"Osek Patur" - Exempt From What?

Opening an Exempt Dealer (Osek Patur) File with the Tax Authority

Self-employed workers? You must open a business file with VAT (Value Added Tax) (MA’AM) at the Tax Authority.

This is followed by opening files with Income Tax (Mas Hachnasa) and National Insurance (Bituach Leumi).

If you open an exempt business file online, the Mas Hachnasa and Bituach Leumi files are also opened in the same process.

With respect to (collecting and transferring) VAT, there are two types of businesses: Licensed dealer and exempt dealer.

• A licensed “dealer” (osek murshe) must collect VAT from customers and transfer the VAT collected from customers to the state. The licensed dealer is entitled to deduct the VAT it paid on its expenses from the total VAT collected from customers, and transfer the difference to the state. If the difference is negative, meaning the VAT the business paid on expenses is higher than the total VAT collected from customers, the business will receive a cash refund from VAT in the amount of the negative difference.
• An exempt “dealer” (osek patur) is exempt from VAT – that is, does not collect VAT from customers and therefore does not transfer VAT to the state (and is not entitled to VAT refunds on expenses).

The dealer is also exempt from ongoing VAT reporting and must report only once a year.

An exempt dealer is exempt only from VAT, and not from income tax!

Every self-employed individual must issue and produce receipts for payments received from customers: a licensed dealer issues tax invoices (heshbonit mas) and receipts (kabala), and delivery certificates (teudat mishloah) according to the nature of the activity; an exempt dealer – issues receipts only.

Who can register as an exempt dealer?
An individual who meets both conditions:

• Their expected annual transaction revenue (not their profit) is up to the amount set (in 2025 – 120,000 NIS).
• Their occupation is not among those requiring opening a licensed dealer file (such as: lawyers, accountants, etc.).

How do you open an exempt dealer file with VAT?
In one of the following ways:

• Online application on the Tax Authority website. You can track the application status.
• Coming to VAT offices. You must go to the relevant branch, according to the business address.
• Through a representative (accountant, tax advisor).

What documents need to be attached?

• Copy of ID card
• Bank account management confirmation
• Rental or purchase contract (if the business will operate out of a property site).
  Additional documents may be required.

To open a licensed dealer file, you must contact the VAT office (you must schedule an appointment) or have your representative do so. You must go to the branch, according to the business address.

Even a salaried employee can open a business file and work as self-employed simultaneously. In this case, it’s important to arrange tax coordination (teum mas) and Bituach Leumi coordination to avoid paying higher income tax and Bituach Leumi fees than required.

Good to know: Many say “exempt business (esek)”, but the official term is “exempt dealer (osek),” meaning that the individual is exempt or licensed, not the business.

For details and submission of an application to open an exempt dealer file

To contact the Tax Authority: *4954