Are you a temporary resident of Israel looking to freelance? It can be done! Here’s what you need to do to set yourself up legally:
Obtain an A-1 visa
In order to obtain an A-1 visa, which gives you permission to work in Israel, you need to go in person to Misrad Hapnim (Interior Ministry). You will need your passport, marriage certificate, birth certificate, proof of your parents’ birthdates, a letter from your school if you are a student, proof of Jewishness (if relevant), criminal background check from your country of origin and an application for visa extension. Be sure to ask specifically for a visa that allows you to work, since it is not offered to you automatically.
Open a file at the VAT office
Before you open your business, you must open a file at the VAT office. You need to do this even if your projected income is that of an Osek Patur (sole trader who is exempt from collecting VAT for the government). As a temporary resident, you can only open a file at the VAT office if you have an Israeli representative who takes responsibility for your business dealings. This representative can be an Israeli spouse, a friend or a relative. The Israeli representative will fill out VAT Form 22, which may need to be notarized by an Israeli notary.
This representative is not involved in business decisions or management, but is fully responsible for timely and correct payment of all taxes. The purpose of having an Israeli representative is to prevent a situation where a foreign national leaves the country with debts, unpaid taxes, wages owed to workers etc.
If you don’t have anyone you can ask to take on this responsibility, you can open your business through a trust company. This company will act as your Israeli representative for a fee. Some of these companies offer additional services, like registering the business for you, preparing and submitting tax reports and opening a corporate business account at the bank.
In order to open a VAT file, you need proof that your bank account belongs to you. You can use a checkbook or ask the bank for an ishur nihul cheshbon (letter stating that you manage this account). If your bank account is shared, both account holders need to be present with proof of identity (Teudat Zehut or passport).
Print receipt books or sign up for an online receipt service
There is a legal requirement in Israel to provide receipts for any business transaction. You can print receipt books with your business name and information at a printing house, or you can sign up for one of the multiple online services that provide you with electronic receipts. Not all receipt services are accepted by the Israeli government, so it is crucial to choose one that has the government’s stamp of approval.
Open an income tax file
Take your documents from the VAT office to the income tax office (Mas Hachnasa) and open a file there as well. You are now obligated to file an annual tax return, reporting your income and expenses to the government. Avoid problems by keeping meticulous records and backing up any documents that aren’t already in the cloud.
Your business is now open! Now’s the time to get the word out, invest in marketing and get your first clients. We wish you great success in your new endeavor!
For more information on opening a business in Israel, see: Osek Patur – Guidance for Your New Business.