Making Sense of Israeli Taxes: A Guide for Olim Doctors

Moving to Israel as a doctor is an exciting and meaningful step, both professionally and personally. But it also comes with new tax responsibilities that are important to understand.

Once you’re settled, taxation in Israel is quite manageable. What really matters is how you choose to work; as a salaried doctor, self-employed, or a mix of both.

Many doctors who make Aliyah take a pay cut at first and try to find the right balance of work that will support them financially and professionally. Some work in a Kupah (HMO) or hospital, others open a private clinic, and many combine different types of work. Some also keep part of their practice abroad through telemedicine or consulting.

Each setup comes with its own tax implications. Here’s what you need to know.

Understanding Your tax structure

When working in Israel, your tax obligations depend primarily on how you operate:

• Employee (Salaried) | שָׂכִיר (Sa-kheer) : 

  • If your employer will issue a payslip, your employer is responsible for withholding income tax, national insurance (Bituach Leumi) בִּיטוּחַ לְאֻמִּי (National Insurance), and pension contributions at source. If this is your only income, you will not be required to file an Israeli tax return (provided your annual gross salary is less than ILS 721,560).

    
    

• Self-Employed (Osek) | עוֹסֵק מוּרְשֶׁה (O-sek mur-sheh) 

  • Doctors working independently עַצְמָאִי (Ats-ma-ee) for the kupat cholim or doctors offering consultations privately, either from a clinic or home, are considered self-employed. You will be required to register with the tax office to open a tax file (ideally before you start trading). You will be responsible for the income tax payments, VAT, Bituach Leumi etc.  

    
    

• Business Owners:

  • Doctors who open their own medical practice, hire staff, or offer medical services would usually do this through a corporate structure (known as a חֶבְרָה בְּעַ"מ (Khev-ra be-am) short for: חֶבְרָה בְּעֵרוּת מֻגְבֶּלֶת (Limited Liability Company (Ltd.)).

  
  

• Hybrid Roles: 

  • Many medical professionals work partly as employees and partly as self-employed; in this case, income from each source must be reported separately on the annual tax return.

    
    

Self-Employed Doctors |  עוֹסֵק מוּרְשֶׁה (O-sek mur-sheh)

Osek Murshe (Registered Dealer): Most self-employed doctors register under the Osek Murshe program. As an Osek Murshe, you must collect VAT from your patients (currently 18%), and issue legally compliant invoices and receipts. You can also deduct VAT paid on professional expenses such as equipment, rent, or services. Read more about the Osek Murshe.

Compliance tasks (your accountant will take care of them all): 

1. Bookkeeping records

2. Submit monthly or bi-monthly VAT and tax pre-payment reports.

3. Submit an annual tax return

   
   

Incorporating a company | חֶבְרָה בְּעַ"מ (Khevra Be-Am)

If it’s more suitable for you, forming a limited company (Khevra Be-Am) can offer scalability and tax efficiency. A corporation is a separate legal entity which can provide a string of its own benefits. The profits would usually be distributed to you via payslip (so, you would be an employee of our own company) or via dividends if this turns out to be more tax efficient. 

Incorporation is often beneficial when income is high enough to justify the administrative costs and when you retain profits inside the business to reinvest in equipment, facilities, or staff. Many doctors with clinics decide on this structure to benefit from separate liability protection and clearer accounting. Read more about corporations 

Compliance tasks (your accountant will take care of them all):

4. Double sided bookkeeping records

5. Submit monthly or bi-monthly VAT and tax pre-payment reports.

6. Monthly payroll

7. Annual financial statement preparation

8. Annual audit

9. Submit an annual tax returns for the corporation and also for the shareholder.

How much tax you’ll actually pay in Israel:

Doctors in Israel pay income tax at the same rate as everyone else. Your income will be subject to both Income tax and Bituach Leumi בִּיטוּחַ לְאֻמִּי (National Insurance) . However, you’ll also have deductions and tax credits, pension contribution deductions, charitable donation deductions, and more. These elements reduce the actual amount of tax you’ll pay. You may wish to use the Dray Accountants income tax calculator to see an estimate of potential your tax liabilities.

Calculate My Tax Contribution

This article summarized the key tax considerations for the different working models available to doctors in Israel. Part 2 will focus on U.S. citizens and explore Oleh tax benefits, including some exciting new updates which may be on the horizon.

Stay tuned, and if there are specific topics you’d like us to cover or questions you’d like an accountant to address, we’d love to hear from you!

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Hebrew Term	Pronunciation	English Translation	Explanation
מַס	Mahs	Tax	General term for any type of tax.
מַס הַכְנָסָה	Mahs Hach-na-sah	Income Tax	Tax on personal income for salaried or self-employed individuals.
מַע״מ – מַס עֵרֶךְ מוּסָף	Ma-am	VAT (Value Added Tax)	A 18% tax on goods and services, charged by self-employed professionals.
מַס חֶבְרָה	Mahs Khev-rah	Corporate Tax	Tax paid by registered companies (חברה בע״מ).
מַס רְכִישָׁה	Mahs Re-chi-shah	Purchase Tax	Tax on the purchase of property or real estate.
הֶחְזֵר מַס	Hech-zer Mahs	Tax Refund	Refund given when excess tax was paid.
נִיכּוּי מָס	Ni-kuy Mahs	Tax Deduction / Withholding	Income tax deducted at source by an employer.
תִּיק מַס	Teek Mahs	Tax File	A registered tax account with the Israel Tax Authority.
מַס בִּיטוּחַ לְאֻמִּי	Mahs Bee-too-ach Leu-mee	National Insurance Contribution	Mandatory payment funding Bituach Leumi (social benefits).
מַס בְּרִיאוּת	Mahs Bri-oot	Health Tax	Collected with Bituach Leumi to support the national health system.
שָׂכִיר	Sa-kheer	Employee / Salaried Worker	A person whose employer handles tax and insurance payments.
עַצְמָאִי	Ats-ma-ee	Self-Employed	Works independently and pays own taxes and insurance.
עוֹסֵק מוּרְשֶׁה	O-sek Mur-sheh	Licensed Self-Employed	VAT-registered professional authorized to issue tax invoices.
עוֹסֵק פָּטוּר	O-sek Pa-tour	Exempt Self-Employed	Small business under the VAT threshold (does not charge VAT).
חֶבְרָה בְּעַ״מ	Khev-rah Be-am	Limited Company (Ltd.)	Registered company with limited liability; pays corporate tax.

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About Boruch Levenson & Dray Accountants 

Boruch was born in Manchester before relocating to Israel at the age of 17 after completing high school. He qualified as an accountant in both the UK and in Israel and built up his experience in international taxation. he joined as a partner to the Dray Accounting firm in 2020 and launched the department for English speaking clients. At Dray Accountants pride is taken as a leading firm providing a high standard of professional accounting and tax compliance services to English and French speaking residents of Israel. A special focus is placed on first time tax registrations, especially for clients with no background in taxation or the Israeli systems. 

If you have any questions, don’t hesitate to get in touch with me via our website or via WhatsApp (+972-52-790-3687)