In Israel, you must declare your expected income and pay a specified amount to Bituach Leumieach month based on that declaration.
To work as an independent in Israel, you must be registered as an atzmai (lit. Ã¢â‚¬Å“independentÃ¢â‚¬Â). The registration process is tedious and requires a lot of paperwork. It also involves three separate offices. Many choose to employ an accountant to do the filing for them, though it may be done independently. The following information is a guide to registering as an atzmai. It has been adapted from theAngloList website. For the most up-to-date information on regulations of becoming an atzmai, we recommend seeking the services of a professional.
Two Types of Atzmai
The first type of atzmai, an osek patur,has declared earnings of less than 79,482 NIS (as of 1/2015) in any business year and is not required to charge clients maÃ¢â‚¬â„¢am (VAT). An osek patur may not reclaim maÃ¢â‚¬â„¢am on business purchases. You may only issue receipts on payment, you do not invoice for work. If you exceed the amount of 79,482 NIS throughout the business year you must request to change your status to osek morshe the following month. As an osek patur you are required to pay Bituach Leumi contributions once a month (initially based on your estimated income) and submit a tax return to Mas Hachnasa at the end of each year. Note: You cannot revert to being VAT exempt for two years following a change in your status.
Certain professionals, including accountants, doctors and lawyers, are unable to register under osek patur and must register underosek morshe.
An osek morshehas declared earnings of more than 79,482 NIS in any business year and is required to charge maÃ¢â‚¬â„¢am(VAT). An osek morshe is entitled to reclaim maÃ¢â‚¬â„¢amon business purchases. You may issue an invoice.
A separate business bank account is not required. The business year in Israel is from January 1 to December 31.
Registering as an Atzmai in Israel
MaÃ¢â‚¬â„¢am Ã¢â‚¬â€œ Sales Tax
Once you have decided whether you are an osek patur or an osek morshe, you will need to go to your local maÃ¢â‚¬â„¢am office. Here you are required to open a tik (file) with your teudat zehut/passport, after which you are issued a certificate showing your atzmai status.
You may also need to take your checkbook with you as proof of your bank account. If you have a joint bank account, both owners will need to be present with teudot zehut or passports.
It is now time to buy a pinkas kabalot(receipt book) and a stamp with your name and business number (which will be your ID number) from a stationery store.
Mas Hachnasa Ã¢â‚¬â€œ Income Tax
At Mas Hachnasa, you will need to find the section for oved atzmai. Mas Hachnasa will ask you to present your certificate from maÃ¢â‚¬â„¢am and to complete the necessary forms. Once registered, you are required to complete a tax return each year (you may opt to have an accountant assist with this). If necessary, an account book can be purchased from a stationery store. In the first 12 months of Aliyah, Olim are exempt from income tax on income up to approximately 105,000 NIS. The exemption is calculated on a points-based system and it reduces on a sliding scale up to 3.5 years from the date of Aliyah.
You may also want to speak to an accountant about deductible expenses, especially if you work from home.
Once a year you will be required to file a tax return. Tax forms are usually sent out in February of the following tax year and you will have until 30 April to submit these forms.
Bituach Leumi Ã¢â‚¬â€œ National Insurance
Finally, download and completeform 6101 from Bituach Leumi to open a tik for making Bituach Leumi payments. You may have to provide previous pay slips. Also required is confirmation from your bank showing ownership of your bank account. The form can be mailed, faxed or given in person at your local Bituach Leumi office.
You will pay between 6.72Ã¢â‚¬â€œ11.23% for Bituach Leumi payments, and between 3.10Ã¢â‚¬â€œ5.00% for Mas Briut. Olim are exempt from Bituach Leumi for a period of 12 months, unless income exceeds the set minimum. Otherwise, you are required to pay a minimum of 167 NIS (as of 1/2015) per month to Bituach Leumi regardless of whether you are working or not. Note: A womanwho is married to an insured person and does not work outside her home is exempt. Contributions will be assessed annually based your tax return.
In order to de-register from these statuses, you must complete a form for maÃ¢â‚¬â„¢am and inform Bituach Leumi.