Israeli Freelancer Service Agreement

Israeli Freelancer Service Agreement

Legal notice

This is a free information tool operated by an AI model. It explains the law and the procedure and helps you organise your own documents. All of its outputs are produced automatically by an AI model, with no involvement, review, or approval by an advocate. The output is not legal advice and not a legal opinion, but a general explanation and a template only: it does not read the full file of your matter, does not check current case law, and does not examine your specific circumstances. An AI model may err, omit data, or present a wrong conclusion.

Any text this tool drafts is an automatic draft for your personal preparation only. It is not a document prepared by an advocate and must not be relied on as evidence. This tool is not a substitute for advice that takes account of the particular circumstances and needs of each person. Before starting proceedings, signing a document, or filing with an authority or a court, consult an advocate. All use of its output is the user's sole responsibility.

Problem

Israeli freelancers (עצמאים) routinely start projects on a handshake or a one-line email, then get burned two ways: a client pays 90 days late with no recourse, or, worse, a long engagement ends with the "contractor" suing for retroactive recognition as an employee and winning severance, pension, and back-benefits because the relationship looked like employment. A generic downloaded contract does not account for Israeli law: the reclassification tests, the default copyright rule that leaves IP with the freelancer, the statutory payment timing, or the VAT framing. This skill drafts a service agreement built around exactly those Israeli rules.

Instructions

This skill drafts a bilateral service / contractor agreement (הסכם למתן שירותים) from the freelancer's side. Work through the steps; produce the contract in Hebrew (RTL) because it is governed by Israeli law and will be read by Israeli parties.

Always tell the user, once, that this is a drafting aid and not legal advice, and that a lawyer should review the agreement before signing. This is especially important when money or IP is significant.

Step 1: Gather the deal facts

Collect the minimum needed to draft:

If the user does not know a field, use a sensible default and flag it in a "review these" list at the end. Never invent the parties' identifying numbers.

Ask the foreign-entity question before drafting anything else. Israeli startups routinely contract through a foreign (often Delaware) parent. If the counterparty is not an Israeli-registered business, two whole sections of this skill stop applying:

• The payment law does not apply. חוק מוסר תשלומים keys its business tier off "עסק", defined in סעיף 2 as a מוסד כספי, עוסק מורשה, or עוסק פטור under the VAT Law. A foreign entity is none of those, so שוטף+45, the interest regime, and the non-derogation rule are all unavailable. Every payment protection must then be written into the contract from scratch.
• The 18% VAT line may be a pricing error. Under סעיף 30 of חוק מס ערך מוסף, a service supplied to a foreign resident can be zero-rated. It is not automatic: the benefit is denied where the service is in fact also supplied to an Israeli resident, and a single Israeli beneficiary defeats it. Flag it and route the user to their רואה חשבון rather than picking a rate for them.

Step 2: Decide the independent-contractor framing (the most important step)

Israeli labor courts ignore the contract's label and apply the מבחן מעורב (mixed test), dominated by the מבחן ההשתלבות (integration test): is the freelancer a separate business, or an integrated part of the client's organization? If it looks like employment, the freelancer can later sue for retroactive recognition (הכרה בדיעבד) and collect severance, pension, vacation, sick days, holidays, and הבראה.

What actually protects the freelancer from a surprise reclassification is the real facts, not the contract wording. So:

1. Include an independent-contractor declaration stating the provider runs its own business, bears its own tax, Bituach Leumi, and pension, and that the parties intend a commercial, not an employment, relationship. Courts give this evidential weight only (per ע"ע 300256/98 אורי אייזיק) and will apply the integration test to the real facts, so never present the label as decisive.
2. Build in operational separation that the contract reflects: own tools, own hours, freedom to serve other clients, no company email, no exclusivity, invoicing per deliverable, and an express right to use subcontractors (no personal-performance requirement, which itself helps the contractor case).
3. Understand the set-off / gross-up clause correctly before using it. It says that if a court later finds employment, the fee is treated as already inclusive of social rights and the excess over a comparable employee wage is set off against any award. This clause protects the client, not the freelancer: it is the client's tool to claw back the "contractor premium", it is enforced only in narrow cases (express term plus a fee markedly above a comparable salary), and a court is not bound to honor it. Do not sell it to the freelancer as their shield. It also cannot waive non-waivable (cogent) labor rights.

Step 3: Draft the consideration, payment, VAT, and withholding clause

State the fee and structure, then set an explicit payment term. Under חוק מוסר תשלומים לספקים, התשע"ז-2017, if the contract is silent and the client is a business, the default is שוטף+45 (no later than 45 days from the end of the month the invoice was submitted). A freelancer is better off naming a shorter term (e.g. שוטף+30 or שוטף+0), and reserve the right to suspend work on non-payment.

Four things about this law that most drafts get wrong. Full tier table and statutory text are in references/legal-reference.md:

1. The tiers are not "government is shorter". Ministries and state authorities pay 45 days from invoice delivery, or שוטף+30 when counted from month end, and they have no contract-out clause. Local authorities are שוטף+45, rising to שוטף+80 for building works. Only the business tier and the budgeted-body tier can vary the term at all. Look up the payer's tier; do not assume.
2. The statutory interest is not automatic in B2B. Under סעיף 4, the interest and דמי פיגורים remedy reaches a private-business client only where that client had עדיפות בעיצוב תנאי החוזה (superior power in shaping the terms). A freelancer who supplies their own draft may have argued themselves out of it. So write interest in as an express contractual term, and reference the statute only as an additional, non-exclusive remedy.
3. The law is a floor, not a ceiling. סעיף 7 provides אין להתנות על הוראות חוק זה אלא לטובת הספק: the parties may contract only in the supplier's favour. This is the direct answer to a client pushing pay-when-paid terms.
4. A bounced invoice restarts the clock. Under סעיף 3, if the invoice is missing a material detail or the contractual conditions for payment were not met, the client returns it and the invoice is treated as never delivered. The check period is capped at 23 business days for business clients, but B2B parties may contract out of that cap, so a freelancer's own draft should fix it expressly and require the client to itemise the deficiencies in writing.

State VAT correctly and unambiguously, because a wrong VAT framing is a direct error in the price:

• עוסק מורשה: "the fee is exclusive of VAT; VAT at 18% (as of 2026) will be added against a חשבונית מס." Say "exclusive of VAT" explicitly, since a bare number with no "+VAT" wording can be read as VAT-inclusive.
• עוסק פטור: "the provider is an עוסק פטור and does not charge VAT; a receipt will be issued." Add that if the provider crosses the turnover cap (122,833 ₪ for 2026) and converts to עוסק מורשה, VAT applies from that point.

Add a withholding-tax clause (ניכוי מס במקור): in Israeli B2B, the client may be legally required to withhold tax from the payment unless the freelancer hands over a valid אישור ניהול ספרים and an אישור פטור / שיעור מופחת מניכוי מס במקור. State that the provider will furnish these certificates, failing which the client withholds at the statutory rate. Without this clause the freelancer is blindsided when the first payment arrives net of withholding.

Step 4: Draft the IP clause

This is the clause clients get wrong. Under חוק זכות יוצרים, התשס"ח-2007 (סעיף 35), the default owner of a commissioned work is the CREATOR (the freelancer), not the client. (Contrast: סעיף 34 gives an employer the copyright in an employee's work; a commissioned portrait or family-event photo defaults to the commissioner.)

Do not tell the freelancer that silence protects them. סעיף 35 displaces the creator default where the parties agreed otherwise במפורש או במשתמע, expressly or by implication. A client can and does argue an implied transfer from the commercial context: bespoke work, full payment, source files handed over, deliverables deployed to customers. So the freelancer who wants to retain anything must say so in writing, exactly as a client wanting to own it must. Note too that under סעיף 37 an assignment of copyright requires a written document, which is why "we agreed on a call" transfers nothing.

So decide and draft explicitly:

• If the client should own the deliverables, expressly assign the economic rights, typically on full payment.
• If the freelancer is retaining anything, say so expressly. Silence is not retention.
• Moral rights (הזכות המוסרית), attribution and integrity, are personal and non-assignable under סעיף 45. Two things follow that most drafts miss. First, סעיף 45 excludes computer software outright, so for a pure software deliverable there is no moral right to assign, waive, or worry about (typefaces are also partly carved out). Second, the Copyright Law provides no general waiver mechanism: under סעיף 50 an act touching the integrity right is simply not an infringement where it was reasonable in the circumstances, and the court expressly weighs the fact that the work was commissioned. So draft consent to specified modifications plus an attribution arrangement, not a blanket "waiver of moral rights" that the statute does not recognise.
• The freelancer keeps rights in pre-existing tools, know-how, and general methods, and third-party / open-source components are licensed, not assigned (the freelancer often cannot transfer them).

Step 5: Add the scope-protection and standard clauses

• Displace the חוק חוזה קבלנות defaults deliberately. This is the statute that actually governs the contract being drafted: סעיף 1 defines a חוזה קבלנות as a contract for work or services for payment where the contractor is not the client's employee, and סעיף 8 makes its rules apply only where the agreement does not provide otherwise. Two of its defaults matter enormously. Under סעיף 4, if the freelancer does not cure a defect in reasonable time the client may fix it at the freelancer's expense or unilaterally deduct the drop in value from the fee, with no notice at all for urgent defects. Bound that: cap any set-off, require written substantiation and a real cure window, and route disputes to the acceptance procedure rather than to self-help. Working in the freelancer's favour, סעיף 5 grants the contractor a lien (זכות עכבון) over client property held for the work until sums due are paid, and סעיף 3 bars the client from relying on a defect it failed to notify in reasonable time. Preserve both expressly; do not let a broad acceptance clause be read as giving them up.
• Acceptance and revisions: define how the client signs off on a deliverable, a deemed-acceptance window (e.g. silence for 7 business days = accepted), and how many revision rounds are included. "What counts as done" is where payment disputes live, so do not push it into an empty annex.
• Termination and accrued fees: state the notice period AND that on termination the freelancer is paid pro-rata for work done and approved expenses; for a cancelled fixed-price project, add a kill / cancellation fee based on progress. Without this, a designer terminated mid-project gets nothing.
• Confidentiality (סודיות), surviving termination.
• Restraint of trade: default to a narrow trade-secret + non-solicitation clause, NOT a broad non-compete. A bare non-compete is generally unenforceable in Israel; courts enforce a restraint only to protect a legitimate interest like a real trade secret and only if reasonable in scope, time, and geography (ע"ע 164/99 צ'ק פוינט נ' רדגארד).
• Liability cap + mutual indemnity, with carve-outs for willful misconduct, IP infringement, and confidentiality breach. Make indemnity mutual: the client should indemnify the freelancer for client-supplied materials and for client misuse of the deliverables. Optionally require professional liability insurance (ביטוח אחריות מקצועית) if the client is a company or public body.
• Data protection: if the freelancer processes the client's personal data (a developer touching a user database, a marketer handling a CRM or mailing list), add a clause defining the freelancer as a processor with security obligations and breach notification, per the Privacy Protection Law and its Amendment 13 (in force August 2025).
• Term, termination, and notice; governing law (Israeli) and jurisdiction, noting that classification disputes go to the labor courts regardless of a forum clause.

Step 6: Generate and hand off the draft

Assemble the Hebrew agreement. You can produce it directly, or use the helper script for a consistent skeleton:

python3 scripts/build_agreement.py --provider "ישראל ישראלי" --provider-id 000000000 \
  --client "חברת לקוח בעמ" --client-id 510000000 \
  --services "עיצוב גרפי וניהול מותג" --fee 8000 --vat murshe --payment-net 30 \
  --out agreement.md

End with a short "review these before signing" list (any defaulted fields, the IP choice, and the recommendation to have a lawyer review).

Examples

Example 1: Designer with a new client

User says: "I'm a freelance graphic designer (עוסק מורשה). New client wants a 6,000 ₪/month brand retainer. Draft me a contract."

Actions:

1. Gather facts; set fee 6,000 ₪/month +VAT, payment שוטף+30, designer keeps IP until paid then assigns deliverables.
2. Add the independent-contractor declaration + set-off clause, with the honest caveat.
3. Generate the Hebrew agreement and list "review these": notice period, insurance requirement.

Result: A ready Hebrew הסכם למתן שירותים the designer can send, with VAT and IP handled correctly.

Example 2: Developer worried about reclassification

User says: "I've been a 'contractor' for one company full-time for 2 years. They want a new contract. What should it say so I'm not treated like an employee?"

Actions:

1. Flag the elevated reclassification risk (single client, full-time, long duration = strong integration-test markers).
2. Draft the declaration + set-off clause, AND advise concrete operational changes (own tools, serve other clients, no company email), explaining the clause alone is not decisive.
3. Suggest, where relevant, the user consult a lawyer given the exposure.

Result: A contract plus a practical risk-reduction checklist, with realistic expectations.

Bundled Resources

Scripts

• scripts/build_agreement.py -- Assembles a Hebrew service-agreement skeleton from parameters. Run: python3 scripts/build_agreement.py --example

References

• references/legal-reference.md -- Clause-by-clause grounding in Israeli statute and case law (reclassification, payment law, IP default, VAT, non-compete, insurance).
• references/domain-checklist.md -- Coverage checklist the agreement is drafted against.

Gotchas

• Do not promise the contract label protects against reclassification. Agents tend to write "the parties agree there is no employment relationship" as if it settles the matter. It does not: Israeli courts treat the label as evidence only and apply the integration test to the real facts. Always add the honest caveat.
• Do not assume the client owns the deliverables by default. The intuition from many jurisdictions is wrong here: under סעיף 35 of the 2007 Copyright Law, a commissioned work defaults to the freelancer.
• But do not tell the freelancer that silence protects them either. The same סעיף 35 displaces the creator default on agreement "במפורש או במשתמע", express or implied. A client can argue an implied transfer from the commercial circumstances. Retention must be written down, not assumed.
• Do not draft a moral-rights waiver for software. סעיף 45 excludes computer software from moral rights entirely, so the clause is inert in a developer's contract. Even for design and copy, the law provides no general waiver: use consent to specified modifications plus an attribution arrangement, and rely on the סעיף 50 reasonableness standard.
• Do not leave payment timing silent and "rely on the law." The statutory default (שוטף+45) is the worst case for the freelancer. Always set an explicit, shorter term.
• Do not promise statutory late-payment interest in a B2B contract. Under סעיף 4 that remedy reaches a business client only where the client had עדיפות בעיצוב תנאי החוזה, which is exactly what a freelancer-supplied draft undercuts. Make interest an express contractual term instead.
• Do not ignore חוק חוזה קבלנות. It governs this contract type by default and hands the client a unilateral fee-deduction right under סעיף 4. A draft that never mentions it leaves that weapon live and leaves the freelancer's סעיף 5 lien unclaimed.
• Do not draft a broad non-compete. A sweeping "shall not compete for 2 years" clause is usually unenforceable in Israel and signals an employment-like relationship. Use a narrow trade-secret / non-solicitation clause.
• Do not state VAT generically. Whether VAT is added depends on the provider's status (עוסק פטור charges none). Getting this wrong is a direct error in the price the client pays. The rate is 18% (from 1 January 2025), not the old 17%. State the fee as "exclusive of VAT" so a bare number is not read as VAT-inclusive.
• Do not forget withholding tax (ניכוי מס במקור). Israeli business clients often must withhold tax unless the freelancer provides a valid אישור ניהול ספרים and ניכוי-מס certificate. If the contract is silent, the freelancer is surprised by a payment that arrives net of withholding. Always include the certificate clause.
• Do not sell the set-off clause as the freelancer's protection. It is the client's tool to claw back the contractor premium if the relationship is reclassified, it is rarely enforced, and it cannot waive non-waivable labor rights. The freelancer's real protection is operational separation, not contract wording.
• Do not assign moral rights. Moral rights (הזכות המוסרית) are personal and non-assignable under the 2007 Copyright Law. Assigning "all rights including moral rights" is partly void; use a separate waiver and carve out third-party / open-source components the freelancer can only license.

Reference Links

Troubleshooting

Error: "The client says they own everything I make for them"

Cause: The client assumes a work-for-hire default that does not exist for contractors in Israel. Solution: Point to סעיף 35 of the 2007 Copyright Law (commissioned work defaults to the creator). Caveat the freelancer needs to hear: that default is displaced by agreement "במפורש או במשתמע", so a client can argue an implied transfer from the commercial context. Do not rest on silence. Put the allocation in writing either way, and negotiate assignment on full payment.

Error: "Is the no-employment clause enough to protect me?"

Cause: Over-reliance on the contract label. Solution: No. It is evidential only. Combine the clause with real operational separation (own tools, own hours, multiple clients, no company email) and, for high exposure, advise a lawyer.

Error: "The client wants to pay 'when they pay their client', is that allowed?"

Cause: Pay-when-paid terms that push beyond the statutory default. Solution: If the client is an Israeli business, the law answers this directly. סעיף 7 provides that its terms may be varied only in the supplier's favour, and the business tier allows a different term only where the engagement's special character requires it or the term is not exceptionally unfair. A pay-when-paid clause tied to a third party's behaviour is neither. Set an explicit term instead. If the client is a foreign entity, none of this applies and the term must be negotiated on its own.