What is an Osek Patur in Israel?
An Osek Patur (עוסק פטור) is a term used in Israel to describe a small business that is exempt from VAT registration. The term literally means “exempt business” and is used to refer to businesses that have an annual turnover below the VAT registration threshold and are not required to charge VAT on their goods and services.
VAT in Israel
Value Added Tax (VAT) is a consumption tax that is levied on most goods and services sold in Israel. The current VAT rate in Israel is 17%.
VAT registration threshold
The VAT registration threshold in Israel is NIS 107,692 (as of 2023). This means that businesses with an annual turnover below this threshold are not required to register for VAT.
Benefits of being an Osek Patur
There are a number of benefits to being an Osek Patur in Israel. These include:
- The ability to keep prices lower by not charging VAT
- The ability to avoid the complex VAT compliance process
Drawbacks of being an Osek Patur
There are also some drawbacks to being an Osek Patur. These include:
- The inability to reclaim VAT on business purchases
- The inability to issue VAT invoices
How to register as an Osek Patur
Businesses can register as an Osek Patur online or by submitting a paper application to the Israel Tax Authority (ITA). The registration process usually takes a few weeks.
Osek Patur obligations
Osek Paturs are required to keep records of their income and expenses for a period of five years. They are also required to file an annual income tax return.
Conclusion
If you are considering starting a small business in Israel, you should consider whether you should register as an Osek Patur. There are a number of factors to consider, such as the expected annual turnover of the business, the need to reclaim VAT on business purchases, and the complexity of the VAT compliance process.
Here are some additional resources that you may find helpful:
- Israel Tax Authority website: https://www.gov.il/en/departments/israel_tax_authority/govil-landing-page
- Guide to VAT in Israel: https://www.gov.il/en/departments/topics/value_added_tax/govil-landing-page
- VAT registration form: https://www.gov.uk/guidance/register-for-vat
