FAQ

What categories of entrepreneurs are required to make savings pension contributions in accordance with the new law?

All entrepreneurs who are 21 years of age and who were not older than 55 years at the time of the enactment of the law as of January 1, 2017, are obliged to make payments for pension contributions. However, the law does not apply to individuals under the age of 21, persons who started to do business after reaching the retirement age (60 years), as well as entrepreneurs who have been engaged in business for no more than six months. For more details refer to the link.

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What amount is the private entrepreneur obliged to contribute?

Here everything depends on your current monthly income. So, if the amount of your earnings does not exceed 4.772 NIS, you need to pay 4.45% of this amount. If the earnings are higher, yet up to the amount of 9.543 shekels, the difference is paid at the rate of 12.55%. Revenues above these amounts are not subject to compulsory pension payments, but if you monthly pay 16% of the income as insurance payments amounting up to 17,400 shekels, the state can provide substantial fiscal incentives. Read more in the article.

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What are the pension contributions of entrepreneurs, if they cannot predict their monthly income?

Yes, it often happens that the business is seasonal and to calculate the exact profit, and, accordingly, your personal income in this month is impossible. In this case, there are two options for paying pension contributions. Minimum monthly deductions and then their adjustment based on the results of the reporting year. Deductions in the amount of a percentage of the estimated income and their adjustment at the end of the reporting year. In any case, in order to determine the optimal model of payments in your particular situation, it is better for you to turn to a professional rohe-heshbon for help.

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What are the consequences of the fact that the entrepreneur does not make pension contributions?

Israel is always strict enough to debtors and violators of the law and this case is no exception. So, after the current year, warnings will be sent out to violators with the amount of debt and the deadline for its repayment. If the amount is not paid within 90 days after receiving the notice, a fine of 500 shekels is imposed. The law does not specify exactly how often such punitive penalties may be imposed, but presumably at least once a year. In addition, the amount of penalty is subject to indexation. More details here.

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How to start your own business and what is needed for this?

To begin with, you need to decide what exactly you are going to do and what kind of the legal form of organization to choose — Osek Patur, Osek Murshe or Hevra Baam. After that, we recommend that you turn to an experienced rohe-heshbon, who will check the viability of your idea, draw up a competent business plan and help you get the necessary investment funds to start the project.

 

After that, the auditor will register your enterprise in the state bodies and choose the optimal taxation system — you will only have to take care of the business.

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Is it profitable for a new repatriate (olim) to open a business in Israel?

Yes, very profitable. For new repatriates, the Israeli authorities provide very substantial tax incentives and contribute in every way to the establishment of business by such people. Also, for the recently moved there is the possibility of obtaining a loan under state guarantees on very favorable terms for the establishment of a company.

 

It should be understood that the specifics of doing business in Israel are so much different from those in the countries of CIS (Commonwealth of Independent States). In addition, for successfully doing business in many spheres you will need a strong command of Hebrew. Therefore, we recommend to the new repatriates who want to establish a business in Israel to find experienced consultants who will help them to understand all the nuances of the legislation and will provide timely and accurate advice for business development. For more details refer to the link.

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How long does it take to start a company in Israel?

Here everything depends on what legal form you choose and whether you will be engaged in the registration process personally or assign this task to a specialist. So, for example, for an unassisted opening of an osek murshe (gathering documents, visiting all the institutions, etc.) a couple of days are needed. Registration of all documents with the rohe-heshbon and the subsequent opening of the sole proprietorship (individual business) by a specialist will take you no more than an hour. With a Hevra Baam everything is more complicated — this will additionally require the services of a lawyer and the entire registration process will take more time, besides it cannot be executed independently.

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How to close down a business in Israel?

If for some reason your company is no longer viable, it is necessary to close down the business. But here everything is not as simple as it seems at first glance. In order to properly terminate the activities of the company, one must personally take the petition to the VAT department of the tax assessment authority (MAAM) with a request to close down the company. But even after that, you have the right to resume the company’s activities. You are required to file an annual report with the Mas Hachnasa (Income Tax Agency). Additionally, it will be necessary to pay all the difference in taxes. In addition, it is necessary to close the file in the Bituach Leumi.

Therefore, in order to avoid unexpected unpleasant situations, we strongly recommend that you seek advice on closing down the business and further submission of annual reports to specialists. This will cost you significantly cheaper than claims from the tax authorities.

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Is it possible to maintain the accounting records of an Osek Murshe (Osek Patur) independently?

By law it is, of course, allowed. But it is worthwhile to understand that here everything is the same, as in the case of self-medication. Yes, you can maintain your health with vitamins, drink teas for colds, but most likely you will simply drive the diseases deeper inside and remove only their symptoms. And when these hidden illnesses break out — paying doctors for their treatment will be much more expensive than for timely diagnostics.

 

The same goes for accounting. Microscopic mistakes made by inexperienced entrepreneurs tend to accumulate and transform into huge fines from the tax office and the collapse of business. To avoid such troubles, we strongly recommend that you directly apply to professionals for maintaining the accounting records.

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