Self-Employed Person

The National Insurance Law considers you as a “self-employed person” if you belong to one of the following categories:
 

A self-employed person who does not belong to any of the above categories is a “self-employed person who does not suit the definition of the term”; regarding obligatory payments and eligibility for benefits, this individual is considered a person who has an income from sources other than work.

As a self-employed person, you are responsible for immediately registering with the National Insurance Institute at the local branch nearest your place of residence once you have opened your business or begun your professional activities, although it is preferable that you register even before this.

The National Insurance Institute calculates national insurance contributions in accordance with the income of the self-employed person from the sources enumerated in Section 2(1) and Section 2(8) of the Income Tax Ordinance pertaining to the tax year for which the national insurance payments must be made. Self-employed persons declare their estimated income in the multi-year report form. The amount of the monthly payments of national insurance contributions is determined in accordance with this income or in accordance with the most recent tax assessment in the National Insurance Institute offices. This declaration will be referred to henceforth as a “declaration pertaining to income.” The payments are determined in accordance with income and might change in accordance with changes in the average wage. On receipt of the final tax assessment from the Income Tax Authority for a self-employed person, the NII recalculates the annual national insurance contributions that he must make and informs him of the differential – whether to his credit or to the NII’s credit – if such differential exists.

Self-employed persons who are 18 years of age and over but who have not yet reached retirement age pay their contributions according to the following specifications:

• For that share of their income which is 60% or below of the average wage NIS 5,171 (as of 01.01.2012) they pay national insurance contributions equivalent to % 6.72 (as of 07.01.2002) of that share and pay health insurance contributions equivalent to % 3.10 (as of 01.01.1995) of that share.
• For that share of their income which exceeds 60% of the average wage up to the maximum level of income for which national and health insurance contributions must be paid, they pay national insurance contributions equivalent to % 11.23 (as of 01.01.2006) of that share and pay health insurance contributions equivalent to % 5.00 (as of 01.01.2006) of that share.

For the table of insurance rates and amounts for self-employed persons, press here

The reference is to the average wage according to the National Insurance Law. It is calculated according to a method determined in the Law, on January 1st of every year, and afterwards each time that a compensation is paid.

The age at which you will be entitled to the old-age pension, on condition that your income from work and from other sources does not exceed a certain amount. Income from work pension is not taken into account. This age is not uniform for everybody; it is determined in accordance with gender and date of birth.

Self-employed persons without any income or whose income is lower than the minimum amount pay the insurance contributions they would have to pay if their income was the minimum amount:

Self-employed persons whose income is no more than 60% of the average wage pay their insurance contributions at a “reduced rate,” provided that they do not work as a salaried employee in addition to being self-employed. Self-employed persons who are also salaried employees already “enjoy” the reduced rate that is deducted from their wages as a salaried employee; thus, they pay the full rate for their income as self-employed persons.

Income ceiling is referred to as “optimal income" or "maximum income". The maximum income per month is NIS 41,850 (as of 01.01.2012) .

For the table Maximum and Minimum Income for Calculation of Insurance Contributions and Income Limit

The following persons are exempt from payment of contributions to the NII’s various insurance divisions but must pay contributions to the Work Injury Branch only:

A self-employed person who has not yet reached the age of 18.
A self-employed person in Israel who is not an Israeli resident.
A self-employed person who is work injured, has a permanent disability degree of 100% and receives a benefit under the Work Injury Insurance Law.
A self-employed person who has a payment disability degree of at least 75% and receives a benefit under the Disability Insurance Law.
A self-employed person who has had a temporary general disability level of 75% for at least one year. 

The benefit is calculated in accordance with the payments you made prior to your work accident.