Comprehensive guide to opening a business in Israel

June 30, 2010

I am so glad that I did not write this post such a bombastic title, I am not deserving!

As many of you know, Rachel Berger is a senior executive (to use Old Countryspeak) at Nefesh Benefesh, and if I haven’t plugged that organization until now on my blog, my bad, here it is.

Anyway, somehow I came across this guide, and then found it was barely findable, so I am assuming Rachel won’t mind my posting it here. As a non-professional, I do not attest to the correctness of her writing, nor of mine, blah blah blah. YMMV.

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Date: Aug 21 2009 – 5:46pm

Establishing a Business

Step 1: Opening a File for VAT
To open a Tik (file) for Ma’am (VAT), you will need to go to the local tax office. To find the local tax office, check online or in a phone directory under “Mas Hachnasa” (income tax). You will need to bring your Teudat Zehut (ID card) with you and fill out forms with the required information. The type of Tik that you open depends on how much you plan to make a year, i.e., the scope of your business.

If you expect to make under 70,000 NIS: Open a Tik for an Osek Patur, which means that you are exempt from Ma’am and – basically – do not need to interface with the income tax offices, which is very convenient. You will need to buy a Pinkas Kabalot (receipt book) so that you can issue receipts for your clients. A Pinkas Kabalot can be found in any office store. can will use the receipts from this Pinkas for bookkeeping purposes.

If you expect to earn over 70,000 NIS: Open a Tik for an Osek Morshe. You will receive an official Ma’am book. Clients will be charged Ma’am and you will basically be required to forward the Ma’am that they pay to the Ma’am office. When you sign up, make sure to ask the exact details of where and how you make the payment.

Step 2: Mas Hachnasa (Income Tax Authorities)
To open a file as an Oved Atzmai (freelancer) , you need to take the Osek Patur or Osek Morshe certificate to the Mas Hachnasa (income tax) office. Find the department in Mas Hachnasa that handles freelancer, and fill out the necessary paperwork. Once you’ve completed the registration, you will be required to submit a tax form once a year, which you will be receiving in the mail from the tax office.

Buy an accountant book – Sefer Tikbulim V’Tashlumim – at any office store, and use it to keep track of your payments and expenses. If you are careful about recording your transactions, it will make it easier to fill out the annual tax form.

Save all of your receipts and relevant paperwork, for a period of seven years. While noone wants to be audited, it does happen, and the only way to protect oneself is by saving all of the necessary documents.

An Atzmai who works from home can deduct some expenses from home bills such as electricity, internet, phone costs, Arnona (property tax), etc. The percentage of the deduction is based on the area used for the business. For example, if a house has four room and one of the rooms is used for business, the deduction that is recognized would be a quarter of the total cost. For more information about what can be deducted, speak to a qualified accountant.

Step 3: Bituach Leumi
When you open a file at Mas Hachnasa, a file is automatically opened for you at Bituach Leumi (National Insurance Institute).

The Bituach Leumi office will send you a form requesting your employment details, including any pay stubs that you have, and an Ishur (statement) from the bank providing that you are the owner of your bank account.

Once you submit this form, Bituach Leumi deducts 9% to 16% of your income as either Bituach Leumi or Mas Briut, depending on how much money you earn. The exact amount that will be deducted is listed on the Bituach Leumi website (HYPERLINK “http://www.btl.gov.il/”www.btl.gov. il).

Step 4: Declaration of Capital
Approximately every four years, you will be asked to submit a declaration which indicates your net worth, including your earnings and any properties that you own. It is recommended that an accountant with expertise in Hats’harat Hon prepare this form on your behalf.

Rachel Berger
Senior Career and Business Developer
NefeshB’Nefesh


Don’t Worry, Be Happy!

August 4, 2009

Someone posted this as a comment somewhere on my blog, and I thought it can be halpful as a post. Bevakasha!

  1. ari Says:

    hi gidon.

    i’m planning on heading out to the tax offices now to register as an atzmai’i. any advice as i head down this potentially bankrupting, forcing-me-to-move-back-to-the-U.S.-shekeless-road?

  2. Gidon Says:
    Hi Ari,

    Good luck in your endeavors!

    I don’t know the nature and scope of the work you intend to do, but in general, registering as an atzmai is not potentially bankrupting!

    Especially, my “expertise” (sic) is about osek za’ir, which means small business, less than about 60,000 NIS a year (income or profit, or somewhere in between), about 5,000 NIS a month. If you make so little, then chances are the authorities will not require payments or even fines that will bankrupt you.

    This blog focuses on interfacing with bureaucracy, not financial success of your business. As a friend of mine once wisely said, he hopes he gets taxed a lot, because that means he is making a lot.

    If your business idea and execution are sensible and market-driven, then you will probably succeed.

    If you add advice from NBN, MATI, various blogs and websites to that mix, and don’t “jump over your pupik”, then you have a good chance at success, and will probably not be forced to move back to the US without a dime.

    I am sure you wrote some of your comment tongue in cheek, but keep your chin up, be optimistic, and good luck!


If I can do it, so can you…

February 13, 2008

If you can provide a service to others that they are willing to pay for, or own an asset that generates income, you should consider opening your own “tik” (file) in Israel.

This is one way that you can provide these services, get paid for them, and fork over taxes and fees to Governmental and quasi-governmental bureaucracies as legally required, and find grace and perceived wisdom in the eyes of God and man. Definitely Win-Win-Win.

On the other hand, conventional wisdom dictates that opening up a tik in Israel is tantamount to standing outside a police station with a neon sign flashing over your head saying “I’m a Thief! Arrest, Interrogate, and Fine Me!”

An incorrigible optimist, I believe in the idea behind Israel’s Basic Law: Freedom of Occupation (1994) (www.knesset.gov.il/laws/special/eng/basic4_eng.htm), namely, it is proper and in the State’s interest to enable and even empower individuals to make an honest living.

Personally, after years of providing these services through Yeul Sachir, I have decided that I want to open a tik and become an osek patur, AKA osek za’ir – small business.This blog is a diary of my experiences, discussions, and interfacing with officialdom, with as many resources that I can find or create, to make your experience doing the same as easy as possible.