Sunday, 5 February 2012

Finding the Right Accountant

If you consider working for yourself in Israel, you will have to find a good accountant. How do you do that? What will you look for? 

Here is some info we are finding, and questions we are gathering. 

First question is what structure do you need for your business?
If you work privatley and earn under 75 000 Shekels a year, you will need to register as an Osek Patur, which requires an anual report compiled by an accountant. What does that mean? What does it cost?

It seems the fee is pretty standard. If you can prepare your books during the year and just have the report written, then the fee will be quoted as around 700  - 800 Shekels. Actually, it is 700 Shekels plus VAT but the accountants won't quote the final figure only the amount before VAT.

If you require a letter written for Bituach Leumi or the Iria or other assistance for either or both, the accountants will charge about 250 Shekels to prepare the letter or an amount per hour of working related to Bituach Leumi and the Iria. If you need a letter written to both Bituach Leumi and the Iria, then the cost will be an extra approximately 100 Shekels. Add on VAT to all figures quoted, the accountant won't do that unless you ask.

There are accountants who will quote for the report plus help with Bituach Leumi as anything from 1000 Shekels to 1800 Shekels. If you do the math, you will discover in the end, it works out the same. One accountant mentioned that any accountant who won't assist with Bituach Leumi, probably did not charge enough to cover the time required to offer this service. i.e. enough more than the amount of 700 - 800 for compiling the anual report.

Watch out for those accountants who charge 2000 Shekels or more and still don't help with Bituach Leumi. Yes they do exist and it is easy to run up bills leading to debts before you realise what happened. 

Now let us do a little math here. If you earn under 75 000 per year, that means 6000 Shekels or less per month. If an average rental around Jerusalem is close to 3000 Shekels and it is more if you are in Jerusalem, then you will quickly begin to realise you won't have much left for other expenses. Keep in mind, if your bank balance shows 2000 Shekels you have to pay full Arnona. That could be 300 - 400 or more per month.
Bituach Leumi will want 10 percent or more on what you earn per month. That means if you earn 6 000 Shekels a month, Bituach Leumi will want 605 Shekels per month if you are an Osek Patur.

That means let's say 350 for Arnona plus 605 for Bituach Leumi plus 3000 on rent plus 50 Shekels for Vaad Bayit, so far we are at 4005 Shekels already gone from your 6 000 Shekels earning. You have not yet paid your Mas Hachnasa (Tax). You have not yet paid the accountant. You still need to add on food, transport, phone, cell phone and other basic expenses. 

How do you get that 605 charge for Bituach Leumi reduced? We really don't know. We are told an accountant can help, but the accountants say it is a Bituach (Insurance) and you just have to pay. Bituach on what? Well we don't have the answer for that either. 

We have had one other area of questioning for accountants. More and more, modern work happens online and payment is via PayPal. Have you ever heard of that? Well ask most accountants and they have NO CLUE what PayPal is. They do seem to undestand there is a service fee taken off at the source, but now how does one convince MasHachnasa and Bituach Leumi and even the Iria that the amount written on a receipt is not the amount received as PayPal took a percentage for their fee at the outset, before you even see the money. That question we have not yet found a satisfactory answer to. Yes, deduct expenses but the accountants get nervous to deduct all the correct expenses lest the outcome is that you can't actually live on only 6000 Shekels a month.
What happens after that, ie if you earn more than 6 000 Shekels a month? Well you have to register for Osek Me'ushar (I think that it the correct term). That means you have to begin to charge VAT. Which means you enter the game of "if you mention the full fee, ie your fee plus the VAT, many will say it is too expensive and not pay or book your service". If you just mention your fee and ignore the VAT cost, well, the client will think your fee is acceptable and then get angry when they hear the VAT added on. The answer? We don't know, do you?

The only thing we do know is we are supposed to be honest. So how do you bring in an honest parnassa in Israel and earn enough to live? And, how do you select the correct account?

This is how far our research is going. If you have more info or insight, please let us know, we'd love to hear and judging from letters from some readers, they would love to know too.


  1. i missed the part that helps me find the right accountant... maybe the title needs adjusting on this piece? some good basic info here, but not about finding the right accountant.

  2. Thank you for your comment. This is the info we have obtained while searching for a good accountant. Do you have a suggestion of one? If so please provide info and details as to what makes him a good accountant.
    For us, we are still searching. We have not yet found one able to assist with Bituach Leumi, one of the biggest difficulties.

  3. Some ten years ago, the Jerusalem Report published an article asking the Tax Authority Director how it can be that the average amount spend by citizens is about 1,000 more than the average amount earned by the same citizens? The Tax Authority had no compunctions with stating that everyone does some transactions under the table to make up for the windfall. In other words, to survive, you can't go fully by the books. This is what the head of taxes says. Draw your own conclusions.

  4. Thanks for the info from the Jerusalem Report. So what does someone who likes to work honestly do? Jews have a Mitzvah to be honest in business.

  5. I learned a lot from this article, thank you, but this statement really surprised me: "Keep in mind, if your bank balance shows 2000 Shekels you have to pay full Arnona. "
    Are you saying that if your bank balance shows less than 2000 Shekels, or if it is in minus, that you do not have to pay full Arnona?
    Who pays then? Or Where does the payment for the Arnona come from? And how does one organize the payments?
    Thank you again.
    BTW, you might want to rename this post "The cost of working for yourself. What makes a good accountant great."



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