Which is better: an exempt dealer or a micro-business?
They are not competing types of business. Exempt-dealer status concerns VAT; the micro-business regime concerns income tax. You can qualify for both, and an eligible VAT-registered individual can also use the micro-business track. A 30% deduction is most attractive when actual deductible costs are lower, subject to your overall tax position.
What is the real difference, and who qualifies?
The official 2026 turnover ceiling is NIS 122,833. This is turnover, not profit. The statutory conditions exclude, among others, employing staff, unacceptable books, business income not personally earned, income from your current employer, income attributed from a transparent entity, controlling a company, and more than 25% from a statutory relative or an employer from the preceding three tax years. Check the full definitions before choosing.
One turnover figure, two cost profiles
Assume NIS 100,000 annual turnover and full eligibility. Actual expenses below are deductions allowed for that year after private-use restrictions, depreciation and VAT treatment. The comparison excludes personal deductions and other adjustments.
| Item | Lower-cost business | Higher-cost business |
|---|---|---|
| Turnover | NIS 100,000 | NIS 100,000 |
| Actual deductible expenses | NIS 15,000 | NIS 40,000 |
| Ordinary-track base before personal deductions | NIS 85,000 | NIS 60,000 |
| 30% deemed deduction | NIS 30,000 | NIS 30,000 |
| Comparable micro-business base | NIS 70,000 | NIS 70,000 |
| Difference in income base | NIS 15,000 lower in micro track | NIS 10,000 higher in micro track |
The difference is in the income base, not a refund. If the entire NIS 15,000 difference were taxed at a hypothetical 20% marginal rate, the tax difference would be NIS 3,000. Actual brackets, credits and other income can change or eliminate that saving.
Which expenses can an exempt dealer deduct?
Under the ordinary income-tax track, eligible business costs may be deducted subject to documentation, restrictions and depreciation. VAT exemption does not mean costs are never deductible; it generally prevents input-VAT deduction. In the micro-business track, do not add the same actual costs on top of the 30% deduction. Personal relief and special rules for education funds, pensions and National Insurance deductions require separate review.
Read our expense guide and profession checklists ↗How do I open an exempt dealer or register a micro-business?
First review the activity and VAT status, then consider the income-tax track. They are separate decisions. The guides below explain what to prepare; use the official service for registration.
What remains to be done?
Complete tax coordination during the year and, if eligible, the abbreviated report and payment after year-end. The baseline 2026 deadline is 31 March 2027, subject to law and official extensions. VAT, National Insurance and document duties remain. Other circumstances may require a full return; changing tracks can carry restrictions and a cooling-off period.
Official government sources
Keeping this article current
Sources reviewed on 28 October 2026. Review again in January 2027 or sooner if rules change; this is an editorial review target, not an automatic update.