How to Start Freelancing in Israel: A Beginner's Guide

1. Why Go Freelance?

Freelancing is a common way to work in Israel. Whether you are a software developer, graphic designer, private tutor, fitness instructor, or delivery courier, going freelance gives you full control over your schedule, your income, and your career direction. Remote work and the gig economy have made freelancing easier to start.

There are several compelling reasons to consider freelancing in Israel:

• Flexibility -- Set your own working hours and choose the projects you take on. You decide when, where, and how much you work.
• Income potential -- Unlike a salaried position with a fixed paycheck, freelancers can scale their earnings by taking on more clients or raising their rates as they gain experience.
• Low barrier to entry -- Opening a freelance business in Israel is a fairly simple process: an Osek Patur can open its VAT and Income Tax files in one online application. You do not need a storefront, employees, or heavy upfront investment.
• Tax advantages -- As an Osek Patur (exempt dealer), you do not charge VAT and file no periodic VAT reports, only an annual turnover declaration, which keeps your first year simpler.

That said, freelancing also comes with responsibilities. You are in charge of your own accounting, tax filings, and National Insurance contributions. The good news is that with the right tools and knowledge, managing all of this is entirely doable -- even if you have zero business experience.

If you still have a salaried job, you can open a freelance business alongside it. You register with VAT, Income Tax and Bituach Leumi in the same way and report the business income in your annual return on top of your salary. Bituach Leumi then checks whether you meet its definition of self-employed: if you work less than 20 hours a week on average in the business and earn less than 6,885 ILS a month from it (as of 2026), you may not meet it, which means a different rate table and no entitlement to some benefits, such as maternity pay.

2. Osek Patur vs Osek Murshe

When you register as a freelancer in Israel, you must choose between two business classifications: Osek Patur (Exempt Dealer) and Osek Murshe (Licensed Dealer). Understanding the difference is critical because it affects your tax obligations, your invoicing, and how much turnover you can have before you must switch to Osek Murshe.

Osek Patur (Exempt Dealer)

An Osek Patur is the simplest business structure for freelancers. It is designed for individuals with relatively low annual revenue. Key characteristics include:

• Revenue cap -- As of 2026, the annual turnover ceiling is 122,833 ILS (the amount is updated periodically). If your turnover exceeds this limit, you must switch to Osek Murshe.
• No VAT collection -- You do not charge VAT (Ma'am) to your clients, which can make your pricing more competitive for end consumers.
• Simplified bookkeeping -- You must issue a receipt (kabbala) for every payment, you may issue transaction invoices (hashboniot iska) or payment requests, and you may never issue tax invoices. You still keep simple books (your receipts plus the expense documents you receive, kept for at least 7 years), file an annual income tax return and file an annual turnover declaration with VAT.
• Cannot deduct VAT on expenses -- Since you do not collect VAT, you also cannot reclaim VAT on business purchases.

Osek Murshe (Licensed Dealer)

An Osek Murshe is required for freelancers who exceed the Osek Patur revenue cap or who want the ability to issue full tax invoices. Key characteristics include:

• No revenue cap -- You can earn an unlimited amount.
• Must charge and remit VAT -- 18% on most goods and services (the standard rate since 1 January 2025). You add this to your invoices and transfer it to the tax authority.
• Can reclaim VAT on expenses -- You can deduct the VAT you paid on business purchases such as equipment, software subscriptions and office supplies when you hold a valid tax invoice. Some costs are restricted: there is no deduction on buying a private car, usually none on hospitality, and only the business share of mixed-use costs such as a mobile phone or car running costs.
• More reporting requirements -- You must file periodic VAT reports, every two months or every month depending on your turnover, and maintain more detailed records.

Which should you choose? If you are just starting out and expect annual turnover (all business income before expenses) of up to 122,833 ILS, Osek Patur is the easier path. If your clients are businesses that need tax invoices, starting as Osek Murshe may make more sense, and if you expect turnover above the ceiling, it is mandatory. As your business grows, you can apply to the regional VAT office to switch from Patur to Murshe, and you must switch once your turnover passes the ceiling.

Turnover, not profit, decides your status: the ceiling counts all business income before expenses. Some professions must register as Osek Murshe whatever their turnover, including lawyers, accountants, engineers, architects and doctors. If you expect to cross the ceiling during the year, it is best to switch before you receive the payment that takes you over it, because input VAT can only be reclaimed on expenses from the date you become an Osek Murshe.

3. Registration Steps

Opening a freelance business in Israel means three registrations with two bodies: a VAT file and an Income Tax file with the Israel Tax Authority, and a file with National Insurance (Bituach Leumi). There is no single required order. An Osek Patur can open both Tax Authority files in one online application and ask in the same application for a Bituach Leumi file as well. An Osek Murshe registers through a representative, such as an accountant or tax adviser, or in person at the regional VAT office.

Step 1: Open an Income Tax File (Mas Hachnasa)

An Osek Patur opens the Income Tax file in the same online application as the VAT file, on the Israel Tax Authority website. Otherwise, the file is opened through a representative or with Form 5329 (a report of personal details and a declaration of income sources) at your local assessing office. You will need your Israeli ID (Teudat Zehut), a description of your business activity, your expected turnover and your bank account details. No new number is issued: as an individual, your ID number serves as your file and dealer number.

Step 2: Register with VAT (Ma'am)

Even Osek Patur freelancers must register with the VAT office. This is often handled simultaneously with your income tax registration. An Osek Murshe registers on Form 821 and receives a dealer certificate, first a temporary one and later a permanent one; an Osek Patur receives a confirmation of registration. For Osek Murshe, this step activates your obligation to collect and report VAT.

You must be registered with VAT no later than the day your business activity starts. You can also register in advance, while you are still setting up, so the file is already open when you issue your first invoice or receipt.

Step 3: Register with National Insurance (Bituach Leumi)

As a self-employed individual, you must notify the National Insurance Institute as soon as you start working as self-employed. If you open an Osek Patur through the Tax Authority's online application, you can ask in it for a Bituach Leumi file as well, and it is worth checking afterwards that the file was opened. If you did not, or you already have a Tax Authority file, you register on Form 6101. Your contributions, which include the health insurance contribution, cover benefits such as old-age, disability, work injury and maternity, but self-employed people are not insured for unemployment. Your monthly payments are calculated as a percentage of your reported income.

• Documents you will need: Israeli ID, a bank confirmation that your account exists (it does not have to be a separate business account), the lease or purchase contract for your business premises if you have one, and proof of expected activity, such as equipment invoices or a client agreement.
• Processing time: The Tax Authority publishes no fixed processing time. It depends on the review of your application and on whether your documents are complete.
• Pro tip: Keep all confirmation letters and registration numbers organized from the start. You will need them for tax filings and when setting up accounting software.

4. Tax Obligations

Understanding your tax obligations is essential to avoiding penalties and keeping your business in good standing. As an Israeli freelancer, you deal with three main types of taxes:

Income Tax (Mas Hachnasa)

Israel uses a progressive income tax system with rates ranging from 10% to 50%, depending on your total annual income. If you are required to pay advances, you make advance tax payments (mikdamot) throughout the year, at a rate and frequency set by your assessing officer, most often monthly. Since 2024, most micro-business owners (annual turnover up to 122,833 ILS as of 2026) are exempt from advances, and a new Osek Patur who opens the file online is registered as a micro business by default. At the end of the tax year, you file an annual return (doch shnati) where your actual tax liability is calculated and any overpayment or underpayment is reconciled.

VAT (Ma'am)

If you are an Osek Murshe, you must file VAT reports every one or two months (depending on your turnover level), by the 15th of the month after the period, or the 19th if you report and pay online. The standard VAT rate is 18% (since 1 January 2025). You report the VAT you collected from clients and deduct the VAT you paid on business expenses. The difference is what you owe the tax authority. As an Osek Patur, you do not file periodic VAT reports, only an annual turnover declaration by 31 January.

The Tax Authority, not you, decides how often an Osek Murshe reports VAT: as of 2026, a business with annual turnover up to 1,775,000 ILS reports every two months, and a larger one every month. A report is due for every period, even one with no activity, in which case you file a zero report.

National Insurance (Bituach Leumi)

Monthly contributions to Bituach Leumi are mandatory and are due by the 15th of each month for the previous month (a bank standing order is debited on the 22nd). As of 2026, the rates are 7.70% on monthly income up to 7,703 ILS and 18% on income above that, up to a ceiling of 51,910 ILS a month. These rates already include the health tax (mas briut). It is important to report your income accurately, as underreporting can lead to retroactive charges.

• Annual tax return deadline: By law, 31 May of the following year for online filers, and self-employed people file online as a rule (30 April applies to paper reports). Micro-business owners file a shortened report, due by law on 31 March. The Tax Authority often extends these dates.
• Advance payments: If you pay advances, set up automatic payments through your bank or the Tax Authority website on the schedule in your advance booklet (usually monthly, by the 15th) to avoid falling behind.
• Deductible expenses: Outside the micro-business track, internet, professional development, business travel (not commuting between home and work), and professional software and tools can reduce your taxable income. Some costs are only partly deductible: at least 50% of a mobile phone, at least 45% of private car costs, and home office costs in proportion to business use.

5. Managing Your Finances

Good financial management is the backbone of a successful freelance business. From day one, develop habits that will keep you organized and prepared for tax season.

Separate Your Business and Personal Finances

Open a dedicated bank account for your freelance income and expenses. This makes tracking your business finances significantly easier and ensures you have a clear record for tax purposes. Many Israeli banks offer small business accounts with low fees for freelancers.

Issue Invoices and Receipts Promptly

Every payment you receive must be documented with a receipt (kabbalah), issued when the payment is received, whether you are an Osek Patur or an Osek Murshe. An Osek Murshe also issues an invoice for every transaction within 14 days of the date VAT becomes due, and a tax invoice (hashbonit mas) when the buyer asks for one. An Osek Patur may not issue tax invoices; it can send a client a transaction invoice (hashbonit iska) or a payment request, but the receipt is the document it must issue. Not keeping documents as the law requires can result in fines.

Track Every Expense

Keep records of all business-related expenses with supporting receipts or invoices. Outside the micro-business track, where 30% of turnover is deducted instead of actual expenses, deductible expenses directly reduce your taxable income, so every receipt matters. Common deductible expenses for freelancers include:

• Computer equipment and software
• Internet and phone bills (business portion)
• Home office expenses (proportional to space used)
• Professional courses and certifications
• Transportation and fuel for business travel
• Marketing and advertising costs

An expense without a supporting document is at risk of being disallowed, so ask for an invoice or receipt for every business purchase. To reclaim VAT, an Osek Murshe needs a tax invoice issued to the business and must claim it within 6 months of its date. As of October 2026, a tax invoice above 5,000 ILS before VAT also needs an allocation number from the Tax Authority before the VAT can be deducted.

Set Aside Money for Taxes

A common mistake among new freelancers is spending all their income without setting aside funds for taxes. Put part of every payment in a separate account for income tax and Bituach Leumi. There is no fixed rate: at modest profits the share you need is well below 30%, and 30-40% fits only high profits. An Osek Murshe also sets aside the VAT they collected, less the input VAT they can deduct. This ensures you are never caught off guard when advance payments or the annual return come due.

6. Tips for Beginners

Starting a freelance career can feel overwhelming, but these practical tips will help you build a strong foundation from the start:

• Start while still employed (if possible) -- Many successful freelancers begin by taking on side projects before making the full transition. This allows you to build a client base and financial cushion before relying entirely on freelance income.
• Set clear rates from the beginning -- Research what others in your industry charge and set rates that reflect your skills and experience. Avoid underpricing yourself, as it is difficult to raise rates significantly once clients are accustomed to lower fees.
• Create a simple contract -- Even for small projects, a written agreement protects both you and your client. Include the scope of work, payment terms, timeline, and cancellation policy.
• Build an emergency fund -- Freelance income can be unpredictable, especially in the early months. Aim to have at least three months of living expenses saved before going full-time.
• Network actively -- Join Israeli freelancer communities on Facebook, LinkedIn, and local meetup groups. Word-of-mouth referrals are one of the most effective ways to find new clients in Israel.
• Invest in professional tools -- Accounting software, project management tools, and a professional website can keep your documents in one place and make you appear more credible to potential clients.
• Consult an accountant early -- Even a single consultation with an accountant when you are getting started can help you choose the right business structure, understand your obligations, and avoid costly mistakes down the line.

A common first-year mistake is to assume that no advance payments means nothing to pay. A micro-business owner who is exempt from advances still files a shortened annual return and pays the whole year's tax with it, so setting money aside every month matters even more.

Remember: Every successful freelancer started exactly where you are now. The key is to take that first step, stay organized, and keep learning as you go.

7. How Keep Helps Freelancers

Keep is digital bookkeeping for freelancers and small business owners in Israel. It takes the complexity out of managing your business finances so you can focus on what you do best -- your actual work.

Here is what Keep offers:

• Digital invoicing and receipts -- Issue unlimited invoices and receipts on every plan, directly from the mobile app. Documents are produced as digitally signed PDFs.
• Expense upload -- On the recommended plan, upload business expenses in a click, as a photo or a file.
• Reports and payments to the tax authorities -- On the recommended plan: VAT reports (for an Osek Patur, the annual turnover declaration), a personal accountant for professional guidance and representation before the tax authorities, and an annual report at a special price, which is not included in the monthly price.
• Financial overview -- A dashboard on every plan shows your income, expenses, and profit for a date range you choose.
• Clear pricing -- For an Osek Patur, 39 ILS a month + VAT on the basic plan and 105 ILS a month + VAT on the recommended plan.

Whether you are issuing your very first receipt or managing dozens of clients, the same plans and the same app work for you.

Keep also offers opening your files with the authorities for a one-time fee of 99 ILS + VAT. For an Osek Murshe, the monthly price is 123 ILS higher, VAT included. There is no commitment, and you can switch plans at no cost.

Frequently Asked Questions

Keep Team

The Keep team creates guides and resources to help freelancers and small business owners in Israel manage their accounting, taxes, and finances with confidence.