The Finance Ministry recently published operating instructions regarding 2024 compensation payments to freelance (self-employed) IDF reservists.
Due to the war, many Israelis have been called up to the IDF reserves for months at a time. Thirty days a year in peacetime is an ancient dream. In fact, for freelancers, downtime in the IDF reserves can be a nightmare for their business.
Employees called up are reimbursed by the National Insurance Institute through their employer's payroll. But it is different for freelancers. The operating instructions spell out the raw deal freelancers get and how to perhaps mitigate this with a 150% "business restoration" bonus.
The compensation is administered by the IDF Assistance Fund together with the Israeli Tax Authority,
A first scheme expired at the end of 2024 – claims may be made on www,miluim.idf.il. A second better scheme that began in June 2024 continues in 2025, but claims must be made on the ITA website www.taxes.gov.il. Replies are promised within 3 months. Negative replies may be appealed to an Exceptions Committee. For telephone inquiries: 074-7951111.
The second scheme
This is aimed at freelancers who are called up under an "Order 8" for at least 21 days of active reserve duty. They must declare that revenues have dropped due to the war and that salaries to any employees of theirs are paid up.
It is notable that compensation is claimable at prescribed rates not only for the period actually served on reserved duty but also for an additional period (150%) assumed necessary to restore the business.
This additional period is limited to 90 days for frontline soldiers and up to 30 days for those serving on rear duties (behind the lines). Settlement defense counts as rear duty.
These periods are reduced if the total eligibility period (IDF service and business restoration) is less than 60 days. The total paid days cannot exceed the days in the period concerned (two-month blocks). There are detailed carryover rules for periods of service spanning more than one two-month period.
In short, two main calculations are needed: (1) paid days and (2) paid amounts.
Paid days
The operating instructions give a few examples – here's one (in Paragraph 2.5.2).
Avi, a front-line reservist, served in the IDF July 1-25, 2024, and September 1-November, 2024. The total eligibility period (IDF service 100% and business restoration 150%) each time is 250% of 25 days, i.e., 63 days. However, there are only 62 days in July-August and 61 days in September-October, so Avi's paid days will be reduced accordingly to 62 days for his first period of IDF service and 61 days for his second period of service.
Similarly, Ben, a rear reservist, served on rear duties in the IDF in July 1-25, 2024 and September 1-25, 2024
The total eligibility period (service and business restoration) each time is 250% of 25 days i.e. 63 days again. But he will only be paid 55 days for each call-up being 25 days service plus 30 days maximum business restoration for reservists serving on rear duties.
Compensation payout
The compensation payout depends on the classification of the freelancer, the drop in revenues compared with revenues in a base period and other factors
For small businesses (Osek Patur, revenues up to NIS 107,000 in 2022), the monthly compensation would be from NIS 1000 – 2000 per month if revenues dropped by 30% ranging up to NIS 2,500-4,500 per month if revenues dropped by 75% or more.
For a regular freelancer – not a small business (i.e. not Osek Patur) – the compensation payout may be:
Drop in revenues compared with revenues in a base period;Reduction for reserve duty under 2 months;Times adjustment for variable costs saved (not defined, presumably salaries etc);But not more than is NIS 1 million per two month eligibility period, pro rated as applicable.
For example, Chaim served in the IDF reserves 27 days in July-August, 2024. His revenues were NIS 51,000 in July-August 2024 compared with NIS 172,000 in the base period a year earlier, July-August 2023.
The revenue drop of NIS 121,000 (=172,000-51,000) is reduced to NIS 74,903 (27 days served / 62 days in July-August), i.e. reserve duty under 2 months is penalized!!
Compensation for business restoration period
Israeli citizens owe much to IDF reservists who sacrifice time and business for their country and risk their lives doing so. Freelance reservists should check out compensation for the business restoration period – up to 150% of time served. Unfortunately, the operating instructions lack an A-Z complete example stringing together paid days and paid amounts of compensation.
As always, consult experienced professional advisors at an early stage in specific cases.
leon@hcat.co
The writer is a certified public accountant and tax specialist at Harris Consulting & Tax
