If you are planning to start a small business and work as a freelancer in Israel, one of the very first and most important steps is opening a file with the Income Tax Authority. This is a critical step that allows you to operate legally, issue invoices, and report your income to the tax authorities. While the process may seem complex at first, with the right preparation it is much simpler than you might think.
Key Takeaways
- You open an Osek Patur income tax file with Form 5329, or with the online request to open an Osek Patur file on the Israel Tax Authority website, which opens your VAT and Income Tax files together. You can also apply through a representative, such as an accountant, or at a VAT office.
- An Osek Patur is a business whose annual turnover does not exceed 122,833 NIS (as of 2026) and whose field does not require Osek Murshe registration, as law, accounting or medicine do. It does not charge VAT, may not issue tax invoices, and issues receipts to its clients.
- You open the file no later than the day you start working. No new file number is issued: your ID number serves as your dealer number and appears on your receipts.
- National Insurance also needs to know you are self-employed: in the online Osek Patur request you can tick the option to open a National Insurance file too; if you did not, or opened the file another way, you register on Form 6101. Your monthly advances are based on the income you declare, and self-employed people have no unemployment insurance.
- Keep offers a one-time service for opening a file with the authorities, for 99 NIS + VAT. Once the file is open, every plan (from 39 NIS a month + VAT) lets you issue receipts without limit, and the recommended plan (105 NIS a month + VAT) adds a personal accountant for guidance and representation before the tax authorities.
What Is Osek Patur and What Does It Mean?
Osek Patur (Exempt Dealer) is a type of self-employed business whose annual turnover does not exceed the legally set threshold: 122,833 NIS as of 2026 (the amount is usually updated every January). A business whose turnover stays below this ceiling can register as an Osek Patur and enjoy significant simplicity in financial management, unless its field requires Osek Murshe registration at any turnover, such as law, accounting, medicine, engineering, or tax and management consulting.
The main advantage of Osek Patur status is that you do not charge VAT to your clients. This means:
- You don't issue tax invoices (an Osek Patur may not issue them); you issue receipts and, if you wish, transaction invoices
- No need to submit monthly or bi-monthly VAT reports
- Reduced bureaucratic burden, allowing you to focus on the business itself
- A simple structure that suits many freelancers and small service providers, except in fields that require Osek Murshe registration
However, even as an Osek Patur, you are required to register with the tax authorities and open files with VAT and the Income Tax Authority. This registration marks the official beginning of your business activity.
An Osek Patur files no periodic VAT reports, but once a year, by 31 January, it files a declaration of the previous year's turnover with VAT. Turnover means everything the business takes in before expenses, not profit. A business expected to cross the ceiling in its first year registers as an Osek Murshe from the start, and a limited company always registers as an Osek Murshe.
Why Must You Open an Income Tax File?
Opening an income tax file is a legal requirement for anyone who begins operating as a freelancer, whether as an Osek Patur or Osek Murshe (Licensed Dealer). Without an open file, you are essentially operating illegally.
Here are the key reasons why opening a file is essential:
- Legal compliance -- Running a business without an open income tax file can lead to fines, retroactive tax charges, and legal issues
- Document issuance -- You open the file no later than the day you start working. From registration on, your ID number serves as your dealer number and appears on the receipts you give clients
- Tax benefits -- A business that reports its income properly can take advantage of tax benefits, deductions, and allowances available to freelancers
- Professional standing -- A registered file enables you to work with corporate clients, companies, and institutional bodies
- Access to financing -- Banks and financial institutions usually require an open business file and tax reports as a condition for business loans
If you have already started working without a file, it's worth opening one as soon as possible. Registering late does not cancel the tax due on your income from the day the activity began. If you don't file reports, you are exposed to fines, and the assessing officer can estimate your income and charge tax on that estimate (a best-judgment assessment).
Form 5329 -- The First Step to Opening Your File
The first step in opening an Osek Patur income tax file is completing Form 5329, officially called the "Report of Personal Details and Declaration of Income Sources." This is the official form through which you notify the Israel Tax Authority about the start of your business activity. An Osek Patur can also submit the online request to open an Osek Patur file on the Israel Tax Authority website, which opens the VAT and Income Tax files together.
On the form, you will need to provide, among other things, the following details:
- Personal information -- Full name, ID number, current residential address
- Field of occupation -- Description of the service or product you provide
- Revenue forecast -- An estimate of your expected annual income
- Activity start date -- The date you started or plan to start operating
- Bank account details -- Your consent for the bank to confirm the account and its holders to the Tax Authority
It is important to fill out the form accurately and completely, as the information you provide will affect your tax liability determination and whether, and how much, you will be asked to pay in advance payments.
When you open a new Osek Patur file online, you are enrolled by default in the micro-business (esek zair) track for income tax, unless you opt out on the registration form. If you open the file another way, you can apply to join the track. In this track, 30% of turnover is deducted as expenses regardless of what you actually spent, and most businesses in it are exempt from advance payments. If your real expenses are above 30% of turnover, it's worth checking before you apply whether the track pays off for you.
Submission Methods -- How to Submit the Form
The application to open your file can be submitted to the Tax Authority in several ways. Each method is valid; the main difference between them is convenience:
Online Submission via the Tax Authority Website
This option is usually convenient. You log into the Israel Tax Authority website, fill out the form digitally, and attach the required documents. The major advantage is that you do not need to leave your home and can complete it at any time.
In-Person Visit to a VAT Office
You can bring your documents to the VAT office in your area and submit the application directly to a clerk. The advantage here is that you can receive immediate answers to questions and verify that everything has been filled out properly.
Submission Through a Representative
You can also apply through a representative linked to the Tax Authority's computer system (SHAAM), such as an accountant, tax adviser or lawyer. The representative submits the application on your behalf, which helps if you prefer a professional to go over the details.
After the application is submitted and processed, your file is opened under your ID number, and no new number is issued. Your ID number also serves as your dealer number: it appears on your receipts, and you will need it for all future dealings with the Tax Authority. An Osek Patur also receives a registration confirmation (an Osek Patur certificate).
Before you apply, it helps to have a scan of your ID card, a confirmation from your bank for the account the business will use, and a lease if the business works from rented premises. A sole trader does not need a separate business bank account and can use an existing account in their own name.
National Insurance Registration -- The Next Step
After opening your income tax file, the next step is to report to the National Insurance Institute (Bituach Leumi) that you are self-employed. In the online request to open an Osek Patur file you can tick the option to open a National Insurance file too. If you did not, or opened the file another way, you register separately on National Insurance Form 6101. This is an important step that should not be skipped, as it affects your social security rights.
As part of the National Insurance registration, you will need to:
- Complete an income declaration form -- detailing your expected business income
- Pay monthly advances -- a monthly payment that National Insurance sets based on the income you declare
- Understand your rights -- paying your advances on time keeps your National Insurance cover, such as old-age pension, disability, work-injury and maternity benefits. Self-employed people have no unemployment insurance, and your right to health services does not depend on the size of your advances
It is important to complete the National Insurance registration as soon as possible, because the duty to report applies from the day you start working as self-employed. Registering late can create a retroactive debt that accumulates and becomes a financial burden down the road. National Insurance payments are based on your income and may change over time.
The income you declare to National Insurance sets your advances, but also your maternity pay and work-injury benefits, which are calculated on the income on which contributions were paid. That is why it's worth declaring a realistic estimate. If your income changes by at least 10%, you can ask National Insurance to update your advances, up to once a quarter.
How Keep Helps with Opening Your Income Tax File
At Keep, we understand that the bureaucracy of starting a business can be exhausting and confusing. That is exactly why we offer a one-time service for opening a file with the authorities, alongside digital bookkeeping:
- Opening a file with the authorities -- A one-time service, for 99 NIS + VAT
- Professional guidance -- On the recommended plan (105 NIS a month + VAT), a personal accountant for professional guidance and representation before the tax authorities
- Business management system -- From the moment your file is open, every plan (from 39 NIS a month + VAT) lets you issue receipts and other income documents without limit and see income, expenses and profit on the dashboard. On the recommended plan you can also upload expenses in a click, and the plan includes reports and payments to the tax authorities, among them the annual VAT report
With the file-opening service, you provide the necessary details and we open the file for you. Once the registration is complete, you can start issuing receipts to your clients.
The prices in this section are Osek Patur prices, and there is no commitment: you can switch plans at any time at no cost. On the recommended plan, the annual income tax report is offered at a special price and is not included in the monthly price.
Frequently Asked Questions About Opening an Osek Patur Income Tax File
What is the difference between Form 5329 and Form 821?
Form 5329 opens the Income Tax file, and Form 821 opens the VAT file. An Osek Patur can submit one online request to open an Osek Patur file on the Israel Tax Authority website, which opens both files together.
Can I open an Osek Patur file myself, without an accountant?
Yes, you don't need an accountant. You submit the online request on the Israel Tax Authority website with scanned documents, or bring the documents to a VAT office. If you prefer help, you can file through a representative such as an accountant, tax adviser or lawyer, or use Keep's file-opening service for 99 NIS + VAT.
Does an Osek Patur pay income tax advances?
In most cases, no. A new Osek Patur who opens the file online is registered as a micro business by default, and most micro businesses are exempt from advances and pay their tax once a year, based on the turnover they reported. If you opted out of the track, the assessing officer sets your advances as a percentage of turnover.
Are self-employed people entitled to unemployment benefits?
No. Self-employed people are insured by National Insurance in every branch except unemployment and employees' rights in an employer's bankruptcy. Paying your advances on time keeps your entitlement to old-age pension, disability, work-injury and maternity benefits, and a contributions debt can reduce or deny a benefit.
Can a salaried employee open an Osek Patur file?
Yes. You can work as an employee and open an Osek Patur file at the same time, and Form 5329 also asks about your salaried work. The Osek Patur ceiling counts only the business's turnover, not your salary. National Insurance recognises you as self-employed if you work in the business at least 20 hours a week on average or your business income reaches set thresholds, so it's worth checking your status with them.
