Israel just made it a lot easier for an individual to start building a small business. The “עוסק זעיר” (“Osek Za’ir” / micro-business) reform aims to simplify the tax reporting process for those ready to take the first steps in building their dream business or earn an extra shekel or two on the side. In most cases, this new system is relevant to you if you have a small business or are looking to start one and you:

• Earned/will earn 120,000₪ or less in the relevant calendar year (total annual business revenue)
• Have no employees
• Don’t have a current or former employer as one of your clients

While this reform is designed to help you get started without the need for an accountant, it doesn’t mean you won’t eventually benefit from tax advice – especially as your business grows or if you’re a US citizen. We hope this article is practical and helpful, but please remember that nothing here should be considered personal tax or legal advice.

We will be updating this article regularly as we learn more about Osek Za’ir and gain tips from others who successfully work through these steps.

What is an Osek Za’ir (עוסק זעיר)?

The general designation for a self-employed individual in Israel is an “Atzmai“. Up until 2024, being an Atzmai could be challenging and expensive. However, this new sub-category of “Osek Za’ir” turned that all on its head. Suddenly you can start a business with almost zero overhead – no accountant, no tracking expenses. You can spend almost all of your time building your business. Here are some of the main advantages:

• Less reporting: Instead of submitting quarterly or monthly revenue reports, you will only need to report twice a year.
• No receipts required: 30% of your revenue will automatically be considered expenses and deducted from your revenue when calculating your profit for tax purposes. No need to save receipts or track every shekel you spend on your business.
• Automatic tax calculation: The Tax Authority’s new system will calculate how much tax you owe, so you won’t need to hire an accountant to help you figure it out.

In addition, the tax authority has recently made significant improvements to the registration process by integrating the tax department, VAT, and Bituach Leumi all into one form.

What will it actually be like to run an Osek Za’ir as a side gig?

Before we dive into the technicalities, we want to give you a sense as to what running an Osek Za’ir involves once everything is up and running:

• You will provide your service / sell your products and use an online invoicing platform such as Sumit or morning to issue receipts whenever you make a sale.
• Your tax rate and Bituach Leumi rate will begin from your current tax bracket. For example, if you are earning 23,000 ILS at your day job, you will pay around 35% income tax and almost 18% Bituach Leumi on your side gig revenue.
• Once a year you will use the online Tiyum Mas system to tell the tax authority your estimated revenue for the current year.
• Following the end of the calendar year you will report your actual income and pay the income tax. You can either save up this tax throughout the year or elect to pay tax advances throughout the year.
• You will pay Bituach Leumi advances every month. This will be recalculated at the end of the calendar year and you will receive either a refund or a bill for the difference.

Making it official

Ready to get started? This section will guide you through the key steps required to start operating your small business legally. While filling out these forms may seem tedious, it’s a one-time thing! Take your time and work through each section step-by-step. If you struggle with Hebrew, don’t worry—ChatGPT and Google Translate are your friends.

If you already have a self-employed file open, skip this section and refer to the FAQ “What if I already have an Osek Patur file open?” below.

Setting up your digital login

If you don’t have one already, you will need to set up your username and password for the Israel Tax Authority online portal. Click here, to set this up. To register you will need your Teudat Zehut number, an Israeli credit card (for identification purposes only) and your previous year’s 106 form (the document you employer sends you every year around February).

Alternatively, if you’ve made tax advance payments in the past, the amount paid can serve as a form of identification.

If you’re unable to provide at least two of these identification methods, you’ll need to visit your local tax office with your Teudat Zehut to obtain a unique identification code.

After entering your contact information and completing the process, you’ll receive an email with your permanent login code, called a “קוד משתמש קבוע”. Keep this code safe—you’ll need it for the rest of the process and future interactions with the Tax Authority.

Completing the online form to open an Osek Patur

Here’s the long one! This form will guide you through “opening a self-employed file” with income tax (מס הכנסה), VAT (מע”מ), and Bituach Leumi (ביטוח לאומי). By default, anyone who opens a new Osek Patur will be classified as an Osek Za’ir (unless you choose to opt out of this status).

Setting up advances for Bituach Leumi

Once you are registered, you will need to set up monthly payments (מקדמות) for Bituach Leumi. This form will help you set up the correct payment amount (based on revenue estimates and other jobs) – don’t worry, you will be able to adjust this in the future as your business grows.

Once your Mikdamot are set up, you can log in to your Bituach Leumi dashboard to automate these payments via credit card.

Creating books & records

Every time you get paid for a product or service you are required to issue a receipt and track your income. For someone who is just starting off or receives less than 10 payments per month, Sumit offers a solid free plan.

Generally, the cheapest way to get paid is by receiving a bank, Bit, or Paybox transfer. Please note that from 2025, Bit will start charging you if you receive more than 25,000 ILS through Bit in a calendar year.

If you want to start allowing customers to pay directly via credit card, additional fees will be incurred and credit card processing (סליקת אשראי) will need to be set up (which can also be done through Sumit or morning).

Stuff you gotta get done once per year

Now that you are all set up you can focus mostly on growing your business with minimal distractions. But there are still a few tasks that need to be completed each year – don’t forget to set those calendar reminders!

Using the Tium Mas system to estimate revenue

[Every year before December 31st] – You must use the Tium Mas system to declare your estimated revenue, even if Osek Za’ir is your only source of income. This has to be done within the current tax year – so for 2024 income, you must submit this declaration on or before December 31st 2024. If you don’t complete this step on time, you will be required to complete a full tax return.

This system will help you estimate the tax you will owe but not obligate you to pay it right away. You have the option to set up advance tax payments (מקדמות) or elect to save the tax on your own and only pay it when you submit the annual report. In certain rare cases, the Israel tax authority will notify you of a requirement to pay monthly מקדמות, but this will not usually be the case for someone with the Osek Za’ir registration.

Annual VAT report

[Every January] – you will need to complete this very simple report for the previous year. So, for example, in January 2025, you will need to declare your total revenue (the total amount of money you brought it) for all of 2024.

Reporting & paying tax

[Every year between January 1st – March 31st] – You will submit your total income for the previous year into the new streamlined tax reporting system, receive a calculation of the total amount of tax that you owe (if any), and pay your tax bill.

Updating Bituach Leumi

At least once a year, you should update your monthly Bituach Leumi advances to more accurately reflect your income. You can use this form (at most 4 times per year) to update your advances (מקדמות).

Paying in to Pension

If the Osek Za’ir is your only income, you may be obligated to contribute to a pension account. Here is an overview of the 2024 minimum and recommended contribution levels for an Osek Za’ir:

Annual income	Minimum Monthly Deposit	Recommended Monthly Deposit
20,000 ₪	25 ₪	250 ₪
40,000 ₪	104 ₪	500 ₪
60,000 ₪	156 ₪	750 ₪
80,000 ₪	208 ₪	1000 ₪
100,000 ₪	260 ₪	1250 ₪
120,000 ₪	371 ₪	1500 ₪

(Note that we set the recommended deposit amount at 15% of income as this is a good target for retirement savings. It is still unclear whether an Osek Za’ir will receive any additional tax benefits for making a contribution beyond the 30% automatic deduction. As such, calculating the standard recommended amount – 16.5% of profit, is likely less relevant here. In addition, if you are a US citizen, speak to your US accountant before contributing more than the minimum.)

If the business is your side gig in addition to salaried work, it is likely that you have already met the minimum pension obligation from your employee salary. However, you may still want to make additional pension contributions from your business income in order to meet your retirement goals. Speak to a pension advisor or financial planner for more details or help calculating.

That is all there is to it! If you learn any useful tips or tricks, please share them in the comments below or feel free to share with us directly.

Common Questions

You got questions, we got answers.

What if I am a US citizen?

As usual, US citizens get a bad deal when it comes to being self-employed or trying to start a side gig as an American living in Israel. This is because:

• You will be double taxed – paying both Bituach Leumi and US self-employment tax (15.3%!) is a killer
• You will still need to track your expenses and save all your receipts for US tax purposes.

Consider whether your after-tax take-home pay will be worth it before proceeding.

What if I already have an Osek Patur file open?

You need to act before the end of this year. Fill out this form (no later than December 25th) to add the Osek Za’ir status to your file and be sure to use the Tium Mas system to estimate your revenue before December 31st.

How much will I take home after tax and Bituach Leumi?

Is a side gig worth the effort? How much will you actually take home at the end of the day?

You can use the following table to get a reasonable estimation. Find the row relating to your gross employee income (bruto) and the column closest to your expected annual business revenue. The resulting value is approximately how much you would take home monthly after income tax, Bituach Leumi, and 2,000 ₪ annual business expenses (to cover some software and other odds and ends):

	Annual Business Revenue:	30,000 ₪	60,000 ₪	120,000 ₪
Monthly Employee Income
10,000 ₪		19,500 ₪	41,800 ₪	83,500 ₪
20,000 ₪		16,900 ₪	36,000 ₪	74,300 ₪
30,000 ₪		16,400 ₪	35,500 ₪	73,800 ₪
40,000 ₪		16,400 ₪	35,500 ₪	71,500 ₪
50,000 ₪		13,800 ₪	30,500 ₪	63,700 ₪

So, for example, if you were earning 30,000 ₪ per month as a employee and bringing about 60,000 ₪ in annual revenue, your monthly take home pay would be about 34,500 ₪. The calculations above are based on 2024 tax brackets and assume no deposits to pension.

US citizens will likely also have to pay US Self-Employment Tax (Social Security). This adds additional overhead of approximately 2,000-2,500 ₪ for each 30K ₪ of revenue that you bring in.

If you receive an annual bonus as an employee, you should divide it by 12 and add it to your gross salary in order to find the correct row above.

What should I do if I’m getting close to 120K ₪ revenue?

The simple answer is that you shouldn’t go over unless you are ready to grow your business. If you are nearing that amount towards the end of the year stop taking on new clients or selling your products.

Once you go over you will have to switch to an Osek Murshe designation. Among other things this involves:

• Keeping every expense receipt
• Hiring an accountant to manage your bookkeeping and reporting every 2 months
• Paying an accountant to complete a tax return each year
• Charging VAT (18% in 2025) to customers. Clients who are businesses can claim this back, but if you are serving private individuals, this effectively increases your price dramatically.
• Managing and passing this VAT onto the VAT authority every 2 months

If you decide you are ready to grow your business, now is good time for a consultation with an accountant and enroll in our Atzmai Income Masterclass.

Can I contribute to a Keren Hishtalmut if I already have a Keren Hishtalmut through my job?

Yes. In addition to the 18,852 ₪ that can be contributed with tax benefits per year as an employee, you can also contribute 20,520 ₪ (in 2024) as an Atzmai. This amount should grow free of capital gains tax, however our current assumption is that it will not give you a further tax deduction against your income as the 30% automatic deduction is all inclusive. In addition, this is not generally recommended if you are a US citizen.

Do I need to charge Ma’am?

Assuming you qualify for the status of Osek Patur (earn under 120K and are not in one of the professions that is prohibited from being an Osek Patur), you will not be charging VAT.

Is an Osek Za’ir subject to automatic audit or declaration of assets (הצהרת הון)?

Unlike other business owners, an Osek Za’ir that fulfills its basic annual reporting obligations will not be automatically required to submit a declaration of assets. The idea is that the Tax Authority is unlikely to put an undue burden on these small businesses (who don’t have accountants) to fill out complex reports & declarations. That being said, the ITA reserves the right to do so if it deems it “to be necessary”.

What if my actual business expenses are more than 30% of my income?

As an Osek Za’ir, you won’t be entitled to deduct more than 30%. If your expenses significantly exceed this threshold, it could be worth registering as an Osek Patur/Murshe without the Osek Za’ir election. If you do so, you will need to collect expense receipts, fulfil your reporting requirements, file an annual tax return, and likely hire an accountant.