Small entrepreneurs were exempted from annual reporting and allowed to write off 30% of income

The Knesset Finance Committee has completed the approval of regulations regulating the new status of businesses for income taxation – the status of small businesses (“osek zair”).

The new status should not be confused with the status of “esek patur” (business exempt from VAT), although in both cases the ceiling on business income qualifying for this status is set at 120 thousand shekels per year gross.

It should also not be confused with the concept of “small business” (“esek katan”), which is not a tax status, but an economic definition.

A business with an Osek Zaire status for income tax purposes can have either an Osek Patur or an Osek Murshe status (a business that charges VAT).

The law creating a new status was approved back in 2023 as part of the law on state regulation. The regulations approved this week are intended to implement its use.

“Osek Zair” has the right to write off 30% of income as expenses without the need to present invoices for these expenses, which not only simplifies reporting, but also allows those entrepreneurs whose activities do not involve significant fixed expenses to save on taxes.

Also, these businesses, in most cases, will be exempt from filing regular reports throughout the year and property declarations, as well as from paying advances on income taxes. The annual report will be submitted online on a platform specially created for this purpose.