Opening an Authorized Business in Holon

What is a Licensed Self-Employed Worker and Who Does It Apply To?

A licensed self-employed worker is the term for someone who has started an independent business and is registered with the Israeli Tax Authority as a self-employed individual. This is not a private limited company — it is a private person running their own business: a contractor, consultant, designer, digital platform seller, or any other self-employed professional.

If you are a Holon resident and have decided to start your own business, or if you are already engaged in self-employed activities but are not formally registered — this page is for you. Most of the clients we see in Holon started exactly where you are now: many questions, some confusion, and a clear need for professional guidance.

Why Is It Important to Open a Licensed Self-Employed Business Correctly?

When you are not formally registered, you are exposed to legal and financial risks. The Israeli Tax Authority searches for self-employed individuals who have not reported income, and when discovered — it is not just a fine. It includes mandatory deductions, interest, and retroactive adjustments of reports from previous years.

On the other hand, when you are properly registered as a licensed self-employed worker, you:

• are required to file periodic reports (a tax advance report), but this is exactly what gives you control over your tax;
• can deduct legitimate business expenses (home office, equipment, maintenance) — which reduces your taxable income by law;
• are recognized as legitimate before banks, suppliers, and major clients.

Steps to Open a Licensed Self-Employed Business in Holon — From Start to Finish

The process is clearer than it appears. Here is the way:

1. Preparation of basic documents: ID card, address (in Holon or anywhere else in Israel), and phone number. If you are a foreigner — you need an entry certificate or valid work permit.
2. Selection of business field: What exactly do you do? Sell on Etsy? Work as a consultant? Build apartments? The field affects your tax classification and the legitimate expenses you can deduct.
3. Submission to the Tax Authority: You can submit it yourself through the Tax Authority website, or — and this is what most of our clients in Holon do — leave it to an accountant. This saves mistakes and time.
4. Receipt of self-employed number: When the Tax Authority approves, you receive a unique self-employed number. This is your number for all future reports.
5. Opening accounting books: From day one, all income and expenses must be documented. You don't need to wait until the end of the year.
6. Filing a tax advance report: Depending on the type of activity, usually every two months (two-month periods) you must file a report to the income tax authority — if there is income in that period.
7. annual report: At the end of the tax year (December 31), you file a complete annual report. This is when it becomes clear if you have a tax refund or owe additional payment.

What Exactly Do You Need to Report to the Tax Authority?

This is a question we receive frequently. In short: all income from your business. It does not matter if you received it in cash, bank transfer, or check. The Tax Authority expects reporting of everything.

Legitimate expenses are deducted from income. If you work in computer repair and bought tools for 500 shekels, or if you are a consultant and paid for a professional course — these expenses are deducted from your profit, and this reduces your tax.

It is important to emphasize this point: you do not pay tax on all gross income. You pay tax on profit (income minus legitimate expenses). This alone significantly reduces your tax burden.

Tax Advances — What Are They and How Much Do You Need to Pay?

Tax advances are amounts you pay to the Tax Authority during the year so that you do not have to pay a large sum at the end of the year. It is like employer withholding, but you decide the amount yourself (in coordination with the Tax Authority).

How much do you need to pay? It depends on your income from the previous year. If your profit last year was 50,000 shekels, the tax advance will be calculated on that amount. If this is your first year, the Tax Authority will help you estimate a reasonable advance initially.

One point that is not always clear: if your income drops significantly in the current year, you can request a reduction in advances. Do not pay more just because that is what you paid last year.

Legitimate Expenses — What Can You Deduct?

Legitimate expenses are what reduce your tax. Here you need to be careful: not every expense is legitimate, and not every real business expense is fully deductible.

Examples of expenses that are usually deductible:

• rent (if you work from home, part of the rent can be deducted according to the office space);
• electricity, internet, phone (part of them, according to business use);
• equipment and tools (computer, machine, tools — according to years of use);
• professional training and courses;
• business insurance;
• office expenses (paper, ink, files);
• business bank account fees;
• supplier commissions.

What is generally not deductible: personal expenses (home food, personal clothing), entertainment expenses, and payments already deducted at source (for example, tax withholding on employee salaries).

Common Mistakes in Opening a Licensed Business — and How to Avoid Them

In the years we've been working with self-employed professionals in Holon and the surrounding area, we've seen mistakes that repeat themselves. Here they are:

• Failing to keep receipts and invoices: If you don't keep a receipt, you can't prove that expense occurred. The Tax Authority doesn't believe hearsay. Keep everything — receipts from stores, supplier invoices, bank receipts.
• Mixing personal expenses with business expenses: When you pay for something that is partly personal and partly business-related (for example, a vehicle you use both for work commutes and family trips), you need to separate them rationally. The Tax Authority scrutinizes this carefully.
• Failing to update tax advance payments when income changes: If your income was low in the first year and tripled in the second year, your tax advance payments should increase accordingly. If you didn't update them, you could face a massive tax bill at year's end.
• Forgetting to report small income: People think that if they received 500 shekels from a one-time job, it doesn't matter. It's a mistake. Every income must be reported. It's small, but it adds up.
• Failing to maintain accounting records in real time: Most self-employed individuals who manage everything in their head or in a random notebook discover at year's end that they don't remember exactly what happened in March. Keep structured records from day one — it saves audits and mistakes.
• Failing to consult with an accountant at the start: Many people think they can do everything themselves, then discover in March that they did something wrong. Consulting at the beginning saves a lot of headaches.

When Should You Contact an Accountant in Holon?

As mentioned, you should contact one at the beginning — even before you open your business. But even if you've already started, it's not too late.

In short, contact us in these scenarios:

• You're about to open a licensed business and are unsure about the requirements and steps;
• You've already opened a business on your own, but you're not sure if you did everything correctly;
• You're paying tax advance payments and think they're too high (or too low);
• You want to understand which expenses you can deduct;
• You're approaching the annual report deadline and aren't sure how to file;
• You're running a digital business (e-commerce, affiliate marketing, marketing in Holon or anywhere in Israel) and the situation is more complex.

Ben Or Kook Accountants in Holon provides personal guidance from day one. A first consultation meeting at no cost — we listen to your situation, explain the path forward, and create a plan that fits your business.

Tax Advances Report — How Often Per Year and What Does It Cost?

A tax advances report is a periodic report that licensed self-employed individuals submit to the tax authority. Typically, the report is filed once every two months (bimonthly) — this is called a "bimonthly report." Some self-employed individuals submit a monthly report, depending on their agreement with the tax authority.

How much does it cost? It depends on your income. If your annual profit is 100,000 shekels, the tax advances will be calculated accordingly. Generally, this is approximately 10–15% of your profit (depending on your marginal tax rate), but it varies according to your personal circumstances.

Important point: Tax advances are not an "additional expense." They are part of your tax that you pay during the year, instead of waiting until the end of the year. At the end of the year, when you file your annual report, the amount you have already paid through tax advances is deducted from your total tax liability.

Annual Report — What Is It and How Long Does It Take to Prepare?

An annual report is a comprehensive report that summarizes all your income and expenses for the tax year (January 1 through December 31). In this report, you report:

• Total gross income;
• Total lawful expenses;
• Net profit (income minus expenses);
• Tax advances paid during the year;
• Calculation of final tax liability.

At the end of the process, if you paid excess tax advances, you receive a tax refund. If you paid too little, you pay the difference.

How long does it take to prepare an annual report? If you maintained good records and receipts — one to two weeks. If everything is mixed up — it could take months. This is exactly where an accountant comes in handy. We review all your records, verify that expenses are lawful, and file an organized report that the tax authority will not question.

VAT — Do Licensed Self-Employed Individuals Need to Report It?

That is a good question. The answer is: generally, no. Licensed self-employed individuals with low income (up to an amount set by the tax authority) are exempt from VAT reporting.

But if you sell products or services that are subject to VAT, or if your income is high, you may be required to report VAT. This is more relevant if you operate e-commerce businesses or startups in Holon or the greater Tel Aviv area.

VAT is a tax on added value. In short: when you sell something, you collect VAT from the buyer. When you buy something for your business, you pay VAT to the supplier. In a VAT report, you report the difference. If you collected 10,000 shekels in VAT and paid 6,000 shekels in VAT, you pay 4,000 shekels to the tax authority.

VAT is a complex matter, and this is another good reason to consult with an accountant to check whether it is relevant to your business.

National Insurance for Licensed Self-Employed Individuals

When you are a licensed self-employed individual, you are not an employee. This means you do not receive mandatory deductions as required by law (as an employee does). However, you still need to be covered by national insurance.

Licensed self-employed individuals pay national insurance contributions directly to the National Insurance Institute in Israel. The amount depends on your income. Generally, this is approximately 8–10% of your profit (again, this varies). National insurance contributions are deducted from your tax — they are not an additional unrelated expense.

Important: If you do not pay national insurance contributions, you do not receive benefits (unemployment benefits, disability benefits, etc.). This is not something to be forgotten.

Comparison: Licensed Self-Employed Individual vs. Ltd. Company

Here is a question that comes up often: Why not simply establish a Ltd. company? Generally, licensed self-employed individuals are the simpler and more cost-effective choice, especially at the beginning. Here is a comparison:

In short: If you are just starting out, an authorized business owner is generally the simpler route. As your business grows and you want greater legal protection, you can consider becoming a private limited company.

Authorized Business Owners in Holon — What is Unique?

Holon is a city in central Israel, and like in Netanya, Ramat Gan, and Petah Tikva, there are many self-employed professionals here — sellers on digital platforms, consultants, contractors, and more. The process of opening an authorized business account in Holon is exactly the same as anywhere else in Israel — there is no local difference. The tax authority is centralized.

What is different is our client base in Holon. We see many business owners in digital services, export, and services. This means their reports can be more complex — for example, when there is income from abroad, or when VAT is involved.

Ben Or Cook Accountants provide personal guidance to business owners in Holon, Netanya, Ramat Gan, Petah Tikva, and throughout the country. We understand the specific needs of self-employed professionals in your city and prepare reports accordingly.

Common Mistakes in Annual Reports — and How to Avoid Them

In our work with licensed self-employed professionals in Holon and the surrounding area, we've seen recurring mistakes. Here they are, and how to avoid them:

• Undocumented expenses: If you didn't keep a receipt, you can't deduct it in your report. Keep everything — store receipts, supplier invoices, bank receipts.
• Mixing personal expenses with business expenses: If you purchased something that is partially personal and partially business, you need to separate them. The Tax Authority checks this.
• Forgetting to report the correct expenses: Sometimes self-employed professionals forget to deduct legitimate expenses (for example, a professional course they took). This increases your profit and thus increases your taxes.
• Incorrect calculation of advance tax payments: If your tax advance payments are calculated based on income that never occurred, you may end up paying too much.
• Late filing of annual report: If you delay filing your annual report, you may face penalties. File on time.

Digital Business Professionals in Holon — Additional Points

If you sell on Etsy, Wix, or other digital platforms, or if you work in digital marketing, your reports can be more complex. Here are some points:

• Foreign income: If you sell abroad, you need to report income in shekels (at the exchange rate of the transfer day). This can affect your taxes.
• Platform fees: Fees you pay to Etsy or Wix are legitimate expenses — deduct them.
• VAT: If you sell products, you may be required to report VAT. Check this with an accountant.
• Digital receipts: Even if you received payment via bank transfer or credit card, it should be reported. It doesn't matter that it's digital — it's still income.

Summary — What's Next?

If you're in Holon and about to open a licensed self-employed business, or if you've already opened one but aren't sure you did everything correctly — now is the time to act.

Ben Or Cook Accountants provide personal guidance from day one. First accounting consultation at no cost — we listen to your situation, explain the way forward, and offer a solution that fits your business. In Holon, Netanya, Ramat Gan, Petach Tikva, or anywhere in Israel.

Don't delay. Getting your accounts in order at the beginning saves big problems at the end of the year.