How can an Umbrella Company Help with Contracting in Israel?
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contractsin Israel. Even better, most are experts in Israeli and expat tax law, meaning they’ll also help you optimise your earnings in Israel.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Can I Organise My Taxes and Work Permit Myself?
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Israel.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Israel, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Israel and your home country can seem like full-time work in itself.
A Contractor’s Guide to Taxes in Israel
One of the most consistently challenging aspects of contracting in Israel is complying with the country’s tax system. As well as paying tax in Israel, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
How do I calculate my taxable income in Israel
If you’re working in Israel under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Israel for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Israel, but contractors may not be offered this service because of their short stay with each employer.
Anybody who can’t pay their tax in Israel through PAYE is left with the prospect doing everything themselves.
Do you know much about Israeli Tax Law? Does Israel have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Israel can range from 10 to 50 percent, and you need to be sure you are placed in the correct tax brackets.
Tax Filing as a Contractor in Israel
|When Do You Need to Lodge Your Tax Return?||By 30 April, subject to extensions|
|Tax Filing Deadline||30 April|
|Can you file it online?||Yes|
How to File Taxes in Israel as a Contractor
Are you required to file taxes?
A resident taxpayer with income from employment only is generally not required to a file tax return, where tax is withheld at source.
A resident taxpayer is required to file taxes in Israel if their employment income exceeds ILS643,880. Other thresholds apply to other sources of income including rental income, capital gains, interest income etc.
How to File Taxes:
Step 1: Register
Register for online services on the Israeli Tax Authority website here. Upon successful registration, you will be provided with a username and password for access to the online services portal.
Step 2: Login
Log in to the online services portal here.
Step 3: File Taxes
Complete the relevant forms online to file taxes. Payments can be made here
Tax Figures in Israel
|Currency||Israeli New Shekel (ILS)|
|Tax-free Threshold in Israel||None|
|Income Tax Rates||
Tax Credits and Deductions
Individuals may be entitled to the following tax credits and deductions:
Deductions for subsistence expenses incurred during employment-related travel (subject to rules)
Tax Residency in Israel
When do you become a tax resident in Israel
You become a tax resident in Israel when:
You become a tax resident when your ‘centre of life’ is in Israel. Your ‘centre of life’ is presumed to be in Israel when:
- You are present in Israel for 183 days or more during the relevant tax year; or
- You are present in Israel for 30 days or more during the relevant tax year, and a total of 425 days or more during that tax year and the 2 previous tax years.
If you are deemed to be both an Israeli tax resident and a tax resident of another country, the ‘tie-breaker’ test specified in the relevant treaty is applied. Usually, the treaties will set out tests such as:
- The location of your permanent home;
- The country in which your personal and economic relations are the closest; and
The country in which you are a national.
Does the 183 day rule apply in Israel
The ‘183-day rule’ establishes a presumption that the individual’s ‘centre of life’ is in Israel. Because it only establishes a presumption, an individual may become a tax resident even if they have been present in Israel for less than 183 days.
Am I taxed on my global income in Israel
Tax residents are taxed on their global income. Non-residents are taxed on their Israeli-source income only.
Can you set up your own Limited Company in Israel?
|How long does it take to set up||12 days|
|How much does it cost||INS|
|Is it easy?||It is relatively straightforward to start a business in Israel, with 4 main steps in the procedure: (1) obtaining company registration documents certified by an attorney, (2) filing documents with the Ministry of Justice, (3) registering for taxes at the Ministry of Finance and (4) registering for VAT at the Ministry of Finance. Preparing the required forms and documents may be time-consuming, however filing them with the relevant agencies is much more efficient. Tax registration is the most time-consuming step, and takes around 7 days to process. The World Bank has given Israel an ‘Ease of Starting a Business Rank’ of 45 out of 190 countries. More details on the cost and procedure can be found on their website here|
Tax Calculator in Israel
If you are a contractor and want a calculation on your tax and net retention in Israel, we can supply it to you free of charge.
Using an Umbrella Company for Income Tax in Israel
Contractors in Israel are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. An Israeli umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in Israeli taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Israeli tax office or tax department directly including processing your tax refund if you are eligible.
How We Can Help You with Tax in Israel
We work with numerous umbrella companies in Israel, many of whom are experts in tax and immigration laws. If you have any questions about tax in Israel, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Israeli work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Israel but without the overhead of directly dealing with the Israeli tax authorities. Get in touch with us today for some reliable advice on tax in Israel!
A Contractor’s Guide to Work Permits in Israel
Immigration is one of the primary concerns for any contractor hoping to start working in Israel. Permanent employees will find it easy to get their Israeli work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.
The Israeli work permit, more commonly known as the B/1 Work Visa, is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Israel is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue.
Work Permit Processing Time
The time it takes to prepare and process a work permit application in Israel is approximately 3.5 months.
Can Work Permit be Processed in Country?
No, the work permit is processed in Israel and not in the applicant’s home country.
Work Permit Application Process
There are 4 steps in the process for obtaining a B/1 Work Visa.
The following documents relating to the applicant may be required in the work permit application process:
- CV or resume
- Academic certificates (translated into Hebrew and notarised by an Israeli notary)
- Copy of passport (valid for at least 1 year and 3 months)
- Completed visa application form(s)
- Power of attorney
- Three (3) passport-size photos
- Original marriage certificate (if bringing spouse)
- Original birth certificate(s) of child(ren) (if bringing children)
- Police clearance (issued in last 6 months)
- Medical clearance (issued in last 3 months)
Step 1: Submit Application to the Ministry of Industry, Trade and Labor (4-8 weeks)
An application for a work permit is submitted to the Ministry of Industry, Trade and Labor. Once the application is approved, the Ministry issues a B/1 recommendation letter to the Ministry of Interior. Recommendation letters are valid up to 1 year, and the umbrella company may request annual renewals of this recommendation for up to 1 year each.
Step 2: Submit Application to the Ministry of Interior (2-4 weeks)
An application for the visa is submitted to the Ministry of Interior. If the applicant is in Israel, they must leave Israel for at least 7 days prior to the submission of the application. The applicant stays abroad until the visa is issued.
Step 3: Obtain Short-Term B/1 Visa
A short-term B/1 Visa is issued at the Israeli consulate in the country in which the applicant is staying. The applicant is required to attend an interview and provide the following documents:
- Verified certificate of good conduct
- Medical results from a recognised clinic/hospital (including tests for tuberculosis, hepatitis and AIDS)
- Proof that a fingerprint has been taken (from the State of Israel)
- Completed visa application form
- 2 passport photos (5 x 5)
- Any additional documents requested by the Ministry
The validity period of this visa is 30 days and it is only valid for a single entry. Depending on the applicant’s nationality, a security clearance may be required prior to the approval of the application. This takes 2-8 weeks.
Step 4: Obtain Extension of Short Term Visa
Within 30 days of arriving in Israel, the applicant obtains an extension of their short-term B/1 Visa at the Ministry of Interior. The extended B/1 Visa is valid for up to 1 year and allows for multiple entries.
If the applicant leaves Israel before the extended visa is provided, this will automatically cancel their short-term visa. It will need to be reprocessed at the consulate if the applicant seeks to return to Israel.
Switch Business Visa to Work Permit?
A business visa cannot be converted into a work visa.
How Does an Umbrella Company Work?
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Israel (which means avoiding fees, fines, or even worse penalties).
How Can We Help You?
There’s a huge variety of Umbrella Companies with different specialities and advantages in Israel. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Israel and match contractors with the right company for them. If you’ve already secured a contract in Israel, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).