Explanation and Clarification About the “Osek Patur” Classification
An Osek Patur is a self-employed individual who reports independent income to the Israeli tax authorities—Income Tax, VAT (Ma’am), and National Insurance. This classification is available only to individuals, not partnerships or companies.
In Israel, every transaction is subject to 18% VAT (as of 2025), unless exempt by law. Osek Patur is one such legal exemption. Others include transactions made in VAT-exempt zones (e.g., Eilat), second-hand car sales, municipal tax payments, insurance, and more.
The term “patur” means “exempt”—Osek Patur does not charge VAT to clients.
גובה הפטור הוא עד למחזור הכנסות שנתיות של 120,000 ₪ בשנה קלנדרית (נכון לשנת 2025).
Calendar year - from January 1 to December 31.
If this threshold is exceeded during the year, the business must immediately transition to Osek Murshe (Authorized Dealer) status, and VAT must be charged on all revenue above the threshold—from the first shekel over ₪120,000.
The turnover refers to gross income before deducting expenses. Salaried income or other non-business income does not count toward the Osek Patur threshold.
Important: Not everyone is eligible to register as an Osek Patur. Certain professions are excluded from this status even if their income is below the threshold. A list of ineligible professions is included in Section 13 of the 1976 Israeli VAT Regulations.
Ongoing Services and Full Support Include:
- Representation before the relevant authorities: VAT, Income Tax, and National Insurance
- Estimating expected annual turnover and setting advance tax payments accordingly
- Registering your business with each of the three authorities
- Guidance on issuing receipts and recording eligible expenses
- Instruction on proper bookkeeping regulations
- Issuing an official Osek Patur certificate
- Obtaining Income Tax certificates: exemption from withholding tax and proper bookkeeping certificate
- Single-entry bookkeeping (cash-based)
- Filing Income Tax advance payments (if applicable)
- Updating your National Insurance status twice a year based on income changes
- Year-end tax assessment
- Submitting the Osek Patur declaration to VAT after the tax year ends
- Preparing and submitting the annual report to Income Tax, including all relevant annexes
- Advising on recommended pension and savings contributions for tax benefits
Annual Filing Obligation for Osek Patur
After the end of each tax year, Osek Patur must submit a full annual tax report to the Israel Income Tax Authority. This includes all personal income, both domestic and foreign, of the self-employed individual and their spouse (for married couples). Some commonly required documents and annexes:
- Annual summary from bookkeeping software and all original receipts
- Depreciation report for business asset purchases (e.g., computers, furniture)
- Car mileage logs (Jan 1 and Dec 31 readings)
- National Insurance payment confirmations
- Annual confirmations for pension, education fund, life/disability insurance
- Receipts for charitable donations
- Confirmation of pension, disability, or other National Insurance benefits
- Form 867 and withholding tax confirmations on interest income
- Rental agreements for residential or commercial property
Capital Declaration (Hatzharat Hon)
Capital Declaration Requirement
Upon opening a business, new Osek Patur registrants are required to submit a Capital Declaration to the Income Tax Authority detailing all personal assets and liabilities.
This declaration provides a full financial snapshot, allowing tax authorities to compare declared wealth between two points in time (initial vs. subsequent declaration, usually 5 years later) and verify consistency with yearly income reports.
In effect, the Capital Declaration acts as a credibility check on reported income.
Service Cost
Service fees depend on your business activity level, whether advance tax payments are required, and the scope of additional reporting beyond your freelance income.
You’re welcome to contact me for a custom quote for your annual report and capital declaration as an Osek Patur.