Financial Tips for the Self-Employed
By: Moshe Zimmerman, CPA
For new Olim in Israel, being self-employed (Heb: Atzma’i) is sometimes a solution to the problem and hardship of getting a job in a Hebrew speaking environment. However, this decision can be daunting; without regular expert advice from a lawyer, accountant and a tax/financial advisor, in the language you understand it can be difficult to navigate the system, the tax laws and other regulations.
Should you make the decision to become self-employed, in addition to all the other challenges, it means having to forfeit many of the employment benefits you would normally have as a salaried employee (Heb: Sachir). As a self-employed, independent, business owner, in Israel, you are fully responsible for your Bituach Leumi (National Insurance) contribution; there are no paid sick-days, annual vacation and a host of other benefits.
Moshe Zimmerman, CPA and tax consultant, has been advising small business owners and independent workers on how to manage their finances and save on taxes for more than 25 years.
Today, Zimmerman shares a pension tip with you:
On January 1st, 2017 a new law came into effect;- every self-employed, independent working person is required to deposit funds into a pension plan. According to the new law, every self-employed person must have his own pension fund (Heb: keren pensia) and he/she must deposit, up to a maximum of 805 NIS per month, in the fund.
About one third of the fund will be allocated to unemployment benefits (which until now, did not exist for self-employed persons) and in the case of ceasing to operate as a self-employed person and closing the business (closing your “tik”) a self-employed person can now withdraw those funds as an unemployment benefit that is free of tax.
There are some restrictions:
- This law is not relevant during the first six months of self-employment
- There is also an age restriction – if you are under the age of 21 or more than age 55, this new law is not valid.
- This new pension law is also not relevant for people who are in early retirement