Because freelancers are not our employees and we don't pay taxes on payouts, they must declare any income received through Solar Staff by themselves.
To carry on tax accounting in Israel for your Solar Staff income, you need to:
Be a tax resident;
Have a tax identification number (TIN);
Be registered as an individual entrepreneur under one of the available tax regimes.
Tax residence in Israel
Israeli residents are taxed on their worldwide income, while non-residents are taxed only on their Israeli-sourced income.
The following individuals are recognized as Israeli tax residents:
whose "center of life" is in Israel (family, social, and economic interests);
who have been present in Israel during a certain tax year for 183 days or more;
who have been present in Israel during a tax year for 30 days or more, and a total of 425 days or more during such tax year and the two previous tax years (on aggregate).
If an individual decides to leave Israel and become a non-resident, they must pay exit tax at the time of their exit based on the market value of the assets, or pay the tax proportionally when the assets are sold.
New immigrants are entitled to:
A one-year acclimation period from the date of their arrival. During this year, these individuals can request not to be considered a resident of Israel for income tax purposes. This request requires the person to notify the Israel Tax Authority (ITA) within 90 days of arriving in Israel;
Exemption from taxes on foreign income for 10 years (the countdown begins from the transfer of the "center of life" to Israel, not from obtaining Israeli citizenship).
Eligibility calculator for new immigrants.
Tax ID number
An individual's tax identification number consists of 9 digits and coincides with the number on the ID card (t'udát zehút, תעודת זהות). It is assigned at birth, and for new immigrants – at the airport upon arrival in the country (initially, a temporary t'udát zehút is issued, which must later be changed to a permanent biometric one).
The list of documents required to obtain a t'udát zehút:
A valid international passport for each family member;
A visa allowing entry as an immigrant, in the passport or on a separate document;
A letter from a Jewish Agency representative (if any);
Birth certificates of each family member (originals, not copies);
Documents certifying the family composition: marriage/divorce certificate, death certificate of the spouse for widowed persons;
Any documents confirming Jewish roots;
Academic documents: diplomas, school-leaving certificates, and so on.
Taxes and contributions
To receive income, freelancers in Israel have to register as an individual entrepreneur (available only to Israeli citizens or new immigrants when obtaining an Israeli passport).
To set up as an individual entrepreneur:
Register with the VAT (ma'am, מס ערך מוסף) Department and obtain:
Information on VAT reporting deadlines and format.
Submit an application and obtain a registration number, as well as choose a tax regime at the income tax authority (mas ahnasa, מס הכנסה).
After successful registration, individual entrepreneurship information is transferred to the National Insurance Institute (bituach leumi, ביטוחי לאומי).
In Israel, there are two regimes for individual entrepreneurs:
VAT registration is mandatory for all individual entrepreneurs. Below is more information about individual entrepreneur taxes and contributions.
VAT-exempt entrepreneur
A VAT-exempt entrepreneur (osek patur, עוסק פטור) is not obliged to pay VAT, but must submit an annual zero VAT return. The maximum revenue for the osek patur in 2023 is ILS 107,692 (recalculated annually). Some professions cannot register as an osek patur: architects, doctors, tax consultants, lawyers, business consultants, real estate brokers, as well as those engaged in any activity that requires licensing.
Osek patur taxes and contributions:
Income tax. Individual entrepreneurs pay income tax (mas hachnasa, מס הכנסה) just like individuals – at a progressive rate, with income in higher brackets taxed at higher rates:
Taxable income, ILS | Tax rate, % |
up to 81,480 | 10 |
81,480 to 116,760 | 14 |
116,760 to 187,440 | 20 |
187,440 to 260,520 | 31 |
260,520 to 542,160 | 35 |
542,160 to 698,280 | 47 |
from 698,280 | 50 |
There are deductions available for the income tax in the form of expenses related to business activities: marketing, payments for consulting or professional development, rental of premises, and more. In addition, Israeli legislation provides for tax incentives that reduce the amount of tax depending on gender, age, place of residence, and so on.
Calculation example
Income = ILS 90,000, tax: (81,480 x 10%) + (8,520 x 14%) = ILS 9,341
Tax returns associated with this regime:
Advance payments return (mikdamot, מקדמות) — every two months by the 19th day of the next month (for example, the reporting for January–February is submitted before March 19).
Income tax return — annually, until April 30 for in-person submission or until May 31 when filing online.
Tax return on capital — once every 4–5 years.
Payment of tax. Income tax is paid via monthly advances until the 16th day of the month following the reporting one in one of several ways. We recommend specifying income tax payment deadlines and the possibility of extending them directly at the tax office.
Tax accounting. Individual entrepreneurs are required to keep accounting records, namely a book of revenue accounting with receipts (which are sent to the client), a book of external documents (contains information about invoices and receipts issued to the individual entrepreneur), a book of receipts and payments, and a book of orders.
Social contributions do not involve reporting to the National Insurance Institute, because the total amount of contributions is determined on the basis of the annual income tax return, which the tax inspectorate sends to the National Insurance Institute on its own following the submission. The individual entrepreneur's contributions are calculated at rates that depend on the average salary:
| Income up to a level of 60% of the average salary | Income exceeding 60% of the average salary |
Contributions to the National Insurance Institute | 2.87% | 12.83% |
Health insurance contributions | 3.1% | 5% |
This website indicates the deadlines for paying the contributions for several months ahead. Payment methods are available here.
Useful links: Income tax calculator; Eligibility application for income tax deductions; Certificate of paid insurance contributions provided to the tax office; Osek patur taxes service.
Non-VAT-exempt entrepreneur
A non-VAT-exempt entrepreneur (osek murshe, עוסק מורשה), as the name implies, is required to charge VAT on their services/sales. An individual entrepreneur gets switched to this regime if they exceed their annual turnover threshold (ILS 107,692), and if they want to switch back, they'll first need to stay below that threshold for at least 2 calendar years. Alternatively, you can just register as a non-VAT-exempt entrepreneur when applying to the VAT Department. The osek murshe isn't subject to any limitations as regards their activities.
Osek murshe taxes:
Income tax and social contributions are the same as osek patur's.
Value-added tax (ma'am, מס ערך מוסף) is levied at 17%, but if services are provided to foreign residents (companies or individuals), then the VAT rate is 0%.
Reporting and payment. The osek murshe is required to issue invoices when receiving income (the document must be in Hebrew, as it is to be submitted to the Israeli tax authorities).
There are two types of VAT returns:
Regular returns submitted during the year using the form issued to the individual entrepreneur when they registered with the VAT Department. These periodic returns must be filed before the 15th day of the month following the end of the reporting period, and the tax must be paid before the same deadline. For online submissions, this deadline is extended until 6:30 pm of the 19th. If the entrepreneur's income for the 12-month period ending on August 31 exceeds ILS 1.615 million, they need to submit these returns monthly; if the income is below ILS 1.615 million, then they are to be filed every two months (for example, the return for March–April would be submitted before May 13). The turnover amount based on which these deadlines are determined is updated every year on January 1 and can be viewed on the website of the Israel Tax Authority;
Final returns submitted at the end of the year (before January 31) by filing a VAT tax return.
If the entrepreneur has no business activity during the reporting period, they are still required to file a zero return. If zero returns are submitted to the tax authority for more than two reporting periods (of a month or two months), the individual entrepreneur can file an application for freezing VAT reporting.
Useful links: VAT guide for individual entrepreneurs.
IMPORTANT! Solar Staff does not have the option to choose a tax status for freelancers based in Israel, but you can fill in your tax ID in your account.
Additional info
Official website of the Israel Tax Authority.
Israel has double taxation treaties with a number of countries.
Confirmation of tax withholding and bookkeeping for opening bank accounts.
Service for checking tax arrears and their payment.
Income received through Solar Staff is declared based on certificates and invoices.
If you have any questions, get in touch via the chat in your Solar Staff account or email us at [email protected].