An Osek Patur is the minimalist, no-frills startup kit of the Israeli business world. It’s a tax classification designed for small-time entrepreneurs and freelancers who keep their annual income under 120,000 NIS. Think of it as the “low-commitment” option for running a business: you don’t charge VAT to your clients, you’re spared from filing bi-monthly VAT reports, and your paperwork is blissfully light. But here’s the catch—your income is capped, and the moment you cross that threshold, you’re booted into Osek Murshe territory, complete with VAT obligations and extra admin. Essentially, an Osek Patur is perfect for people dipping their toes into the business world or working part-time gigs while keeping things simple and streamlined.
Going over the threshold mid-year
What happens if your revenue goes over the 120,000 NIS before the end of a calendar year? First of all, congratulations! Your business has leveled up and you’re on your way to increasing your income exponentially.
Once you go over the threshold, you (or your accountant) need to go to the VAT office and register as an Osek Murshe. Next, adjust your pricing so clients pay your previous price plus 18% VAT. Begin reporting to the VAT office every two months and transferring the VAT you collect from clients to the government.
It’s possible that even if you were doing your own reporting while you were an Osek Patur, you will want to hire an accountant or tax advisor once you become an Osek Murshe. That’s because Osek Murshe paperwork is more consistent and complex than that of an Osek Patur.
Going over the threshold at year end
Making more money is almost always a good idea, but if you suddenly realize you are about to go over the threshold in December, it’s best to slow down work just enough so that you can end the calendar year as an Osek Patur and start the next year as an Osek Murshe. Obviously, don’t do this by illegal practices such as falsifying receipts. Consult an accountant or tax advisor to make sure you are staying compliant.
Switching to an EOR
The move from Patur to Murshe might be the tipping point at which you close your government file as a business owner and switch to working through an Employer of Record (EOR) service. When you are an employee of an EOR, you maintain autonomy over your business and continue doing what you love with the clients you want to work for. But you don’t have to deal with all the paperwork that comes with being an Osek Murshe. All you have to do is let the EOR know who to bill and how much at the end of each month, and they take care of the rest. No more separate payments to Bituach Leumi, Mas Hachnasa and Ma’am. All payments are dedicated automatically from your salary and you receive a pay stub like any other employee.
If you’re an American citizen, you get the added benefit of avoiding the 15% Social Security payment required by the US government for all self-employed citizens, even those living overseas.
Navigating the transition from Osek Patur to Osek Murshe (or even to an EOR) might feel like stepping into the deep end, but it’s also a sign of your business thriving. Whether you choose to embrace the Osek Murshe life or offload the admin to an EOR, remember that crossing the threshold isn’t just a tax milestone—it’s a badge of progress. And that’s worth celebrating!