מחשבון – עובד לעומת קבלן עצמאי

The answer depends on several personal factors. Generally, at low to medium incomes (up to about 15,000 ILS per month), employees tend to enjoy higher net income thanks to lower national insurance and health insurance rates and the fact that part of the payments are covered by the employer. At higher incomes, self-employed individuals can earn more net if they have significant business expenses that can be deducted from taxable income.
Our calculator allows you to enter your personal data and receive an accurate comparison tailored to your specific situation.

Both Registered and Exempt Contractors are Self Employed individuals (עצמאים). The main differences between a Registered Contractor (עוסק מורשה) and an Exepmt Contractor (עוסק פטור) are:

• VAT Reporting and Payment Obligation: Registered Contractors must report and pay VAT, while Exempt Contractors are exempt from this.
• Input VAT Offset: Registered Contractors can offset input VAT on business expenses, while Exempt Contractors cannot.
• Income Threshold: Exempt Contractors are limited to an annual income threshold (100,491 ILS in 2025), while there is no such limitation for Registered Contractors
• Reporting Requirements: Registered Contractors are required to provide more detailed reports and maintain full bookkeeping.

In terms of income tax and national insurance, there is no difference between the two – both pay according to the same rates.

A Micro Business is a relatively new track designed for self-employed individuals with low incomes. Its main advantages are:

• Automatic Deduction: Automatic deduction of 30% of income without needing to prove expenses or keep receipts.
• Simplicity: Minimal reporting and registration requirements, without the need for detailed bookkeeping.
• Income Limitation: Limited to an annual income of up to 120,000 ILS.
• No VAT: No obligation to register and report to VAT.

A Micro Business is especially suitable for self-employed individuals at the beginning of their journey, those with a side occupation, or businesses with relatively low expenses.

Calculating net income for self-employed individuals includes the following steps:

• Gross Income – Total income from the business
• Deduction of Recognised Expenses (הוצאות מוכרות) – Subtraction of recognised business expenses (or automatic deduction in the case of a Micro Business)
• Deduction of Contributions – Subtraction of pension and study fund contributions
• Income Tax Calculation – Calculation of tax according to tax brackets, taking into account tax credits
• National Insurance and Health Insurance Calculation – Calculation of mandatory payments according to the relevant rates
• Net Income = Income after expenses and contributions, minus income tax, national insurance, and health insurance

Our calculator performs all these calculations automatically and accurately, according to the data you entered.

Self-employed individuals pay higher national insurance rates than employees:

Employee:

• • 0.4% on income up to 60% of the average wage in the economy
  • 7% on income above 60% of the average wage up to the ceiling

Self-employed:

• 4.47% on income up to 60% of the average wage in the economy
• 12.83% on income above 60% of the average wage up to the ceiling

The difference stems from the fact that in the case of an employee, the employer pays an additional portion of the national insurance (about 7.6% more), while a self-employed person pays the full amount themselves.

Yes, an Exempt Self-Employed is obligated to pay income tax just like any other self-employed person. The exemption refers only to the obligation to report and pay VAT, not to income tax or national insurance.

An Exempt Self-Employed pays income tax according to the same tax brackets that apply to every citizen in Israel and enjoys the same tax credits. Additionally, they are entitled to deduct recognised business expenses from taxable income, just like a Registered Self-Employed.

The recognized business expenses for self-employed individuals include:

• Office Expenses – Rent, property tax, electricity, water, internet, and phone
• Equipment and Computing – Computers, software, office furniture (usually spread over multiple years)
• Vehicle – Fuel, insurance, maintenance, depreciation (at defined rates)
• Marketing and Advertising – Advertising, promotion, conferences, marketing materials
• Professional Services – Accounting, legal advice, business consulting
• Business Travel – Domestic and international (subject to limitations)
• Professional Training – Courses, workshops, professional literatur
• Business Insurance – Professional liability insurance, office insurance
• Refreshments and Hospitality – With certain limitations (usually 80% of the expense)

It’s important to note that a Micro Business enjoys an automatic deduction of 30% of income, without needing to prove expenses.

Tax credit points do not depend on the type of employment (employee or self-employed) but on personal data:

• Base – 2.25 credit points for men, 2.75 credit points for women
• Children – Additional credit points for children (different between men and women)
• Single Parent – Additional credit points for single parents
• New Immigrant – Credit points in the first years in the country
• Periphery Resident – Credit points for residents of certain settlements
• Academic Education – Credit points for academic degree holders in the first years

The value of a credit point for 2025 is 2,976 ILS annually (248 ILS monthly).

The income ceiling for a Micro Business is 120,000 ILS per year. If the annual income exceeds this amount, it is not possible to continue in the Micro Business track, and one must transition to an Exempt Self-Employed or Registered Self-Employed track (according to the scope of income).

It’s important to monitor income throughout the year and prepare in advance for transitioning to another track if a deviation from the ceiling is expected. The transition involves bureaucratic procedures with tax authorities and the National Insurance Institute, and it’s preferable to perform it in an orderly manner.

The decision between a Micro Business and an Exempt Self-Employed depends on several factors:

A Micro Business is more advantageous when:

• Annual income is less than 120,000 ILS
• Business expenses are low (less than 30% of income)
• Maximum simplicity in business management is preferred
• There is no need to offset input VAT

An Exempt Self-Employed is more advantageous when:

• Annual income is between 100,000 and 200,000 ILS
• Business expenses are high (more than 30% of income)
• There is ability to maintain books and keep receipts
• Customers are mainly private individuals (not businesses)