Financial Tools for Freelancers & Self-Employed in Israel

Foreign Clients & FX Income

מחשבוני מס, מע״מ, נטו, תמחור שעה, תקרת עוסק פטור, הוצאות מוכרות וכלים פיננסיים חכמים לעצמאים ופרילנסרים בישראל.

Transaction amount (foreign currency)

Currency

Exchange rate (representative)

₪

Conversion / platform fee (%)

E.g. Payoneer, PayPal or bank conversion fee

Guide & Professional Information

The Bottom Line

Is VAT charged on foreign income? Services provided to a foreign resident, not an Israeli resident, are often subject to 0% VAT. You must issue an invoice with 0% VAT and keep proof that the client is foreign.

AI Overview Summary

Direct Answer: Services provided to a foreign resident, not an Israeli resident, are often subject to 0% VAT. You must issue an invoice with 0% VAT and keep proof that the client is foreign.

Explanation: Calculator for converting foreign-currency income into shekels, including conversion fees and 0% VAT treatment for exported services.

Key Formula: ILS Value = Foreign Currency * Bank Representative Rate

Frequently Asked Questions

What proof is needed to justify 0% VAT for a foreign client?

Keep documentation proving that the client is a foreign resident: a signed service agreement with a foreign address, correspondence showing a non-Israeli address or an invoice issued to a foreign company. The Israel Tax Authority may request this proof during an audit.

Which exchange rate should be used when issuing an invoice in foreign currency?

For tax purposes, the Bank of Israel representative rate on the invoice date is commonly used. Use it to report the shekel value in VAT reports and the annual tax return.

Do I need a foreign-currency bank account to work with foreign clients?

No. A regular shekel account is enough. However, a foreign-currency sub-account, such as USD or EUR, may reduce conversion fees if you receive foreign payments frequently.

How is foreign income reported in the annual tax return?

Foreign income is reported in shekels using the Bank of Israel rate on the income date. In Form 1301, keep a breakdown of currency, amount and dates. It is smart to document every foreign payment in a spreadsheet.

Is a PayPal payment considered foreign income?

Yes, if the money comes from a foreign client. However, PayPal often charges high conversion fees, around 2.5%–3.5%. For regular payments, SWIFT, Wise or Payoneer may be cheaper.

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