Osek Patur vs. Osek Murshe vs. company
| Osek Patur | Osek Murshe | Ltd company | |
|---|---|---|---|
| VAT | Not charged | 18% charged and reclaimed | 18% charged and reclaimed |
| Turnover limit | Annual ceiling | None | None |
| Tax on profit | Personal rates | Personal rates | 23% + dividend tax |
| Bookkeeping | Simple | Regular VAT returns | Full books + audit |
| Good for | Side income, starting out | Freelancers with B2B clients | Higher profits, investors |
How to register
- Open a file at the VAT office (online for most cases).
- Open an income tax file and set advance payment rates.
- Register with Bituach Leumi as self-employed.
- Set up invoicing software and a business bank account.
Tips for olim and foreign clients
If you are a new oleh with foreign-source income, the 10-year exemption covers foreign income — but income from work performed while living in Israel is generally Israeli-source and taxable, even if the client is abroad.
Working for foreign clients often makes Osek Murshe attractive: export of services may be zero-rated for VAT while you still reclaim VAT on expenses.
What Tax-IL handles for you
- Choosing Patur, Murshe or a company
- VAT treatment for foreign clients
- Setting correct advance payments
- Coordinating with the 10-year oleh exemption
- Planning the move to a company when it pays off
Planning to set up in Israel?
One free 15-minute call. Tell us what you're setting up and where you're coming from — we'll map the right structure and next steps.
- Licensed Israeli tax advisors
- Reply within one business day
- Confidential — never shared
Frequently asked questions
What is the difference between Osek Murshe and Osek Patur?
An Osek Patur does not charge VAT but is limited to a low annual turnover; an Osek Murshe charges VAT and can reclaim VAT on expenses, with no turnover limit.
Can I switch from Osek Patur to Osek Murshe?
Yes. You must switch once you pass the turnover ceiling, and you can choose to switch earlier.
Do I charge VAT to clients abroad?
Services supplied to foreign clients may qualify for 0% VAT if the conditions are met. We check your specific contracts.
What is an Osek Zair?
A simplified track for very small businesses with reduced reporting; eligibility conditions apply and change over time.
Figures reflect Israeli rules as of 2026 and change periodically. This page is general information, not tax or legal advice. See also corporate tax services.