Freelancing in Israel: Oved Atzmai vs Billing Company
July 25, 2012 at 10:40 am 62 comments
Congrats, you’re considering starting your own full time business. Or maybe you’re just looking for a little money on the side. Sooner or later, someone is going to want a cheshbonit mas (tax receipt) and its time to stop working under the table; it’s time to register as a freelancer.
In Israel, you register as a freelancer or Over Atzmai (hereinafter OA) as either an osek patur or osek murshe. An osek patur earns less than NIS 76,884 and does not charge VAT for his services. If an OA makes more than NIS 76,884, he or she registers as an osek murshe. An osek murshe does charge VAT, but can reclaim VAT on business expenses. You can change from an osek patur to an osek murshe mid-year (when you come close to the 76,884 line you have to change your status) and once you are an osek murshe, you cannot be an osek patur again for at least two years. Finally, some professions such as accountants, lawyers and doctors may only register as an osek murshe. Regardless of what you choose, the process is the same: register at the tax authority, then mas hachnasah, and then bituach leumi Once you are registered, you have to file regular reports, prepay VAT every so often (for an osek murshe) and file an annual report.
Sounds difficult. Is there an easier way?
I know, the reason you became a freelancer was so you wouldn’t have to leave the couch and put on pants; going to so many government offices seems out of the question. Fear not, there is an alternative; you can register with a billing company. A billing company is a company that hires you as a worker. You work as a freelancer, the company does your billing and the company takes a small cut of your revenue and pays you as a worker. Since you are working under the guise of another company, you pay both the employer and employee side of all taxes and investments. Billing company freelancers (hereinafter BF) do not issue personal receipts, but send the money to the billing company and then ask their billing company to issue a receipt. All that the billing companies ask for in return is a small percentage of your revenue.
So which is right for your?
This is a very complicated question that gets to the heart of a very important matter – tax planning, or more honestly, tax avoidance. With tax rates as high as they are in Israel, saving money on your taxes can mean a world (or at least a paycheck) of difference.
1) Tax deductible expenses: Expenses are deductible for both OAs and BFs. The only difference is that OAs can also deduct some living expenses (a portion of arnona, electricity, water and va’ad bayit). In addition, OAs who are registered as an osek murshe and BFs can also receive back VAT on most expenses (for some such as a car and cell phone, you only get back 2/3 VAT. Car rental expenses receive no VAT at all). Click here for a full list of deductible expenses for an OA including VAT reimbursement rates.
2) Charging VAT: Despite popular belief, VAT is more of a tax on the seller than on the buyer. Like all taxes, it leaves a tax incidence, but in a world of many suppliers, VAT is really less of a 16% sales tax on the consumer and more of a ~14% tax on the supplier. An OA is allowed to not pay this tax as long as he is an osek patur. One he is an osek murshe, then he is in the same boat as the BF, who always charges VAT.
3) Bituach Leumi. OAs pay 9.82% on all salary below 60% of the average wage (meaning on the first 5,000 of revenue) and 16.23% on all revenue after that. BFs pay 3.95 on the first portion of revenue and 17.9% afterwards. This means that until ~ NIS 14,200 revenue BF’s pay less, but after 14,200 revenue, OAs pay less. All in all, the difference is not that significant until an OA starts making a lot of money. Another difference is that OAs pay a minimal amount of Bituach Leumi (NIS 212) every month, whether they receive income or not. BFs only pay bituach leumi during months they receive income.
4) Pension: Both BFs and OAs can put aside money for pensions. BFs can put aside up to 7.5% from the employee side (which means after tax money, but 35% of the deposit is a tax credit, 7.5% from the employer side (tax and bituach leumi exempt money), and up to 8.33% for pitzuyim (also, tax and bituach leumi exempt money). Note that the percentages from the employer side turn out to always be a bit less than listed above because these are percentages of your declared salary after you remove the deductible and refundable expenses, including the hishtalmut and pension (there is some complicated math in this). OAs can also put aside money for a pension, 5% from the employee side and 11% from the employer side (both have the same tax deductible policies mentioned for a BF).
5) Hishtalmut: One of the best ways to get some money past the tax man is by paying to a keren hsihtalmut. Typically, a keren hishtalmut, allows a worker to pay in 2.5% of his or her income, which the employer matches with 7.5%. Since BFs are paying both the employer and employee side, this means that they get to pass the 7.5% through tax free and bituach leumi free (Note: like pensions, percentages are a bit less than 2.5% and 7.5% because these are percentages of your declared salary after you remove the deductible and refundable expenses, including the hishtalmut and pension). Similarly, an OA may deposit 2.5% from the employee side, but only 4.5% from the employer side.
6) Social Security: This is where the OA’s have it rough. If you’re an American and registered as an OA. you’ll have to pay 15.3% of your revenue (before taxes, but after deductibles and bituach leumi) to the US government for social security. This is sometimes a good thing, because if you’re close to having 40 quarters, being an OA can push you over the edge, but it also means you’re going to be paying a lot of extra taxes. (For those interested, I plan to have a post discussing the social security issue at length in the near future). Again, this tax does not apply to BFs at all.
7) Billing company fees and accounting fees. Billing companies charge a certain percentage of your initial revenue as a fee for its services (the fess is paid on revenue after removing VAT, but before removing expenses.) This fee covers not only billing, but all Israeli accounting expenses you’ll need throughout the year including deductions, refunds and tax planning (fees range from 4% – 7% with a maximum fee per month). Similarly, an OA requires the services of an accountant. I know there are many OAs out there who choose to do it alone, this is often a huge mistake. The major perk in being an atzmai is the ability to utilize tax exemptions and if a worker is not using an accountant he or she risks either not taking advantages of all the tax advantages at his or her disposal or, conversely, committing fraud. The cost of an accountant is usually between NIS 1000 and 3,000 a year for preparing an annual report. Obviously this price varies depending on the extent of the time and service you need from your accountant.
Some final thoughts:
There are a variety of billing companies that can offer you their services (Yeul Sachir, Atzmai Sachir, Autotax, Cheshbonit Sachir, Sveram & Taxpay to name a few.) When choosing a billing company, it is important not only to look at the fee, but the level of customer service offered. I have heard good reviews from customers from Yeul Sachir. If you have worked with any of these companies, please share your experience in the comments below.
Many choose to be an OA because issuing a receipt from one’s own company looks more professional.
Despite what many say, and what I have been told in the past, it is not a big deal to close a tik. Just speak to your accountant and he or she will probably do the paperwork for you for a small fee.
This is the first time I am posting about this topic and I anticipate feedback and corrections. I’m going to be on vacation next week, so if there is any problem, please e-mail me and I’ll correct it when I come back. In the meantime, please enter any comments relevant to this topic below.
Entry filed under: budgeting, Finding a Job in Israel, pensions, Pensions, Insurance & Everyday Investments, Personal Finance, Taxes, Banking & Mortgages. Tags: .
1.
Reuven | July 25, 2012 at 12:44 pm
Great post!
Do you know if a tutoring job grossing under 10k NIS a year has to be reported? I recall that in the US, very low income doesn’t have to be reported, but I can be off.
2.
jonnydegani | July 26, 2012 at 7:50 pm
Hi Reuven,
Legally, everyone has to report everything that is earned. Practically, I’ve never met anyone asking a 14 year old babysitter for a cheshbonit mas. Depending on the clients and the money involved, this could be a grey area.
3.
zivia | July 30, 2012 at 10:49 pm
Thank you so much for your post! It came at just the right time. I set my business up as a Ba’am (Ltd) in 2004 so I wouldn’t have to pay self-employment tax in America (15%). I end up paying about $3,000 a year to my Israeli and American tax accountants and Israeli bookkeeper. That was fine when I was making good money but my income is less than half what it was before the global economy tanked. I think maybe the BF is a way for me to go. I can’t start it until next year, but it is something to look into.
4.
Shomer Shekalim – ₪ | August 20, 2012 at 12:41 pm
[...] 1) Register and work as an atzmai (and thus pay FICA) [...]
5.
Next Post « Shomer Shekalim – ₪ | August 20, 2012 at 12:41 pm
[...] 1) Register and work as an atzmai (and thus pay FICA) [...]
6.
getting your 40 quarters – social security in Israel « Shomer Shekalim – ₪ | August 20, 2012 at 12:42 pm
[...] 1) Register and work as an atzmai (and thus pay FICA) [...]
7.
daniel | September 19, 2012 at 6:36 pm
I work with taxpay.co.il, a small company with good customer services.
8.
Ben May | September 24, 2012 at 2:53 pm
How does an osek mursheh start the process of setting up a pension?
9.
jonnydegani | September 24, 2012 at 2:57 pm
Choose your pension fund and contact the company directly. They’ll send someone who will sign you up and fill out all the appropriate paperwork for an osek murshe
10.
Susie Keinon | October 31, 2012 at 8:30 pm
Hi
I was wondering two things: Do you know anything about not being able to take car expenses under 2,000 shekels with billing companies?
Also’ if billing companies are so great and only slighty more expensive than accounting fees, why don’t more people do it (is there a catch). I’m an atzmai that makes between 12-10,000 shekels bruto and I’m considering moving over to a billing company but not sure.
11.
jonnydegani | October 31, 2012 at 9:16 pm
About the car: Certain billing companies have preferences about how much they want to deduct for certain expenses. In truth, it’s about not putting up any red flags because they don’t want to deal with an audit. I have heard of one company that allows almost no expenses, while other allow much more. Always get a second opinion.
About the “catch” of using a billing company: Simply stated, being an Over Atzmai is more professional. When you get money, you give a receipt on the spot, without a two day delay; you can deduct all your expenses properly without the whim of a billing company (although subject to the warning of your accountant). For most people who are not Americans, being an Oved Atzmai (opening a tik) is usually the way to go. But there are exceptions:
(1) If your work is irregular, then you would not pay Bituach Leumi for months you don’t earn – so a billing company would be better
(2) If you are American, and subject to social security laws, then you are paying an additional 15.3% social security tax as an Oved Aztmai – so working with a billing company become MUCH more profitable.
12.
Shara Shetrit (@SocialShara) | April 4, 2013 at 11:29 am
Has anyone heard of mas hachnasa cracking down on the use of billing companies and charging freelancers back taxes?
13.
jonnydegani | April 4, 2013 at 11:34 am
I’ve never heard of such a thing. The government established billing companies in the first place in order to avoid hiring more part time workers so it wouldn’t make sense for them to fight it. On the other hand, it wouldn’t be the first time the government shot itself in the foot. Has anyone else heard anything about this?
14.
Shara Shetrit (@SocialShara) | April 7, 2013 at 10:59 am
Any new feedback about best company to use? I have seen negative feedback for Yeul Sachir.
15.
jonnydegani | April 7, 2013 at 11:29 am
Reviews are mixed. I once had a meeting of Atzmai’im where one said they were the devil and another said they were the best company ever for their service and worth every penny.
I think that a person’s selection will depend on a few things (1) how comfortable he or she is with Hebrew (yeul sachir specializes in satering to anglos) (2) how much money you’ll be making as an atzmai (yeul sachit costs more if you’re not bringing in enough) and (3) your own personal experience. It is so easy to move from one service to another that people really have the luxury of trying out one and moving to another if they’re unhappy.
16.
sharashetrit | April 7, 2013 at 12:01 pm
Thanks! What are the top few that people are using?
17.
jonnydegani | April 7, 2013 at 12:32 pm
Yeul sachit, taxpay and sveram are the ones i have heard the most about – mixed reviews for all
18.
Isadora | April 21, 2013 at 12:10 am
also Taxpay works with anglos
19.
Shomer Shekalim | April 21, 2013 at 5:57 pm
[...] A while ago, I published a post about billing companies and freelancing in Israel. Since publishing this post, I have received dozens of e-mails asking me which service I preferred. Since I only worked with one company, I clearly cannot give any personal recommendations and opinions about all the companies. [...]
20.
Zohar | April 22, 2013 at 11:30 am
I just got my first freelancing client – a small position that pays 3,000 a month. I am American (with Israeli citizenship) so I imagine BF is the way to go. Any recommendations on who to use for this low amount of money? I checked Yeul and they charge 590 or 7%, so on this amount it’d be 590 – and then also taxes. Any billing companies handle this low amount of money for 4-7%? Thanks!
21.
jonnydegani | April 22, 2013 at 12:24 pm
yesterday I published a poll asking people about their experiences with the various companies. I will publish the results in a couple of weeks.
22.
Shara Shetrit (@SocialShara) | April 22, 2013 at 1:08 pm
Where is the poll?
23.
jonnydegani | April 22, 2013 at 1:30 pm
http://jonnydegani.polldaddy.com/s/billing-company
24.
Shara Shetrit (@SocialShara) | April 22, 2013 at 1:07 pm
The others charge 5% but there is no cap.
Try Adina Lessin: aklessin@gmail.com
25.
Eliezer W | April 25, 2013 at 9:27 am
Can someone please explain all the taxes and amounts taken out of a paycheck for a BF. Just to pick a round number, if someone bills 10,000 NIS per month as a BF, what taxes are taken out of it?
Am I understanding this correctly?
- 17% VAT
- 7% Billing Company Fee (Yeul Sachir)
- 23% Income Tax
- 3.5% Bituach Leumi for the 1st 5,000 NIS and then 17.9% on the rest of the 5,000 NIS
- About 15% pension (includes both employee and emploer amounts)
- 8.33% pitzuyim
- Keren Hishtalmut (if desired and if have any money left after this)
So does a BF get to take any money for themselves or is 80% of their salary going to taxes?
If someone can please explain this to me, it would be VERY appreciated.
26.
jonnydegani | April 25, 2013 at 9:44 am
You’re mostly right. There is a bit of complicated math involved – for example, for Bituach Leumi and your pension, they don’t just take a regular percentage off, they remove it so that the employer will pay the correct taxes to match what is leftover after they deduct it. For example, if you make 100, they don’t just remove NIS 22.83 for your pension, which is NIS 22.33, they set it up so that after removing the employer side, they will leave over the correct amount that will show they took off 7.5% and 8.33% of that amount. Kind of like how in the תורהwe calla חומש 25%, because when you add it to the principal amount (it is a fifth of the total amount (25% + 100% = 125%, and a חומש is a fifth of this).
Regardless, someone from Yeul Sachir should be able to explain to you what they took off. If they can’t, then you certainly have a problem on your hands. Have you contacted them? What has their response been?
27.
Eliezer W | April 25, 2013 at 10:45 am
I haven’t started working with Yeul Sachir yet — I’m trying to figure out if it is worth working! If I only take home 20% of my salary, it may not be worth working at all!!!
28.
jonnydegani | April 25, 2013 at 11:00 am
Pensions, bituach leumi and taxes are a part of life. Odds are you’ll bring home around 60% of whatever you earn, but that depends on how much you are making.
The way I see it, you only have three options – become an atzmai (in which case you’ll pay another 15.3% for social security if you’re American), use Yeul Sachir, or use anotherservice like taxpay. The only question you ave to ask yourself is how much you’ll be bringing in monthly and based on that will Yeul Sachir or taxpay offer a cheaper fee. As a general rule, if you’re making less than NIS 11,800 a month, taxpay and the other companies are cheaper. If you’re making more, then yeul Sachir is cheaper.
29.
Eliezer W | April 25, 2013 at 11:18 am
I would be working for an American Company, earning around 10,000 NIS a month. How do you figure that I bring home 60% of what I earn?
If I take off 17% VAT, 7% Yeul Sachir, 23% Income Tax, about 11% Bituach Leumi (averaged from the 3.5% and 17.9%), 15% pension, 8.33% pitzuyim — if I add up all those percentages, that is 81% of my salary that I am paying out on a monthly basis. Can it be that I only take home 19% of my salary?
I’m obviously misunderstanding something — I’m really sorry, but could you please explain? I’m going into panic mode here that I need to just give up being a freelancer and instead need to look for a job here in Israel as a company employee (which I don’t want to do!).
Any advice is really appreciated!!!
30.
jonnydegani | April 25, 2013 at 11:31 am
you’re confusing your marginal rate with your effective rate. On earning 10,000, you’ll probably get a base salary of around 8,500 or less (from the math mentioned above), which means you’ll pay approximately:
500: 5% to taxpay (they’ll be cheaper than Yeul Sachir)
1100: Bituach Leumi
2000: Pension
400: Taxes (remember, you pay nothing on the first 6,000, then %10 for a while, then 10% until 9,000, then 23% on the last 1000, so it’s much less. Also, you didn’t include your points and deductions for putting money into your pension.)
So you’ll pay around 4,000 and be left to take home 6,000
31.
Shara Shetrit (@SocialShara) | April 25, 2013 at 11:39 am
Aside from the 5% to Taxpay, do you make more money as an emplooyee of a real company than a freelancer using a biliing company? Or is it the same? Financially speaking am I better off taking a 10K job at a company or working for 10K as a freelancer using a billing company?
32.
jonnydegani | April 25, 2013 at 11:43 am
If you work for a company, then the company pays into your pension and you only have to put in 5%-7%. Also, the company pays a big part of Bituach Leumi,.
33.
Eliezer W | April 25, 2013 at 12:15 pm
I don’t understand the calculations 100% — I’m not a math person
(was the 8,500 because of 10,000 less VAT?) but this is very reassuring. Thanks for the help.
Taxpay seems from their website to be entirely in Hebrew. My Hebrew is OK but not great, which made Yeul Sachir look better to me. 5% sure beats 7% though so maybe I’ll reach out to Taxpay and see if someone speaks English.
Thanks for all the help and advice! Tremendously appreciated!
34.
Isadora | April 25, 2013 at 12:35 pm
10% pension (tagmulim 5+5) and 5% pitzuyim (8.33 not mandatory, only 5 out of it )
35.
jonnydegani | April 25, 2013 at 1:28 pm
True. 5+5+5 is only the legal minimum. Next year it will be 5.5+6+6. You can take out up to 7+7.5+8.33
36.
Eliezer W | April 25, 2013 at 1:48 pm
Got it — so that is how it went from 10,000 to 8,5000 (10% pension + 5% pitzuyim). Where does VAT fit into this picture then?
37.
jonnydegani | April 25, 2013 at 1:54 pm
Your base salary is after the 7.5 + 8.33 as well as large part of your bituach leumi is taken out. Remove all of those, you’re talking at least 15% drop.
VAT is another issue. I thought you meant 10,000 after VAT. if it is before, then you have to deduct VAT as well.
38.
Eliezer W | April 25, 2013 at 2:07 pm
No, I meant my client will send 10,000 NIS a month. At this point, no VAT has been paid. So this means that I first need to take off 17% VAT, then pension & pitzuyim, then Bituach Leumi, and then if there is any salary left, income tax.
So because of the VAT, I would end up taking home a lot less than 60% of my salary. Looks more like I’ll get around 43% of my salary…which is pretty upsurd…
39.
jonnydegani | April 25, 2013 at 2:16 pm
If you get in 10,000, it is around 8,600 after removing VAT.
Pension will be around 1,700
Bituach Leumi will be around 850
Taxes will be around 250
You’ll still pay taxpay NIS 500
This will leave you with 53% of whatever you make
40.
Isadora | April 25, 2013 at 5:29 pm
Is it possible, you guess, that a payment to freelancer/employee is the same?
As a company employee, your salary will be about 10,000-30% (all taxes/pensions and another pays) = 7,000 in your “tlush” brutto. Probably, minus 20% and =8000 NIS…
41.
jonnydegani | April 25, 2013 at 5:34 pm
it depends on who is paying the employer side of pensions and bituach leumi when working for an employer. If the employer is, and not the worker, then it will be much less. if the worker pays it, then it is the same thing as the billing company
42.
Isadora | April 25, 2013 at 6:49 pm
the employer must to pay
43.
jonnydegani | April 25, 2013 at 7:00 pm
I meant will the employer deduct your salary accordingly. No doubt that if I had the option of being a freelancer making 10,000 or being paid by a company 10,000, the later choice would net a few thousand more.
44.
Jush | April 25, 2013 at 3:18 pm
Taxpay have English instuctions on their web site.
You can also ask for Gil, from Taxpay, who speakes Enlish quite well.
45.
Eliezer W | April 25, 2013 at 6:33 pm
I spoke to Gil at Taxpay (nice guy) and it looks like the breakdown is as such (assuming a gross monthly income of 10,000 NIS):
- 5% Taxpay service fee (500 NIS)
My Base salary therefore is 9,500 NIS
- 17.9% Bituach Leumi (he said this is not a progressive fee rather a flat 17.9% on the entire amount — is that right?) (1,700.5 NIS)
- 18.3% Pension & Pitzuyim (13.3% employer side, 5% employee side) (1,738.5 NIS)
- Income Tax (1,152.9 NIS)
He said if the company I will work for is in the US and has no Israeli division, then I will not need to pay VAT.
In total though, this calculates to mean I only take home 49% of my salary!
46.
jonnydegani | April 25, 2013 at 7:02 pm
He is correct about VAT; if the client is American, you can get around it. he is wrong about Bituach Leumi. See http://www.btl.gov.il/Insurance/Rates/Pages/%D7%9C%D7%A2%D7%95%D7%91%D7%93%D7%99%D7%9D%20%D7%A9%D7%9B%D7%99%D7%A8%D7%99%D7%9D.aspx
47.
Josh | April 25, 2013 at 9:06 pm
The maximum Bitiuach leumi is 18.5 % maybe he said that calculating together it amount to 17%.
Also he is correct about the vat and pension.
48.
Joey | April 30, 2013 at 8:05 pm
I am pretty new to Israel and I am also still working for my old company in America.
I was wondering — if I am an employee of a US company, would I still be considered an OA here? Meaning, I am paying social security taxes etc still in the US and I have a pension there as well. Am I still going to need to pay bituach leumi here and a pension here? And if so, do I need to pay the amounts of an OA or the amounts that an employee of an Israeli company would pay?
49.
jonnydegani | May 1, 2013 at 6:15 am
You are not an Atzmai, but you may need to pay the difference in the tax rates and maybe some Bituach Leumi. I would reccomend contacting an accountant. I have a few to recommend – do you live in jerusalem or the Mercaz
50.
Joey | May 1, 2013 at 4:37 pm
Beit Shemesh — but Jerusalem is close enough if you have someone good.
51.
jonnydegani | May 8, 2013 at 3:10 pm
contact chaim@tax-usa.co.il
52.
Joey | May 20, 2013 at 11:49 pm
I’ve asked several accountants and have not been able to get an answer yet to the following question:
If I am an employee of a U.S. company (and do not need to travel to the U.S. — therefore my income taxes get paid here in Israel), as an employee of a US based company, would I still need to pay 15% bituach leumi (as if I was self employed) since my company will not pay any of my bituach leumi? Or would that rate be reduced to be similar to bituach leumi amounts charged to an Israeli employee? If I still need to pay 15% bituach leumi, then I assume working for a billing company is better than being an employee of the US company since I would avoid all US social security taxes. If I would not need to pay 15% bituach leumi, I would rather remain an employee of the US company (only pay 7.5% social security — and I need another couple of years to hit the 40 quarters mark).
Any clue how the bituach leumi works for employees of US based companies??
Thanks!
53.
jonnydegani | May 21, 2013 at 10:28 am
I asked one as well and he didn’t know. I’ll try to send it out to a couple of accountants and see what they say. Please post if you get an answer
54.
Rafi | May 6, 2013 at 6:59 pm
Just stumbled over this very informative blog. I haven’t read all the comments so apologies if I am re-asking this question.
I am set up already as an Osek Murshe and have been for close to 3 years. Is it possible for me to work as a regular Sachir at the same time? That is, maintain the business as an Osek Murshe but earn a regular monthly salary working a regular job at the same time. And what tax implications will this have for me?
55.
jonnydegani | May 8, 2013 at 3:05 pm
Hi Rafi,
there is no problem working as both things; but you’ll need to do a תאום מס and possibly a תאום ביטוח לאומי
56.
Esther | May 19, 2013 at 9:59 pm
Hi and thanks for writing this post. I was researching how to open up an osek patur when I came across this, and it made me start thinking about joining a billing company instead. Did you post the results of the poll yet?
If I’m making about 3500NIS per month in part time freelance work, which option would be the cheapest for me? How do billing companies compare with being self-employed with regards to benefits such as maternity pay and sick leave?
Also, my client is in the UK and I get paid in GBP. I usually lose about 2-2.5% in conversion rates. How do billing companies handle foreign salaries?
Thank you very much!
57.
jonnydegani | May 20, 2013 at 9:14 am
Hi,
You can find the initial results for the billing companies here
Since you’re only talking about 3,500 a month, the cost of an accountant vs billing company is about the same (3500 x 12 months x 5% = NIS 2,100 vs about the same for an accountant). In most cases I’d recommend a billing company because it is much less hassle. Both don’t pay you for sick leave and in both cases it is Bituach Leumi, not an employer, that pays you for maternity leave.
Conversion rates are terrible and there is only a few ways around them (1) get someone to come to Israel strapping the money to their body and then exchange it at a money changer or (2) use a service like isratransfer to help you move the money, they usually get a better rate.
Good luck. Please tell me how things turn out.
58.
kate | May 20, 2013 at 9:40 am
(Tried to reply to Rafi, but it wouldn’t let me. Hope you see this) My understanding from talking with Isratransfer is that they only work with large amounts of money. You need to shop around for the best conversion rates. 2-2.5% sounds rather high to me. It should be closer to 1% (if you are exchanging cash) or 1.5% if you are using a check. FYI, most credit cards (American ones at least) will charge you a 3% foreign exchange fee when you use your card outside of America. Are you from GB or America? If you are American and work as a freelancer in Israel, you will have to pay Betuach Leumi in Israel AND Social Security (about 15%) to American too. Social Security is not covered under the tax treaty between America and Israel. Only Income tax is. (GB is a different story). If you are working as an “employee” with a billing company, you won’t have to pay Social Security to America. Good luck.
59.
Esther | May 20, 2013 at 11:23 am
Thanks for replying.
Wouldn’t Bituach Leumi also be less for me if I went with a billing company? In the post, you wrote:
Bituach Leumi. OAs pay 9.82% on all salary below 60% of the average wage (meaning on the first 5,000 of revenue) and 16.23% on all revenue after that. BFs pay 3.95 on the first portion of revenue and 17.9% afterwards. This means that until ~ NIS 14,200 revenue BF’s pay less…
With the BF route, do you only pay Bituach Leumi on the employee side, or do you also have to pay on the employer side? How much does it all add up to in the end?
Also, regarding money transfer services, does this mean that my client would have to convert the money when paying the billing company, or could I do it myself, pay the billing company then have them pay me back again with a payslip?
One more thing, are pensions and keren hishtalmut optional or obligatory for OAs? I understand from the post that for BFs they are obligatory.
Thanks once again for all your help!
60.
jonnydegani | May 20, 2013 at 1:22 pm
As a BF, you pay both the employer and employee side, so it works out the same either way; the difference is only going to be a few shekels.
you have to ask the money transfer service about what they can do and the different financial repercussions.
For an OA, nothing is mandatory. For a BF, pension is mandatory, hishtalmut is not.
61.
Jeremy Hess | May 28, 2013 at 1:28 pm
Thanks for the mention, Jonny!
62.
Esther | May 20, 2013 at 11:29 am
Reply to Kate:
Thanks for writing. I’m from GB so don’t need to pay Social Security twice. Not sure, but I think last time I checked, the rates were generally higher for GBP vs. USD..