates begin at 4.51% for resident employees and 0.75% for non-resident employees, though the rates for the self-employed differ; consult the National Insurance Institute of Israel for the current schedule applicable to self-employed individuals.

Osek Zair Tax Relief

The Osek Zair status, introduced in 2024, enables self-employed individuals — whether registered as Osek Patur or Osek Murshe — with annual turnover below NIS 120,000 to claim an automatic 30% deduction on their income without needing to retain receipts for business expenditure. Income tax is therefore calculated on just 70% of revenue. This represents a significant administrative simplification compared with equivalent schemes in other countries, as it eliminates the burden of expense receipt management for smaller operators.

Tax Treaties

Israel has signed more than 56 double taxation agreements with countries across Europe, Asia, and Latin America. These treaties can reduce or remove double taxation on income earned in Israel by non-residents, or on foreign income received by Israeli tax residents. Always verify whether your home country has a treaty in force with Israel before finalising your tax planning arrangements.

Are there any incentives, grants, or programmes to encourage expat entrepreneurs in Israel?

Israel has cultivated one of the world’s most celebrated startup environments, and the government makes active use of tax policy and grant funding to draw in and retain international talent and capital. Several of the most pertinent programmes for expat entrepreneurs are described below.

Innovation Visa for Foreign Entrepreneurs

The Government of Israel’s Innovation Visa programme is designed to bring innovative entrepreneurial talent to the country. Participants may remain in Israel for up to 24 months and seek support from the Tnufa Programme — the early-stage startup initiative — to advance their ideas. The programme is run by the Israel Innovation Authority; visit their website for the current application process and host-organisation requirements.

New Immigrant (Olim) Tax Exemptions

Israel has long extended tax benefits to new immigrants and veteran returning residents. Qualifying individuals enjoy a ten-year exemption from Israeli tax on income sourced from abroad, starting from the date they become a tax resident. In many cases, they have also been exempt from any obligation to file or report foreign-sourced income and foreign assets during that benefit period.

Under a new reform programme anticipated to apply to immigrants arriving in 2026, tax benefits are expected to be made available to new immigrants and returning residents, who would receive a tax advantage on employment and self-employment income generated within Israel — applying to earnings of up to NIS 1 million per year (as of 2025). As this reform was still awaiting formal legislative approval at the time of writing, check the Israel Tax Authority for the latest developments.

High-Tech Tax Reform 2025

The Israel tax reform of 2025 represents the most far-reaching overhaul of high-tech taxation seen in many years. On 2 November 2025, the Israeli Ministry of Finance, Tax Authority, and Israel Innovation Authority jointly announced a comprehensive tax reform package addressing the most pressing issues confronting Israel’s high-tech sector. The package introduces major incentives for venture capital funds, foreign investors, returning professionals, and multinational research and development operations. Foreign investing bodies — including venture capital and hedge funds — will be exempt from capital gains tax on their direct investments in high-tech companies.

Eilat Free Zone

Israel offers the opportunity to establish a company within the Eilat Free Zone. Eilat is a port city on the Red Sea where local and foreign entrepreneurs can set up businesses with relative ease and take advantage of a favourable tax environment. The zone houses modern manufacturing facilities, workshops, and public areas available for lease. Reduced or zero VAT applies to certain goods and activities within the zone; verify the current terms with the Invest in Israel portal.

R&D Grants via the Israel Innovation Authority

The Israel Innovation Authority administers a wide range of competitive grant programmes for technology startups, including the Tnufa early-stage grant and larger innovation grants for more established companies. These are open to foreign-owned Israeli companies. Grant amounts, eligibility criteria, and sector priorities change regularly, so visit the Israel Innovation Authority website directly for current open calls.

What are the practical challenges of being self-employed or running a business in Israel?

Israel offers a genuinely accessible business environment, but expat freelancers and company founders regularly encounter real practical obstacles. Being aware of these from the start will spare you considerable time and expense.

Language and Bureaucracy

Hebrew is the primary language of all official government forms, tax filings, and legal documents. While many Israeli accountants and lawyers work in multiple languages, and corporate documents submitted in other languages are frequently accepted, Hebrew and Arabic remain Israel’s official languages. The Registrar of Companies requires that Articles of Association be translated into Hebrew. Dealing with Bituach Leumi, the tax authority, and municipal licensing offices — whether in person or online — will typically demand Hebrew literacy or professional assistance.

The Role of an Israeli Accountant (Roa Heshbon)

You may choose to conduct the entire registration process through a qualified tax consultant or accountant, who can also assist with annual reporting obligations. For Osek Murshe registrations and company structures, engaging a licensed Israeli accountant (roa heshbon) is strongly advisable rather than merely helpful. They manage bi-monthly VAT returns, advance income tax payments, pension fund administration, and year-end filings — all of which attract penalties if not completed on time.

Banking Access

Opening a business bank account as a foreign national can be a slow process. Israeli banks apply stringent anti-money laundering procedures and demand extensive documentation covering the source of your funds and the nature of your business activities. Expect thorough AML and KYC checks, ultimate beneficial owner verification, and detailed explanations of where your funds come from and how they will be used. Foreign owners without an Israeli identity number will be assigned the necessary identifiers during the process. Allow several weeks for this and consider using a law firm’s address and representative services to smooth the application.

Invoicing Requirements

As a sole trader, you bear full responsibility for bookkeeping and financial reporting. Israel imposes specific rules on invoice numbering and requires the use of approved software for issuing tax invoices (heshbonit mas). You should configure your accounting or invoicing solution to support the applicable VAT rate and invoice allocation controls, and to align numbering correctly for invoices of NIS 20,000 or more. Failure to issue invoices in the prescribed format is a common compliance error among newly arrived expat freelancers.

Working Alongside Employment

If you are already employed in Israel and wish to add self-employment income, you must still register as an atzmai and report that income separately — this applies whether you are a full-time freelancer, an employee running a side business, or carrying out ad-hoc consulting work. Your advance payment levels with Bituach Leumi must be updated to reflect your total combined income.

The Osek Zair Election

Whether to elect Osek Zair status is a decision best taken on the advice of an accountant or tax adviser. Under Osek Zair, your deductible expenses are capped at 30% of income. If your actual business costs substantially exceed this figure, it may be more advantageous to register as Osek Patur or Osek Murshe without making the Osek Zair election.

Frequently Asked Questions

Can I be employed and self-employed at the same time in Israel?

Yes. Israel expressly allows individuals to hold employee and self-employed status concurrently. This applies whether you are a full-time freelancer, an employee running a side business, or undertaking occasional consulting work. You must register as an atzmai and declare your self-employment income separately. Your Bituach Leumi advance payments will need to be recalculated to cover your combined earnings. An accountant can help you arrive at the correct advance amounts and avoid underpayment penalties at year end.

How do I issue invoices to foreign clients from Israel?

Invoicing foreign clients from Israel is common practice, especially in technology and consulting. If you are registered as Osek Murshe, you ordinarily apply 18% VAT to domestic services; however, certain services supplied to clients based entirely outside Israel may qualify for zero-rated VAT treatment. The applicable rules are nuanced and turn on the type of service provided and the residency of the client. Consult the Israel Tax Authority or your accountant for guidance specific to your situation. In all cases, invoices must be issued through approved software and carry proper sequential numbering.

What happens to my self-employment registration if my visa or residency status changes?

Your entitlement to operate as a self-employed individual in Israel depends on your legal status authorising you to work. Should your visa lapse, not be renewed, or your residency circumstances change, you may no longer be legally permitted to function as an atzmai. In that situation, you should formally notify the Tax Authority, the VAT office, and Bituach Leumi, and close your files with each body. Failing to do so may result in continued demands for contributions and financial penalties even after you have stopped trading.

Do I need a local Israeli director or shareholder to set up a company?

Full foreign ownership at 100% is permitted in Israel. At least one director must be in place, but private limited companies face no requirement to appoint a locally resident director. You will, however, need an Israel-resident representative for VAT registration purposes and a registered Israeli address. In practical terms, this means retaining a local lawyer or accountant to fill those roles on your behalf.

How long does it take to register as self-employed in Israel?

Where all documentation is in order and the case is straightforward, registration with the VAT office and tax authority can be finalised within a few days to two weeks. Foreign nationals may encounter a longer timeline because of the need to prepare the notarised VAT form 22 and designate an Israeli representative. Company incorporation for an Ltd. can also be completed within days to a couple of weeks once documents are in place. Bank account opening, however, often takes considerably longer owing to compliance requirements.

Are there double taxation treaties that protect self-employed expats in Israel?

Israel has entered into more than 56 double taxation agreements with countries across Europe, Asia, and Latin America. These treaties generally cover employment income, self-employment income, business profits, dividends, and capital gains. If you remain a tax resident in your home country while earning income in Israel, or conversely if you are an Israeli tax resident with foreign income, the relevant treaty will determine where your tax obligations lie. Always review the specific agreement between Israel and your country of tax residence, and consider taking specialist cross-border tax advice.

What is the Osek Patur annual turnover limit and what happens if I exceed it?

The Osek Patur threshold is fixed at NIS 120,000 for 2024 to 2026, although this figure is reviewed periodically — confirm the current amount with the Israel Tax Authority. If your income surpasses the annual ceiling, you must inform the VAT office without delay and convert your registration to Osek Murshe, effective from the date the threshold was crossed. Once you have changed status, you are not permitted to revert to Osek Patur for a period of two years.

Is professional accounting support essential, or can I manage compliance myself?

The principal challenges involve projecting revenues accurately, selecting the right Osek category, managing VAT where required, and keeping national insurance contributions up to date. The sole trader structure carries a lighter administrative load and simpler tax filings for those registered as Osek Patur. For Osek Patur with the Osek Zair election, it is feasible to handle compliance independently, particularly with the help of online government portals. For Osek Murshe registrations, company structures, or any situation involving foreign income, dual tax residency, or material business expenses, a qualified Israeli accountant is strongly recommended. Consulting an accountant about deductible expenses can be particularly worthwhile for anyone working from home.