One of the things you learn quickly in Israel is flexibility. Plans tend to change at the last minute, rules aren’t necessarily law and the food tastes nothing like it did in your home country. At the beginning of life here, these things can be frustrating, but soon you will start to see the benefits of agility and adjustment.
One of the ways in which Israelis are flexible is in the definition of their careers. There are many Israelis who have one conventional career and stick to it, of course. But there are also a lot of Israelis who work more than one job in order to make a living. There’s the office worker who teaches exercise classes in the evening, the teacher who tutors on the side and the translator who also runs a marketing business, to name a few.
When you have two (or more) jobs, there are some Israeli laws you need to be aware of.
Coordination of Income Tax
If you are a salaried employee, the Income Tax Authority (Mas Hachnasah) provides guidelines to your employer for how much tax to withhold from your salary. Without instruction from Mas Hachnasa, when your employer becomes aware that you are receiving another salary, they are obligated to withhold the maximum amount of taxes.
In order to prevent most of your income going to taxes, you need to coordinate your income tax in a process called Teum Mas. You can apply for a Teum Mas online by providing information about your income sources, although it may be worth your while to stop by your local Mas Hachnasa office and walk it through with an agent. This may take more time, but oftentimes saves headache down the road due to misunderstandings or typos. You will need certain details from your employers, such as their Mispar Tik Nikuim (payroll tax number) and your expected annual income. Register at the Income Tax Authority in order to access the form for Teum Mas. The Teum Mas will arrive within a week or two of applying and you should then send this report to your payroll or HR department so they know the proper amount of taxes to be withheld.
In some cases, you may also need to communicate your dual income to Bituach Leumi. If you didn’t do so and you overpaid, you can request a return.
Working a second job doesn’t disqualify you from unemployment benefits. If you worked for two employers and one of them laid you off, you can continue to work at the second job and collect unemployment from the first one if you qualify. Your benefits will, of course, be lower than if you were laid off from your only job and were no longer working at all. You’ll need to submit pay stubs from your employer each month.
Entrepreneur with Multiple Clients
If you have multiple clients and don’t receive a salary, you must open a business with independent contractor files at the VAT office, Income Tax Authority and Bituach Leumi. You report your income and pay income tax, Bituach Leumi and VAT (if relevant) according to your total income from all your clients. This involves paperwork and it is recommended that you hire a tax consultant (Yoetz Mas) or accountant to help you with this.
It is also possible to receive a salary from an Employer of Record such as Route 38. In that case, the clients pay the EOR and you receive a salary based on revenue collected. Payments and taxes are automatically withheld, just like they are for every other salaried employee.
Employee and Entrepreneur
If you’re supplementing a salaried job with a side business, you need to open files with the VAT office, the Income Tax Authority and Bituach Leumi. Your payments to Bituach Leumi will be deducted automatically from your salary and additional payments will be owed from your freelance income, taking into account what you have already paid as a salaried employee.
As a freelancer, you are required to report your income to the Income Tax Authority. There is no need for a Teum Mas, unless you have more than one salaried position in addition to your freelance earnings. When filing your end of the year report, include your income as a salaried employee so your income tax is calculated correctly. This report should also include funds deducted from both the job and the business for pension or Keren Hishtalmut (education savings fund), as they will reduce your taxable income.