Opening an Exempt Dealer for Employees: How to Start and

Opening an exempt dealer for employees allows you to start independent activity alongside your employment, provided the business meets the registration conditions. The salary is not included in the exempt dealer's turnover limit, but it does affect the overall tax calculation. Before starting, you need to arrange the registration with VAT, Income Tax, and National Insurance.

Have you received a project offer after work hours, started selling products, or decided to turn a talent into extra income? You can start a business without leaving your job. Just understand that the tax deducted from your paycheck does not cover the independent activity, and the business has its own registration and obligations.

Does the salary affect eligibility for an exempt dealer?

To register as an exempt dealer, the business's turnover is assessed without the salary. Turnover is the total income from business activity before deducting expenses. In 2026, the threshold is ₪122,833, according to the Israel Tax Authority. Additionally, the activity must be of a type that is allowed to register as an exempt dealer. There are professions, such as law and accounting, that require registration as a licensed dealer even at a low turnover. The Israel Tax Authority

For example, if you receive a salary and simultaneously start providing graphic design services, the income from design is assessed for the exempt dealer's threshold. The salary does not add to the business turnover. However, when calculating Income Tax, both the salary and the taxable income from the business are considered. Therefore, you need to separate the eligibility check with VAT from the tax calculation you will pay.

Before registration: Check your current job and numbers

It is advisable to start by reading your employment contract and the procedures at your workplace. Look for references to additional work, the need for approval, confidentiality, and conflicts of interest. If the independent activity is related to the employer's field or involves contacting their clients and using their materials, clarify what is allowed before committing to a client. If there is doubt about a clause in the contract, a legal review of the wording and circumstances is required.

Next, prepare a simple estimate of the activity: how many jobs you can take, the price for each job, and what expenses you will have. Do not consider every payment from the client as free money. Part of it may be used for business expenses, Income Tax, and National Insurance. An early check with an accountant will help you understand how much to set aside and how to price the additional work.

How to open an exempt dealer while already working as an employee?

You can submit an independent application through the online service of the Israel Tax Authority to open an exempt dealer. The application includes opening files with VAT and Income Tax. During the submission, you also provide data that will be used to assess the need to open a file with National Insurance, and in appropriate cases, the information is automatically forwarded to them. The fact that you are an employee does not replace the registration of the independent activity.

Before submission, prepare the following details and documents:

• Identity card and bank account management approval.

• A precise description of the activity and its start date.

• Estimated expected income turnover from the business.

• Data on working hours and expected income for National Insurance.

• Documents regarding the business location, such as a rental agreement, when required by the circumstances of the activity.

If you prefer to get help with the process, at start business (opens in a new tab) you can fill out an online registration questionnaire and upload the required documents. We handle the registration process according to the details you provided. In any path you choose, keep the submission confirmations and check that the registration is completed with each entity, including requirements for completing documents.

Income Tax and National Insurance alongside the paycheck

For Income Tax, the taxable income from the business is assessed alongside the salary and other income. Taxable income is the income on which tax is calculated after the allowable deductions according to the law and the relevant track. This means that the tax on the business is not necessarily calculated as if it were your only income. You need to check the reporting obligations, advances, and expected tax according to your data.

Also, with National Insurance, the deduction on the paycheck does not guarantee that there are no additional charges. An employee who is also self-employed may pay insurance contributions on both sources of income, according to the rules and the threshold. The status of the independent activity depends, among other things, on the scope of work and income, so it is important to report realistic data and update them when changes occur. The registration is arranged at the start of the activity, according to the National Insurance guidelines for opening an independent file. All Rights

Frequently Asked Questions

Can you open an exempt dealer even if the salary is high?

Yes, the salary amount alone does not disqualify registration as an exempt dealer. For the threshold, the business's turnover and the type of activity are assessed. However, the salary may affect the tax that applies to the income from the business. Therefore, it is advisable to check the total income before deciding how much to charge and how much money to set aside for tax payments. All Rights

Is it necessary to coordinate tax when opening an exempt dealer?

It is not correct to assume that regular tax coordination covers all obligations of an employee with a business. The management depends on the Income Tax track and personal circumstances. In the small business track, for example, tax coordination is part of the track requirements. Before submission, check what applies to you and what is required in addition to coordination, including reports and payments throughout the year. The Israel Tax Authority

Is a small business suitable for those who work as employees?

Working as an employee does not automatically disqualify suitability for the small business track, but you must meet all its conditions. This is an Income Tax track, and it is separate from the classification as an exempt dealer for VAT. If you plan to receive business income from the employer as well, it is important to check the eligibility limitations before joining and not to rely solely on turnover checks. The Israel Tax Authority

Do you pay National Insurance even if it is already deducted from the salary?

It may be yes. The insurance contributions paid through the salary do not automatically exempt you from payment for the independent activity. The calculation depends on income, the established status, and the charge threshold. Therefore, you need to provide National Insurance with the business data and ensure that the combination of employment and independent activity is reflected in the registration and payments set for you, and update them in case of changes.

Is an accountant required to open the business?

You can submit the application to open an exempt dealer independently on the Israel Tax Authority website. However, opening the files and ongoing management are two different things. If you are unsure how to report on the salary and the business, or which track is suitable for you, it is advisable to get a professional review. For ongoing support, you can check the services of the partner EA&CO.

To get started, prepare an estimate of the income and expenses and check that the activity is suitable for registration as an exempt dealer. We would be happy to assist you and guide you through the online business opening process. You focus on the business, and we will focus on the bureaucracy.