Deciding to start your own business in Israel is an exciting step, but navigating the tax registration process can feel overwhelming, especially if it is your first time. One of the most important first steps is opening a file with the VAT authority (Ma'am). While the process may seem daunting initially, it is actually quite straightforward.
Key Takeaways
- You open an Osek Patur VAT file online on the Israel Tax Authority website, through a representative such as an accountant, or at the regional VAT office. The online application opens the VAT and Income Tax files together, and you can tick the option in it to open a National Insurance file too.
- You can register as an Osek Patur if your annual turnover does not exceed 122,833 NIS (as of 2026) and your profession does not require Osek Murshe registration, as law, accounting and engineering do.
- The application needs a copy of your ID, a bank account confirmation, and a lease contract if the business works from rented premises. A driver's license is not required.
- An Osek Patur does not charge VAT or issue tax invoices, and it cannot deduct the VAT it pays on expenses.
- After registration you issue a receipt for every payment, file an annual Income Tax report and file an annual turnover declaration with VAT by 31 January.
What Is Osek Patur and Why Should You Consider It?
When you open a business and begin issuing invoices to clients, you are required to register with the Israeli tax authorities. However, if your business is small and your projected annual turnover does not exceed the legally set ceiling of 122,833 NIS as of 2026 (the amount is updated periodically), you have the option to register as an Osek Patur (Exempt Dealer) with the VAT authority.
This means you do not need to collect VAT from your clients as long as your annual turnover stays below the legal ceiling. On the other hand, you cannot deduct the VAT you pay on your expenses.
The major advantages of Osek Patur status include:
- No unnecessary VAT payments to the authorities
- No requirement to submit monthly or bi-monthly VAT reports, only an annual turnover declaration by 31 January
- No input-VAT deduction to calculate on your expenses
- Reduced bureaucratic burden, allowing you to focus on running your actual business
This structure is particularly well-suited for small businesses just starting out -- freelancers and professionals in fields like design, software development, marketing, and more. Some professions, such as law, accounting, engineering, medicine and tax consulting, must register as an Osek Murshe whatever their turnover.
The ceiling is measured on turnover, meaning everything clients pay you before expenses, not on profit. If you expect turnover to pass the ceiling in your first year, you must register as an Osek Murshe from the start, because Osek Patur status is only for businesses whose expected turnover stays within the ceiling.
Why Must You Register with VAT Even as an Osek Patur?
Every business that sells services or products in Israel must register with the VAT authority -- even if it is an Osek Patur. The difference is that as an Osek Patur, you register as exempt from VAT, meaning you do not collect VAT or file periodic VAT reports, but you still need to be officially registered with the VAT office and file a turnover declaration once a year.
This registration is essential for several reasons:
- Legal compliance -- Operating a business without VAT registration is a violation of the law
- Document issuance -- Registration gives you a dealer number (for an individual, your ID number), which must appear on the receipts and transaction invoices you issue. An Osek Patur does not issue tax invoices
- Recognized status -- Registration gives your business official standing with clients and suppliers
- Preventing problems -- Proper registration prevents sanctions and issues with the authorities down the line
Registration has to be completed no later than the day you start working, not after your first job. You can also register in advance, while setting up the business and before your first sale.
Registration Steps: How to Open an Osek Patur VAT File
Opening an Osek Patur VAT file is not as complicated as it may appear at first glance. You do not need to be an accountant or lawyer to understand and complete the process.
Step 1: Prepare Your Documents
Before you begin, gather all the required documents in advance. You will primarily need a copy of your Israeli ID (Teudat Zehut), personal details such as your current address, a bank account confirmation from your bank, and, if you rent premises for the business, the lease contract. This ensures that your business details will be correct and up to date.
Step 2: Submit Your Application
You can submit your application to open a VAT file in several ways: online on the Israel Tax Authority website, through a representative linked to the Tax Authority's computer system (SHAAM), such as an accountant, tax adviser or lawyer, or in person at your regional VAT office. The Osek Patur online application opens the VAT and Income Tax files together, and you can tick the option in it to open a National Insurance file too.
Step 3: Receive Registration Confirmation
After your application is submitted and approved, you will receive an Osek Patur certificate confirming your status. From this point forward, you are officially registered and can begin operating as an Osek Patur.
The online application is for an Osek Patur only. If you must register as an Osek Murshe, because of your turnover or your profession, you open the file through a representative or at the regional VAT office with Form 821. The registration certificate you receive at the end must be displayed prominently at your place of business.
Required Documents
As part of the process, you will need to submit several basic documents to the tax authorities:
- Israeli ID -- A copy of your Teudat Zehut with the supplement page
- Personal details -- Current residential address, contact information
- Bank account confirmation -- A confirmation from your bank for an account in your name
- Lease contract -- If you rent premises for the business
- Business description -- The type of service or product you provide
- Estimated annual revenue -- Your projected income for the coming year
It is important to ensure all documents are complete and accurate to prevent delays in the registration process.
The Tax Authority may also ask for proof of expected activity, such as invoices for equipment you bought or an agreement with a first client, and some sectors need extra documents. An individual does not need to open a separate business bank account to register.
What Happens After You Open Your Osek Patur File?
Once you are registered as an Osek Patur with the VAT authority, you can begin issuing receipts and transaction invoices to your clients -- without worrying about periodic VAT reports or unnecessary bureaucracy.
However, it is important to remember that even as an Osek Patur, you have obligations to fulfill:
- Issue receipts -- For every payment you receive from a client
- Maintain income records -- Organized documentation of all income
- Submit annual reports -- An annual report to Income Tax, and an annual turnover declaration to VAT by 31 January
- Monitor the turnover ceiling -- 122,833 NIS as of 2026. A business that crosses it must register as an Osek Murshe
With Keep you issue receipts without limit and see the status of every document and payment, on every plan. On the recommended plan you can also upload business expenses in a click, as a photo or file.
Receipts and expense invoices are kept for 7 years from the end of the tax year, or 6 years from filing that year's annual report, whichever is later. Expense invoices go in a separate file, known as the external documents file, even though an Osek Patur does not deduct VAT on them.
How Keep Helps with the Registration Process
At Keep, we understand all the challenges of managing a freelance business -- especially the need to simplify all financial and bureaucratic processes. That is why we developed a system that helps in several ways:
- Opening your file -- We take care of opening your file with the authorities, including document submission, for a one-time fee of 99 NIS + VAT
- Personal guidance -- On the recommended plan, a personal accountant for professional guidance and representation before the tax authorities
- Automatic document generation -- Invoices and receipts at the click of a button, on every plan
- Income and expense tracking -- A dashboard with income, expenses and profit for a date range you choose, on every plan
- Reports to the tax authorities -- On the recommended plan, reports and payments to the tax authorities. For an Osek Patur, the VAT report is the annual turnover declaration
All you need to do is sign up with Keep and provide us with the necessary details, and we will take care of opening your file. Once registration is complete, you can start working.
The basic plan costs 39 NIS a month + VAT and the recommended plan costs 105 NIS a month + VAT. These are Osek Patur prices (as of September 2026). There is no commitment, and you can switch plans at any time at no cost, so you can start on the basic plan and move to the recommended plan when you want a personal accountant.
Frequently Asked Questions About Opening an Osek Patur File
Does an Osek Patur also need an Income Tax file?
Yes. The Osek Patur exemption covers VAT only, not income tax, so you also have an Income Tax file and file an annual report. The online application on the Israel Tax Authority website opens both files together. A representative linked to SHAAM also opens both files in one request. If you register at the VAT office, you open the Income Tax file separately with Form 5329.
Do I need an accountant to open an Osek Patur file?
No, it is not required. You can apply online on the Israel Tax Authority website and attach scanned documents. If you prefer not to handle it yourself, you can file through a representative linked to SHAAM, or open the file through Keep for a one-time fee of 99 NIS + VAT.
What is the difference between Osek Patur and Osek Murshe?
An Osek Murshe charges VAT, issues tax invoices, deducts the VAT on its expenses and files monthly or bi-monthly VAT reports. An Osek Patur does not charge or deduct VAT and files only an annual turnover declaration with VAT. Osek Patur status is available only up to the turnover ceiling and in professions that do not require Osek Murshe registration.
What happens if an Osek Patur crosses the turnover ceiling?
It must switch to Osek Murshe status, and from then on charge VAT and file periodic VAT reports. It is worth contacting the VAT office or an accountant as soon as turnover approaches the ceiling, which is 122,833 NIS as of 2026.
