Thank you for your blog – it’s quite a nice support!
I am an olah from Toronto,
Hi loyal fans!
I apologize for not updating this blog as frequently as I should. Please submit your request for your money back in triplicate:-)
Anyway, great news!
As I had a feeling would happen, Mas Hachnasa has extended the deadline for submitting the doch shnati tax return. It was scheduled to be April 30, 2011. This was three days after the end of Pesach, and Shabbat, by the way.
Anyway, nu nu nu I was a naughty boy and didn’t submit my form till then.
But as I said, I had a feeling it would be extended.
So today I succeeded in finding a phone number where someone answered. 02-6559559 ext 6 then 2. That brought be to Galia in the Mateh, and lo and behold, she answered the phone!
So I asked her if there has been an extension. She said I think so, wait a sec. She asked a colleague and he said yes (get this) till June 30! That’s right, not one month, but TWO MONTHS extension!
You can all go back to sleep now.
BTW, you have to submit it by Internet online starting this year. Bli neder, I will report how (easy it is) to do this.
a message to me, a reply in a comment somewhere on this blog, and a repost here in its own post..
Dear Chana Leah,
Thanks for writing, sorry for the time lag in responding, I guess you get what you pay for:-)
I have been reading your blog on-and-off for a while. I just opened an osek patur, but I am still working in a regular “sachir” job part-time. I wanted to ask you the following: Will this affect the taxes that I will pay at my sachir job or as an osek patur?
>>I remind you, my “advice” is not professional, just my educated guess. Depending on your salaried income, it probably will not impact. I don’t have the exact numbers, but from what I understand, if your combined income is under a certain number, you do not pay more. See below>>
If so, do I need to visit Te’um mas or any other office to fix this?
>>The question isn’t how much tax you will pay, but how much people will withhold from you. Ultimately, around Pesach you will go to the free advice hours, and they will help you complete your tax return (doch shnati) and tell you how little if any tax you will have to pay. But until then, you should go the Mas Hachnasa and get a teum mas, so your salaried job won’t deduct more than he should, and your clients won’t think they have to withhold at source (nikkui mas bamakor). Getting a teum mas is painless, just takes time. I understand that you can do it online nowadays. Taxes.mof.gov.il or something like that.
Thanks for your help, Chana Leah
Thanks, Gidon Ariel
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.
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.
Senior Career and Business Developer
Some one else posed this question and I am posting it here, with my answers interspersed. Hope it hopes him and you!
I have been reading your blog about succeeding as an “Atzma’i” for advice about my situation. I am a 24 year old recent oleh from Boca Raton, FL now living in Jerusalem.
>>Welcome! my sister is from Boca, we should compare notes..
I am in the midst of my enlistment process for the IDF, having already hope to be drafted in the summer.
>>Behatzlacha rabba on that too!
In the meantime, I’ve been hired as an outside contracted translator for a consulting firm based in Tel Aviv, on a part-time basis. My employer says that her company can only pay me if I open an “Osek Za’ir” file, because I am not a company employee and they do not want me to be entitled for full employee benefits.
>>They are thinking inside the box that they know. The know that they do not want to hire you, for the reason you mention and maybe others. They know that they have to work within the framework of the law, so they cannot pay you “under the table.” They realize that they will not be paying you so much that it would make it worth your while to open up a tik as osek mursheh, and they are familiar with the less known possibility of Osek Zair, which seems to fit your situation, so that is what they are recommending/requiring of you.
Researching your site and speaking to other people, it seems she meant an “Osek Patur”.
I intend to work at this position until my army draft, no more than 4 or 5 months. Moreover, the total salary I earn won’t amount to more than 20,000 shekels.
>>If this (or even as much as about 60K NIS) is all that you will make during calendar year 2010 in receiptable work (not as an employee, or as a soldier I would venture to guess – any position with a tlush maskoret) then they are right – you can be an osek zair, and probably should be.
I’ve spoken to some employment specialists from Nefesh B’Nefesh, and a few Jerusalem-based accountants about my status and which option of registering as an independent seeks me best. The consensus among them seems to be that I should open an Osek Patur of the “third category”- as an atzma’i- with a Koach Adam company.
>>I am not sure what you mean here. When you go to open as an Osek Patur (in the VAT office), you actually first open as an Atzmai in the Mas Hachnasa office. There, at Mas Hachnasa, they ask you what you want to do as your business, but I don’t remember categories, you just tell them Translation Services or Translating and Business related services or whatever, they don’t really care too much about small businesses that barely bring them tax income at all .. I for SURE don’t understand this Koach Adam part..
(One account told me to look up a Jerusalem-based company called Oleh Sapir in the white pages, which I couldn’t find) According to them, I open a file with this company, and my employer sends my paychecks to this firm, who takes a small commission to handle my case.
>>Ahh. “Oleh Sapir” is probably Yeul Sachir, a company that I am quite familiar with, and owe my loyal readers a deeper post about. I can see how someone might call this a Koach Adam company, but it works quite differently from standard koach adam companies, like Manpower.
With Manpower, they collect potential workers for positions that they specialize in, then companies who want to hire someone to do that job but want to save themselves some headaches (interviewing, training, benefits, etc etc) and frequently for a short term contract, go to Manpower and get someone.
With Yeul Sachir, the service professionals do the services they specialize in, but they also do the marketing of their services, and have a personal relationship with the companies/people they do business with. Yeul Sachir does the finance work, bills your client and collects (with help from you) and pays you with a tlush, as you are legally their employee. They take a cut of 7% up to 400 NIS a month for their services.
They maintain that the advantages of this option include: easy opening and closing my file as an Osek Patur,
>>Actually, establishing a repationship with Yeul Sachir obviates the need to open or close an Osek Patur file at all.
no taxation on American assets,
>>I am not sure of this one
and no hassle opening my own Osek Patur at varius bureaucratic agencies while I am being interviewed by the army agencies to secure my placement.
as above, no need to interface at all with Mas Hachnasa or VAT
I am still confused about how to proceed, as I am in the dark with the Israeli tax system and bureaucratic institutions. I would greatly appreciate any advice you can give me about how to go about this.
>>Notwithstanding the extensive descriton I gave above of Yeul Sachir, since it looks like you are only going to bill about 20K NIS this calendar year, and since I assume your client will be a business, which means they do not care whether they “pay” their service providers VAT or not (because the deduct it), Rodan Gordon (principal at Yeul Sachir) would probably encourage you to open a tik as an Osek Zair.
Try calling him at 02-6510666, tell him Gidon sent you.
Obviously, the answer is as much as you can.
But I have recently noticed that there are a few bureaucratic bodies who care how much I make, and charge me. And some of them charge me more if I make more than a certain amount (in some cases, they charge me nothing if I stay clear of that minimum), and some charge me more (relatively) if I make less than a certain amount.
VAT only “charges” me if I make more than about 60,000 NIS a year. (Yes, I realize it’s more complex than that, they don’t really charge me etc, but for the sake of my own radar, let’s keep it at that.)
Bituach Leumi charges me a minimum of about 80 or 110 NIS a month (I can’t remember and can’t be bothered to go find the paper that hinted at this number). This is even if I make 80 NIS a month, or less – even someone who is unemployed is required to pay National Insurance premiums monthly. And once you make more than 17,443 NIS a year, your premiums go up (not sure how much, but it starts at about 6% I think (that’s about 1000 [the premium you pay annually for up to the minimum income rate) divided by 17443 (the minimum income you start paying more than the minimum premium on).
Here are the other offices that care about my income as an atzmai (and even as an employee, for the most part):
The IRS: Evidently, if you are a US citizen, you are required to complete an annual tax return. In principle, you will owe no income tax if you make less than some amount (depending on number of dependents etc.) For me, this number seems to be a walloping $70,000 or $90,000, whatever, they are both pie in the sky right now. BUT, you are entitled to up to $1000 per child rebate (I use the good help of Jeff Melamed for this http://groups.yahoo.com/group/ustaxreturnREFUNDS/). That “Up To” depends on your income. When you start making less than a certain amount, then your rebate per child is less. This depends on the number of kids you have etc. etc., my “aim for” amount to get the the maximum is about $46,000 a year household income.
FBAR: This requirement is not a tax, it is simply a reporting requirement. If you have a cumulative balance of more than $10,000 in all of your overseas (i.e., not USA) accounts, including banks, keren hishtalmut, and dunno what else, you have to report all of these accounts. You get to the cumulative balance by finding the highest recorded balance of each account for the year (say, Feb 15 for one bank, Dec 31 for the just-put-in account) and adding them up. This thingie got a lot of press this year, because it is the first time they are clamping down on enforcement, with draconian penalties threatened. (If you are interested, I checked my balances for every year since 2003, the year they are checking on since nowadays, and I was only on their radar for 2 of those years). (This link is a good start if you haven’t heard about this until now: http://muqata.blogspot.com/2009/06/us-citizens-in-israel-have-you-filed.html)
Doch Shnati: As I have blogged here before (most of this blog is about this), if you keep pretty good records of your income and your spouse’s income, then go ask for help towards the deadline during Mas hachnasa’s free advice hours, you should be OK. BTW, for me, I think I would have had to staert paying Israeli Income Tax at household income of no less that 200,000 NIS a year.
So, if you have the same factors as me, then here are the annual numbers that raise a flag:
17,443 NIS – what to aim for if you want to pay the lowest amount percentage and cash-wise for Bituach Leumi.
60,000 NIS – when an Atzmai moves from being an Osek Patur to an Osek Mursheh.
$10,000 – FBAR reporting requirement
$46,000 – household minimum to get the maximum Child Tax Credit refunds
200,000 NIS – start paying Israel Income Tax (Mas Hachnasa)
$70,000 – start paying US Income Tax
DISCLAIMER: I wrote most of the above from my own limited knowledge, with barely even using Google. I hope I haven’t made any glaring mistakes, and I will appreciate any corrections and additions.
I got a notice in the mail saying:
Re: Postponement (Hash-hayah) of Increase of Prepayments for Tax year 2009
Your 2008 tax return was received in your file.
We see that it justifies increasing your pre-payments to 16%
according to clause 180 B 1 in the Income Tax Code.
Please check the correctness of these details, because if you do not do so by 3 July 2009, that increase will be activated.
Now, this surprises me, because, as my loyal blog readers know, I made much less than the 50,000 NIS ceiling requiring pre-payments (in fact, requiring payments at all!), and I was told that I would NOT need to make prepayments.
I assume this is just the system justifying itself.
Anyway, I found a great blog that explains what to do in plain English:-), so I found the post that talks about submitting a request for an exemption (ptor) from prepayments. Unfortunately, I had not written the name, phone number, or fax number of the person I needed to be in touch with, so hoping that she won’t retire by next year, here is the info:
For Jerusalem area small businesses (NOT Jerusalem itself!) you have to use Pkid Shuma Yerushalayim Shtayim (#2) which is near the Tachana Merkazit (actually, next to Center One)
Hebrew info page: http://ozar.mof.gov.il/taxes/cities/jeru.asp
So I filled out the form 2216/א at http://www.mof.gov.il/taxes/tfasim_mas.htm, called 02-5019203, spoke to Gilad (probably Tekoa, the Deputy Tax Assessor) who told me to send a fax to “Attention: Dafna” at 02-5019250.
My guess is that that will do the trick.
I will bli neder report back here when I get the official letter saying that in fact I am exempt from prepayments, or if they decide that I must prepay.
If anyone wants me to spend time translating Form 2216A, please ask.