Osek Patur or Osek Murshe: a complete guide for new immigrants 2025–2026

One of the first questions that every new immigrant who decides to become self-employed faces: which is better - Osek Patur or Osek Murshe? Both statuses are a form of individual entrepreneurship in Israel, but there is a fundamental difference between them. An error in choice results in fines, extra taxes or lost business opportunities. This guide explains the key differences and the steps involved.

What is Osek Patur and who can open it

Osek Patur (עוסק פטור, “VAT-exempt sole proprietor”) - self-employed status for those whose annual turnover does not exceed the legal threshold. The key word “exempt” means exemption from the obligation to collect VAT (מע"מ) from clients. It is important to understand: we are talking about VAT - Osek Patur pays income tax and contributions to Bituach Leumi (National Insurance) on the same basis as everyone else.

The status is available to any individual, including a new immigrant from the first day after aliyah. There are no restrictions on length of stay.

Turnover threshold and annual indexation

The turnover threshold at which one can remain Osek Patur is indexed annually by the Israel Tax Authority (Rashut HaMisim). For 2025 it is approximately ₪120,000 per year for most activities. For so-called “personal services” (שירות אישי)—situations where you provide services primarily to one or two clients and essentially work as an employee—the threshold may be lower. Always check the current threshold before opening on the official website mof.gov.il.

What is included in “turnover”

Turnover includes the total revenue from all business activities for the year, including income from foreign clients. The following are not included: employee wages, government benefits, reimbursement of expenses from the employer.

What is Osek Murshe

Osek Murshe (עוסק מורשה, “VAT-registered sole proprietor”) - status for self-employed with a higher turnover or for activities for which a murshe is required regardless of the amount of income. The main difference: An Osek Murshe charges VAT at 18% (the rate in effect since 1 January 2025) and remits it to the state. In return, they have the right to deduct VAT, which paid on eligible business purchases.

When is murshe obligatory?

• Your annual turnover has exceeded (or is about to exceed) the Osek Patur threshold.
• You are engaged in a licensed activity for which murshe is established by law: real estate broker, insurance agent, doctor in private practice and a number of others.
• You are a car dealer or jeweler (special rules).

Why murshe is beneficial for B2B

Buying companies in Israel prefer to work with Osek Murshe: they receive a tax invoice (חשבונית מס) and can deduct VAT from your invoice as input. This is especially important if your clients are legal entities. Freelancers working with corporate clients often lose tenders for this reason.

Comparison: Osek Patur vs Osek Murshe

5 questions to help with your choice

1. What is the expected annual turnover? Up to ~120,000 ₪ - patur, above - murshe.
2. Who are your clients: individuals or companies? Osek Murshe is often more suitable for corporate clients.
3. Are business expenses subject to VAT? If yes, murshe will allow you to deduct eligible input VAT on equipment, office rent, and services.
4. Is there a murshe requirement in your industry? Check before opening.
5. How prepared are you for the accounting workload? Patur - minimal; murshe - significant, especially at first.

Step-by-step registration: Osek Patur or Osek Murshe

1. Apply to Rashut HaMisim - online at mas.gov.il or in person. You will need: teudat zehut, bank details, description of activity in Hebrew.
2. Register with Bituach Leumi as self-employed - within 90 days from the start of your activity. Missing a deadline creates arrears in contributions.
3. Open a separate checking account - mixing personal and business finances is a major source of tax-audit problems.
4. Set up an invoice issuing system (heshbonit or kabala). It is mandatory to issue an invoice for each transaction.
5. If you are registered as an Osek Murshe: register for VAT, find out your reporting frequency (rav-mashmai or two-mashmai) and set up reminders.

Typical mistakes of new immigrants

• Exceeding the turnover threshold without switching to mursha will result in fines plus retrospective VAT calculation.
• Incorrect classification of activity: consult an accountant before opening if the type of activity is non-standard.
• Mixing personal and business expenses is the first thing people look at during a Tax Authority audit.
• Late registration at Bituach Leumi will result in penalties.
• Failing to issue the required document can result in an administrative fine for each transaction.
• Late transition from patur to mursha - if the turnover is growing quickly, plan the transition in advance, and not after the threshold has already been exceeded.