SMB thresholds and simplifications in Israel
How Osek Patur and Osek Murshe differ for small businesses, and when the allocation number threshold matters.
Israel distinguishes between an Osek Patur (exempt dealer), who does not charge VAT, and an Osek Murshe (registered dealer), who charges and reports VAT. The turnover ceiling for Osek Patur, and other simplifications such as bookkeeping and cash-basis options, are set by law and the tax authorities and are updated over time. This page does not state those figures. Check the Israel Tax Authority (ITA) site or ask your accountant. The allocation number requirement applies to tax invoices with VAT issued to registered dealers above a threshold, which was NIS 20,000 in 2025, NIS 10,000 from 1 January 2026 and NIS 5,000 from 1 June 2026.
- Osek Patur: does not charge VAT; ceiling set by the authorities.
- Osek Murshe: charges VAT (18% standard rate) and files returns.
- Allocation number threshold: NIS 5,000 before VAT from 1 June 2026.
- Check the ITA site for current ceilings and simplifications.
How it works
Estimate your annual turnover and check the current Osek Patur ceiling with the ITA or your accountant.
If you are Osek Patur, issue the documents the rules require for exempt dealers, usually receipts without VAT.
If you are Osek Murshe, charge VAT on each line at the applicable rate and issue tax invoices.
For B2B tax invoices to registered dealers, compare the amount before VAT with the allocation number threshold.
Ask your accountant about bookkeeping and any cash-basis options that fit your business.
Legal framework
- Value Added Tax Law 5736-1975.
- Income Tax Ordinance (New Version) 5721-1961.
- Israel Tax Authority guidance for small dealers.
Frequently asked questions
If I am an Osek Patur, do I have to issue any document?
Yes, generally a receipt for each transaction, without VAT. Confirm the exact document and fields with the ITA or your accountant.
What is the Osek Patur turnover ceiling?
It is set by the authorities and updated over time. This page does not give a figure. Check the ITA website for the current one.
Does the allocation number threshold affect small dealers?
It can. Since the threshold fell to NIS 5,000 before VAT from 1 June 2026, more B2B tax invoices to registered dealers are covered. Confirm current rules on the ITA site.
Does cash basis change when VAT is due?
That depends on the rules that apply to you. Ask your accountant rather than relying on a general page.
Does 4invoices keep a list of grants or file anything for small businesses?
No. 4invoices does not keep a grant list, does not file returns and does not obtain allocation numbers. It creates invoices with a VAT rate per line, in any currency with an exchange rate, and lets you download a PDF, with a 6-month free trial without a card.