Israel Introduces New Tax Route for Small Businesses
Translated & summarized from Bizportal by baba
Israel has launched a new 'Tiny Business Owner' tax track for 2024, allowing eligible individuals with annual turnovers up to 122,833 shekels to deduct a fixed 30% of their income. This simplifies tax filing for businesses with low expenses, potentially exempting them from annual returns. The track is an alternative to existing 'exempt' and 'licensed' dealer statuses, with specific eligibility criteria.
The story in 6 lines · by baba
- Israel introduced a new 'Tiny Business Owner' tax track starting in 2024.
- The track allows a fixed 30% deduction from turnover for eligible businesses.
- The annual turnover ceiling for this track is 122,833 shekels as of 2026.
- This option simplifies tax filing for businesses with low actual expenses.
- Certain business owners, like those employing staff, are excluded from the track.
- Eligible individuals may be exempt from filing an annual tax return.
Israel is offering a new tax option for small business owners, the 'Tiny Business Owner' track, effective from January 2024. This route, available to those with an annual turnover of up to 122,833 shekels in 2026, allows for a fixed 30% deduction from turnover without the need for receipts or detailed expense calculations. This simplifies tax reporting for eligible individuals.
The 'Tiny Business Owner' track is an addition to existing classifications like 'exempt dealer' (osek pateur) and 'licensed dealer' (osek mureshe), which are determined by the Tax Authority. An exempt dealer's transactions are VAT-exempt, but they cannot deduct VAT paid on business expenses. A licensed dealer collects 18% VAT and can deduct input VAT on business expenses. The choice between these statuses depends on the nature of the business and its clients.
For the 'Tiny Business Owner' track, the 30% deduction replaces all expenses, including the usual deduction for national insurance contributions. This makes it particularly beneficial for businesses with low actual expenses. However, individuals with higher expenses may find it more advantageous to calculate taxes based on actual costs. The track is not available to those who employ staff, receive significant income from their employer, or are controllers of a company.
Income from employment is combined with business income for overall tax calculation. Those who qualify for the 'Tiny Business Owner' track and meet its conditions may be exempt from filing an annual tax return, paying taxes throughout the year via a tax coordination system. Standard bookkeeping and obligations to VAT and National Insurance remain unchanged.
The turnover ceiling for an exempt dealer was 120,000 shekels in 2024-2025 and was updated to 122,833 shekels for 2026. This same ceiling applies to the 'Tiny Business Owner' track. Exceeding this turnover limit, even with low profits, can necessitate a change in VAT classification. Exempt dealers must submit an annual turnover declaration by January 31st.
