Payment Obligation
Every self-employed person must pay monthly income tax advances (mikdamot) by the 15th of each month. The advance rate is set by the tax assessor based on prior years' assessments, typically ranging from 2% to 10% of monthly revenue. Advances are offset against the final tax liability when the annual return is filed.
How the Rate Is Determined
The assessor sets the advance rate based on the most recent tax assessment. New businesses start with a standard rate (often 5%). The rate is applied to gross revenue (not net profit). If the rate results in overpayment, the taxpayer can request a reduction. If it results in underpayment, a deficit penalty may apply.
Example
Freelancer with monthly revenue of ₪40,000 and advance rate of 5%.
Monthly advance: ₪40,000 × 5% = ₪2,000 (due by the 15th of the following month)
Annual advances: ₪24,000
If the final annual tax is ₪30,000: owes an additional ₪6,000 when filing the return.
If the final tax is ₪20,000: receives a ₪4,000 refund.
Tips
- Pay advances on time to avoid interest and penalties
- Request a rate reduction if your income has dropped significantly
- Request a rate increase if you're building up a large deficit
- Keep your assessor informed of major changes in your business
Important Note: The information on this website is for general informational purposes only and does not constitute professional tax advice. Consult a qualified tax advisor before making financial decisions.