Last Updated on March 19, 2024

The information contained in this article is for general educational purposes and should never be viewed as investment, tax, or legal advice.

Remote work is no longer a crazy concept. Many companies all over the world are much more open to the possibility of letting their employees work digitally from their homes. Some companies looking to retain top talent are even open to their employees working from another country. This presents a unique opportunity for Olim and potential Olim looking to keep or apply for a new job in the US.

Unfortunately, even if your employer is fully on board with you keeping your job remotely after Aliyah, there will be significant complexities to consider. One of the most important factors for determining where you are taxed first on your employment income and the labor laws you are governed by is the location in which you are physically performing the work. Even though the company you work for will still be located in the US, once you move to Israel, there is a high likelihood that the way you are paid and the income and payroll taxes that are withheld from your paycheck will need to change.

Beyond the usual caveats, I must stress that if you are considering this type of work, you must get proper tax advice prior to making any decisions. Some of the advantages and disadvantages presented below can easily be very different based on your personal circumstances. The goal of this article is to help summarize some of the basics to assist you in preparing questions prior to your meeting with an accountant – not to give tax advice in any way.

Reasons to work for a non-Israeli company

While this article will focus on many of the complexities involved, there can also be significant benefits for an Israeli resident to continue or begin employment with a US company, including:

• Better salary – Salaries in the US are generally significantly higher than in Israel. Securing a remote job with a higher salary than a similar position in Israel can make the added costs and complexities worth it in some cases.
• Smoother financial transition for Olim – Many of those considering Aliyah are rightfully concerned about the difficulty of breaking into the Israeli labor market quickly upon their arrival. Being able to maintain an existing job after Aliyah can provide for a lot more financial stability and give you the time and flexibility to search for the right opportunities in Israel after Aliyah.

Different options for structuring your employment

Working for a US company after Aliyah will take some research and tax guidance. It is important that you understand your options and the costs for implementing them before accepting any remote position. As someone who has most of his work based in the US, I know how challenging and frustrating this topic can me – I hope this article will be helpful!

I am not an accountant and therefore can’t offer consultations on this topic but please feel free to reach out over WhatsApp and I would be happy to point you toward someone who can, depending on the specifics of your situation.

Here is a summary of many of the different ways to be employed by a US company while living in Israel – not every option will be available or advantageous for each individual situation – they all will have tradeoffs:

Opening a self-employment file (Tik Atzmai) in Israel

One of the more popular options is to register in Israel as self-employed and get paid by your US company as an independent contractor. Companies in the US will refer to this as 1099 contractor (rather than a regular W-2 employee). Getting registered as an Atzmai includes opening up a file with the Israeli tax authority, the VAT authority and Bituach Leumi. You can work through this process yourself or hire an accountant to do it for you.

You can either register as an Osek Patur or Osek Murshe. An Osek Patur generally has simpler accounting costs and reporting requirements but you will only be eligible to remain registered as an Osek Patur if your annual revenue is very limited (up to 102,292 NIS in 2022).

Some of main disadvantages of being self-employed:

• US self-employment tax – In many situations where you are working as “self-employed” you must budget in an additional 15.3%!! (12.4% for Social Security and 2.9% for Medicare) tax on your profits. The social security tax will apply to all income up to threshold of about $143k. Some companies may be willing to increase your salary in order to compensate you for the need to pay this tax on your own. Unlike income tax, this tax will not be canceled out by the other taxes you pay in Israel or any foreign tax credits/exclusions. Keep in mind that in order to to be eligible for Social Security benefits at retirement you need to have earned enough “work credits” – by paying Social Security tax on your income you will generally be earning more credits towards a significant retirement benefit – not just paying an additional tax. Speak to your US accountant to determine whether your specific situation qualifies you as self-employed or a common-law employee.
• Bituach Leumi (Israeli Social Security) – You will be required to pay into Bituach leumi based on your income (around 15%) in addition to US social security. See the contribution rates, here.
• Pension contributions – You will need to ensure that you are contributing the minimum required by law to your Israeli pension fund as no employer will be doing this for you. See more on required pension contribution rates, here. Do not contribute more than the minimum without speaking to your US accountant first about the PFIC issue.
• Accounting costs – You will need to factor in all the extra accounting costs including: hiring an Israeli accountant, annual tax filings in both Israel and the US and other occasional reporting requirements in Israel. In many cases, a regular employee or employee working through a payroll company (discussed below) wouldn’t need to hire an Israeli accountant at all.

Despite the significant costs to the employee, this is generally a simple option for the employer to implement and one they may be more likely to agree to. For guides to opening a self-employment file in Israel, see our Master List.

Using an “employer of record”

Basically how this option works is that an Israeli entity owned by a local or global payroll company “hires” you on behalf of the US company. The payroll company will take care of all the tax withholding, pension and Keren Hishtalmut contributions, much of the paperwork, and transfer the remaining salary to your Israeli bank account in shekels. Your US company will be sent an invoice each month for your salary that they can easily and automatically pay using ACH. Obviously, your US company maintains full responsibility over managing your day to day responsibilities.

This “Employment of Record” service is designed to help the company reduce permanent establishment risk in the country they are hiring in (Israel). Given that the employee is officially being hired by an Israeli company this solution also helps the employee avoid US self-employment tax. One of the clear advantages of this option is the simplicity of having a company manage much of the payroll/billing process for you and should reduce or eliminate the accounting costs and responsibilities that come with owning your own business.

Examples of global payroll companies include: Papaya Global, Remote, Deel and Global Expansion.

Examples of some of the Israeli based payroll companies include Route 38, Yeul Sachir, and Workknot.

To understand this further, let’s look at one of the popular options more closely: Deel (which also happens to be yet another Israeli based billion dollar startup). Deel charges $599 per employee per month. Essentially the total monthly cost to the employer for hiring one employee through Deel would = $599/employee + $5 processing fee + gross salary + mandated benefits. The employer can choose to cover all these costs or deduct them from the original salary offered – obviously this all should be part of salary negotiations. Deel’s employment calculator can also be useful for understanding this further.

Clearly, the salary has to be high enough to justify these fees from the both the employee and employer perspective but this is another solution that is relatively easy for an employer to implement. Deel’s onboarding process takes only 1 business day. You can watch a demo of the employer portal, here.

Keep in mind that, while you will be saving a large portion of your “salary” from the US social security tax, a large portion of that savings will likely be directed toward your Israeli pension and the fees of the payroll company instead. This is because employees have higher contribution pension requirements than someone who is considered self-employed. Whether contributions to Social Security are a “better investment” toward retirement than your Israeli pension/payroll company fees is a complex subject dependent on many different factors and personal preferences – and beyond the scope of this article.

The main point to consider is that using a payroll company will not necessarily increase your after tax “take-home pay.” In addition, keep in mind that Bituach Leumi has taken issue with this structure in the past (2014) and there are some Israeli accountants who believe that many of these companies are likely to face regulatory issues in the future.

Opening a US based LLC

A single member LLC is another alternative structure to consider whereby the US employer can pay the employee’s LLC as a 1099 contractor. This option could be advantageous over the Atzmai option for several reasons:

• Avoid the one-time expense and ongoing reporting requirements of opening up an Osek Patur or Osek Murshe (You will still need an Israeli accountant to report this income annually and set up the proper tax files)
• Income received by the LLC can be exempt from Bituach Leumi and Israeli pension contribution requirements under certain conditions. – speak to an Israeli accountant knowledgeable in this topic (US Self-employment tax and Israeli income tax would still apply).
• With access to many of the best US based digital checking accounts, having a US based entity may make it easier and cheaper to receive and transfer your USD salary to Israel in shekels.

Despite the potential advantages, an LLC can have other complications and costs that must be considered. Opening an LLC generally requires a US address and someone living in the state you are registering in to serve as your “Agent for service of process“. The cost of opening and maintaining an LLC varies by State and can be a significant consideration depending on the state (LLC cost by State).

In addition, from an Israeli tax perspective, the specific details around the treatment of LLCs is a much debated topic. There are also important elections (such as treating the LLC as a “pass-through” entity) that must be made from your very first year of reporting your LLC income in Israel.

If you decide to move forward after proper tax consultation, you can either open an LLC on your own or use a digital service to take care of the process and documents for you. Some online LLC filing services include LegalZoom, Incfile, and ZenBusiness. There are also some all-in-one LLC solutions like Firstbase that can offer filing, agent for service, and a US business address in an LLC-friendly State such as Wyoming.

Once the LLC is open, you will need open a business checking account for your LLC. Consider one of the digital-only business banks that regularly open accounts for people working all over the world, including: Revolut, Jeeves, Wise, Mercury and BlueVine.

Forming an Israeli corporation (LTD, ba”am)

Another option is for you to open an Israeli corporation and have your US company pay your corporation. One of the main advantages of this solution is the avoidance of the US self-employment tax and this is one of the more popular options for well organized high earners.

Accounting costs (both US and Israel) can be extremely high for this and is therefore not usually the right option for someone who is just looking to be employed by a single US based company. On the US tax side, owning a foreign corporation requires significant additional reporting requirements whereby lack of compliance can lead to massive automatic penalties. Extensive consultations with both a US and Israeli accountant will likely be necessary before proceeding with this option.

Joining the company as a regular employee (W-2)

While this option might sound simple it is often not recommended for several reasons:

• A US employer that is hiring Israelis as regular employees could be deemed to have a “permanent establishment” in Israel by the Israeli tax authority and therefore become liable for Israeli corporate tax. This is a risk many employers are not willing or interested in taking.
• Most US based payroll software is designed to make automatic withholding from employee paychecks for federal, state, and local taxes. For someone working while physically in Israel the proper choice would likely be to override and stop all income tax withholding. The employer or whoever is in charge of payroll processing might not be able or willing to do so – especially when it comes to federal income tax withholding.
• The process for getting back the federal income tax that is withheld from your paycheck via a tax refund is not necessarily a quick or efficient process. Your Israeli tax deadlines will not change even if your US tax refund is delayed.
• The employee would still be required to file an Israeli tax return and pay the required income and bituach leumi taxes in Israel. Israel pension contributions would also likely be required.
• In this scenario, there is still a significant element of double taxation as the employee is paying both social security and bituach leumi. The one advantage in this case (relative to the “Atzmai”) is that the employer is paying half the social security & medicare tax while someone who is considered self-employed would need to pay the whole amount on their own. 

Your employer opens an Israeli entity

Let’s face it, even if you are the greatest employee in the world, your company is not going to be opening up a new branch in Israel just to employ you. From both a tax and legal perspective, it can be a huge undertaking. This option is not going to be realistic in anyway unless your company is already actively considering such a move for other reasons.

Acclimation year (שנת הסתגלות)

New Olim can apply for an adjustment year in which for their first year after Aliyah they can choose to not be considered an Israeli tax resident for income tax purposes. To be eligible, you must fill out the application within 90 days of Aliyah. This can be a beneficial option for someone who is not sure if they will or will not be remaining in Israel after a years time.

Building an effective system for transferring money

If your setup involves getting paid into a US bank account it is very important that you set up an effective system for transferring money to Israel. Anyone with regular currency exchange needs can save a lot of money by keeping their currency fees low.

You can read our free guide or take our low-cost step-by-step course to build an effective currency plan that helps you save on every transfer. It is important to note that Blue & White Finance is completely independent from all currency apps and services and we do not earn commissions of any kind. We are focused on providing English speakers in Israel objective financial education & resources.

Drawbacks of working for a US based company

Beyond all the complexities mentioned for each option above, there can be significant disadvantages to consider when it comes to maintaining your current US job after Aliyah:

• Exchange rate risk – Getting paid a USD salary while living in Israel will expose you to the risk that the exchange rate will move in an unfavorable direction. You could find yourself in a situation where, measured in shekels, your salary is falling while at the same time your cost of living is rising. For tips on how to manage your exchange rate risk, click here.
• Getting the money to Israel – Getting paid by a US company can often lead to added costs and time involved in transferring that income to Israel. In such a situation, saving money on currency exchange can make a major impact – see our article on the best options for currency exchange to learn more.
• Time Zones – Working for a foreign company from Israel often requires navigating very significant time differences. See “After Aliyah’s” guide on how to work with the world for more info.
• Working from home – For some, getting out of the house and going to an office is a positive and refreshing experience. Luckily, shared work spaces like WeWork for remote workers are becoming increasingly common and affordable in many places in Israel.
• Lack of integration – Working for an Israeli company can give you additional skills, resources and contacts for navigating the local job market. Many working remotely for a non-Israeli company may want to put extra effort into local networking so they can keep their options open for the future.
• Sick pay and maternity leave – Some of the options above (like the LLC) will not provide some of the useful benefits a standard Israeli employee receives. Make sure to weigh the costs and benefits of each option before proceeding.

Working for a US based company from Israel can be challenging but the challenges are not insurmountable. For many people, US based employment can represent a significant professional opportunity to both live in Israel and continue their career remotely.