Setting up the legal infrastructure for an Osek Patur (Exempt Dealer) in 2026 requires more than just filling out forms - it demands understanding the updated tax landscape. Registering properly with three authorities - VAT, Income Tax, and National Insurance - is critical. You must also account for VAT at 18% (since January 2025) and the micro-business track in Income Tax. A common bureaucratic failure is completing VAT registration while neglecting National Insurance registration, a mistake that can lead to loss of social rights and retroactive debts plus fines and linkage differentials (inflation adjustments).
Key Takeaways
- In 2026 you open an Osek Patur with a single online application on the Tax Authority website, which opens your VAT file and your Income Tax file together. You also need to register as self-employed with National Insurance (Bituach Leumi), which you can request in the same online application.
- The Osek Patur ceiling is 122,833 NIS of annual turnover as of 2026 (it was 120,000 NIS in 2024 and 2025). It is measured on total sales, not profit, and above it you must move to Osek Murshe.
- Some professions, such as architects, lawyers, accountants and engineers, must register as an Osek Murshe from the first shekel, even with low income.
- A new Osek Patur who opens the file online is placed by default on the micro-business (Esek Za'ir) income-tax track: 30% of turnover is recognized as expenses, you file a shortened annual report and you are usually exempt from income-tax advances. You can ask to leave the track, which may pay off if your real expenses are higher than 30% of turnover.
- You must notify National Insurance when you start working as self-employed, even with low income. If you do not register, you can lose work-injury and maternity benefits and build up retroactive debt plus fines and linkage differentials (inflation adjustments).
Are You Even Eligible for the Status in 2026?
Before approaching the forms, verify that the legal status matches your planned scope of activity. Osek Patur is a VAT Law definition relevant to businesses whose annual revenue does not exceed the statutory threshold.
As of 2026, the threshold is 122,833 NIS a year (it was 120,000 NIS in 2024 and 2025). It is normally indexed to the Consumer Price Index on 1 January, and it is measured on turnover, meaning total sales, not profit.
A trap if you open mid-year: When a business opens mid-year, the law looks at the turnover expected for that year, under guidelines set by the Minister of Finance. Before relying on the full annual threshold, check with the VAT office or an accountant how it applies to you. Once it becomes clear that this year's turnover has passed or will pass the threshold, you must notify VAT and change your status to Osek Murshe, and you charge VAT from then on.
The immediate economic implication of Osek Patur status is that you do not charge your clients VAT, and therefore cannot offset VAT on business expenses. With VAT at 18% (since January 2025), this is a consideration to examine seriously if you anticipate significant startup costs.
Certain professions are not permitted to register as Osek Patur even with low income (such as architects, lawyers, accountants, dental technicians and private investigators), and must go through the Osek Murshe registration process from day one.
To check whether you are under the ceiling, estimate your total expected sales for the year, before expenses. When you open the file, you declare your expected annual turnover, and if it is above the ceiling, you cannot register as an Osek Patur.
Step 1: VAT Registration
An Osek Patur can open the file with a single online application on the Tax Authority website, which opens the VAT file and the Income Tax file together. You can also apply through an authorized representative (a CPA, tax adviser or lawyer) or at the regional VAT office, with Form 821. By law, you must register no later than the day you start trading, and you may register earlier. Your dealer number is usually your ID number; no new number is issued.
Watch out for the 'branch code' trap: During registration, you describe what your business does. If your occupation is on the list of professions in the VAT Registration Regulations, you must register as an Osek Murshe liable for VAT from the first shekel, regardless of revenue. The duty follows what the business actually does, so describe your activity on the form accurately.
Documents required for registration:
- Copy of identity card
- Lease or purchase contract for the business premises (in the online Osek Patur application, a contract is needed only if the premises are rented)
- An account-management confirmation from your bank
- Proof of expected activity, such as an invoice for equipment you bought, an agreement with a client, or a professional certificate (if the field requires it)
At the end of registration you receive confirmation of your classification as an Osek Patur, and your dealer number has to appear on every receipt you issue.
Step 2: Income Tax & the Micro-Business (Esek Za'ir) Track
With the online application, your Income Tax file opens together with your VAT file. If you registered at a VAT office, you also need to open an Income Tax file (Form 5329), because the law requires written notice to the Tax Assessor about opening the business, no later than the day it opens. The "Osek Patur" title does not exempt you from paying income tax - only from charging VAT and filing periodic VAT reports.
The micro-business (Esek Za'ir) track, in force since 2024
If your transaction volume does not exceed the threshold (122,833 NIS as of 2026) and you meet the track's other conditions, you can be on the micro-business track, and if you open a new Osek Patur file online, you are placed on it by default unless you opt out. On this track, 30% of your revenue is recognized as expenses, instead of you deducting your actual expenses receipt by receipt.
Another advantage is bureaucratic: a micro-business owner files a shortened annual report instead of the full annual report (Form 1301), and is usually exempt from income-tax advances as well.
However, it is worth checking whether staying on the track pays: if your actual expenses are higher than 30% of turnover, the regular track may be more worthwhile, even if it requires filing a full annual report.
A micro-business owner files the shortened annual report by 31 March of the year after the tax year, and the Tax Authority sometimes extends the deadline (for tax year 2025 the report could be filed until 31 August 2026). If you leave the track, you file a full annual report (Form 1301) and pay the advances the Tax Assessor sets. A wealth declaration is filed only when the Tax Assessor demands one in writing, and you then have at least 120 days from the date of the demand. Such a demand can come within the first years after the file is opened, so it helps to keep records of your assets and liabilities from day one.
Step 3: The National Insurance Pitfall
Many freelancers stumble precisely at this junction. They complete VAT and Income Tax registration, assuming the process is done. This is a mistake.
Failing to register with National Insurance as a self-employed person can strip you of rights in case of work injury or maternity, and lead to retroactive debts plus fines and linkage differentials (inflation adjustments).
National Insurance has a concept called "self-employed person who does not meet the definition." As of 2026, you meet the definition if you work at least 20 hours a week on average, or earn at least 6,885 NIS a month, or work at least 12 hours a week and earn at least 2,065 NIS a month. If you meet none of these, you pay contributions as someone with non-work income: income up to 3,442 NIS a month is exempt, and you pay contributions on the part above it. In that status you also lose work-linked rights such as maternity pay. Either way, you must register.
In the online Osek Patur application you can ask to open a National Insurance file as well, and it is worth checking that this registration went through. If you already have a Tax Authority file but are not yet registered with National Insurance, you register separately with Form 6101. Note: declaring income that is too low may reduce your future compensation in case of work injury.
After you register, National Insurance sets monthly advances based on the income you declared when opening the file. If your income changes by at least 10%, you can ask to update the advances. The account is later settled against your final income-tax assessment.
Key Differences: Osek Patur vs. Osek Murshe (Updated for 2026)
| Parameter | Osek Patur | Osek Murshe |
|---|---|---|
| VAT Collection | Does not charge clients VAT | Must charge VAT (18% as of 2026) |
| Expense Offset | Cannot offset VAT on expenses | May offset VAT on business expenses |
| Revenue Threshold | Limited to 122,833 NIS a year (as of 2026) | No revenue limit |
| Regular Reporting | VAT report once a year only | Monthly or bi-monthly VAT reports |
| Business Image | Sometimes perceived as small or just starting out | Perceived as more established |
An Osek Patur's annual VAT declaration, covering the previous year's turnover, is due by 31 January. When choosing between the two statuses, look at who your clients are: a client who is an Osek Murshe deducts the VAT on the invoice, so VAT does not make the deal more expensive for them, while a private client pays it in full.
Digital Management: The New Standard
The world of manual binders and paper receipt books is disappearing. Today many businesses are run on digital systems that save time, reduce human errors, and keep income and expenses in one place (the law still recognizes manual bookkeeping).
The transition to digital invoices is now a basic standard. The major advantage is the ability to generate receipts digitally, send payment requests to clients, and document expenses with a photo (in Keep, uploading expenses by photo or file is part of the recommended plan).
The "Israel Invoices" model (allocation numbers for tax invoices) applies to Osek Murshe businesses and companies, not to an Osek Patur, which does not issue tax invoices.
Whichever method you use, manual or digital, you must keep your books and documents for 7 years from the end of the tax year, or 6 years from filing that year's annual report, whichever is later. That applies to expense receipts too, so it helps to keep them in one place from day one.
Why Not Do It Alone?
Although information is available, dealing directly with the authorities creates mental overload and risk of errors. A single incorrect field on the registration form can lead to unnecessary tax liabilities.
At Keep, we believe business owners should focus on growth. Our system gives you the tools to run your business. Opening the file with the Tax Authority is itself free of charge; if you prefer us to handle it, you can open it through us. The recommended plan also includes reports and payments to the tax authorities.
The service includes:
- Opening your file with the authorities (a one-time service, 99 NIS + VAT)
- A system for issuing unlimited digital invoices and receipts
- Built-in credit card processing option
- In the recommended plan: a personal accountant for professional guidance and representation before the tax authorities
If you open the file on your own, check three details before you submit, because they shape what follows: the description of your activity, your expected turnover and the expected income you declare to National Insurance. And even when someone else handles your reports, the responsibility to file and pay on time stays with the business owner.
The Next Step for Business Growth
Registering kicks off your 2026 business year. It pays to build a stable foundation from day one - one that helps you avoid surprises with the tax authorities and lets you see your bottom line throughout the year.
Once the file is open, the first step is to issue a receipt for every payment you receive. It also pays to track your cumulative turnover through the year, so you know in advance if you are getting close to the 122,833 NIS ceiling.
If you're ready to get started and looking for a partner to make the paperwork easier, you can check the plans and prices on our pricing page.
Frequently Asked Questions About Opening an Osek Patur
Can you open an Osek Patur online?
Yes. The Tax Authority's online service for opening an Osek Patur file is free of charge. You attach a scan of your ID, the bank's account-management confirmation, a lease if the premises are rented and, in fields that require one, a professional certificate. If you do not use the service, you can apply through an authorized representative or at the regional VAT office.
What happens if an Osek Patur goes over the ceiling?
Once it becomes clear that your turnover for the year has passed or will pass 122,833 NIS (as of 2026), you must notify VAT and change your status to Osek Murshe in the same file. From then on you charge VAT and file periodic reports, and you can deduct VAT only on expenses from the date of the change. It is worth making the change before you receive the payment that crosses the ceiling.
Does an Osek Patur pay income tax?
Yes. The exemption covers only charging VAT and filing periodic VAT reports: an Osek Patur pays income tax and National Insurance contributions, as other self-employed people do. On the micro-business track your taxable income is 70% of turnover, because 30% is recognized as expenses, and the tax is usually paid once a year with the shortened report.
What is the difference between an Osek Patur and an Osek Murshe?
An Osek Patur does not charge VAT or deduct VAT on expenses, and its turnover is capped at 122,833 NIS a year (as of 2026). An Osek Murshe charges VAT at 18% (as of 2026), deducts VAT on business expenses and files monthly or bi-monthly reports, with no turnover ceiling. An Osek Patur files a single annual turnover declaration with VAT, by 31 January.
Does an Osek Patur need to register with National Insurance?
Yes, even with low income. In the online Osek Patur application you can tick the option to open a National Insurance file as well; if you did not, you register separately with Form 6101. If you do not meet the self-employed definition, you pay contributions as someone with non-work income on the part above 3,442 NIS a month (as of 2026).
