You’ve landed a job with a company overseas and now you have to figure out how you’re getting paid. Israeli tax authorities expect income to be reported properly, regardless of where it comes from, so you need to make sure you’re set up to report and pay taxes.
If you live in Israel and earn income from abroad, you generally have two legitimate ways to do this: open a registered business or get paid as an employee through an Employer of Record.
Option one: open a business
This is the route most people hear about first. You register as a freelancer and invoice your foreign client directly. There are three types of freelance businesses in Israel – Osek Zair and Osek Patur for lower incomes and Osek Murshe for higher salaries. If you’re making a very high salary, you can open a Ba’am business (sort of like an Ltd).
Once you open a business, you’re responsible for reporting income to the Israel Tax Authority, paying income tax and making regular payments to Bituach Leumi (National Insurance). You may need to charge VAT depending on your status and the nature of your work. You will likely work with an accountant or tax advisor, because it can be complicated to do it yourself. If you’re an American citizen, the US government will require you to pay 15% of your income to Social Security as a self-employed person.
You will also need to issue invoices, track payments, handle currency conversions and stay on top of filing deadlines. If you’re working with multiple clients, the administrative side of running a business can take you away from doing what you’re actually good at.
The advantages of opening a business are that you have full independence, you can work with multiple clients easily and you can deduct certain business expenses. And for some people, especially those building a long-term freelance career, this structure makes sense.
Option two: get paid through an Employer of Record
The second option is less obvious, but often much simpler. Instead of becoming self-employed, you become an employee in Israel through an Employer of Record (EOR) service.
The way this works is that your foreign employer partners with an EOR provider in Israel. That provider becomes your official employer on paper. They handle payroll, taxes, Bituach Leumi, pension contributions and compliance with Israeli labor laws. You receive a regular salary with a payslip in Hebrew.
From your perspective, it feels like a normal job. You get paid, taxes are handled, there’s no need to open a business or deal with invoicing (beyond letting the EOR know who to invoice and for how much). You avoid the administrative burden of running a business. You’re classified as an employee and don’t need to pay US Social Security. And you don’t need to navigate Israeli tax rules on your own or hire an accountant to help you.
It’s also a strong fit if you are working for a single company and want stability without becoming a contractor.
The tradeoff is that you’re not operating as an independent business, so you can’t deduct most expenses and some clients or companies will prefer to work with freelancers. If you plan to juggle multiple clients or build a freelance brand, this structure may be less flexible.
Getting set up
Want to get paid from abroad but don’t want to open a business? An EOR is an excellent solution in this situation. Reporting income is required in Israel from the first shekel earned, so it’s important to get set up right from the start. Choose an Employer of Record service that fits your income, work structure and customer service expectations and you can focus on your work while everything behind the scenes is handled properly.
