Doing business in Israel
How quickly can I set up a business?
At least 11 days – It varies based on business size, documentation needed, and type of business.
It takes ~2 days to obtain company registration documents certified by an attorney, ~2 days to file with the registrar of companies, the Ministry of Justice, and ~7 days to register for taxes and VAT at the Ministry of Finance, Income Tax Department and at the National Insurance Institute.
What is the minimum investment needed?
It depends on the scale of the project.
Note that there is a registration fee of 2,645 NIS on paper, and 2,176 NIS for the online process. There is a minimum of 1,862 NIS + VAT for document certification by an attorney.
How can I raise finance?
Projects can be financed by investors/loans, venture capitalists, angel investors. Government grants are also (rarely) a possibility.
What are the legal requirements for setting up my business?
The following company certification documents must be certified by an attorney:
• Application to register the company.
• Declaration by the initial director(s) of competence to serve.
• Initial shareholders’ signatures on articles of association. The company’s initial articles of association must be signed by the initial shareholders and their signature needs to be authenticated by an attorney.
Option 1: Private/public company (local)
– Must register with the Registrar of Companies.
– Must include “Ltd.” or “limited” in documents if liability of members is limited. A public company is obliged to publish an annual report that includes the audited financial statements and directors’ report, all to be filed with the Register of Companies, where they are available to the public.
Option 2: Foreign Company (a branch)
– A company incorporated overseas may establish a branch or local office in Israel as long as it is registered as a foreign company with the Registrar of Companies within a month of its establishment. In order to register, a foreign company must submit all the necessary documents to the Registrar of Companies. There is no requirement to publish financial statements of a private company.
What structure should I consider?
Establishment (a branch of your overseas business):
• Not a separate legal entity but an extension of the overseas parent company.
• No limited liability or ring-fencing of the Israel operations.
• If they have a permanent establishment in Israel then profits from this PE are liable to Israeli corporation tax, subject to treaty between countries.
• Provides limited liability and ring-fencing to [Israel] operations.
• Gives a perception of a local business with longevity.
• Corporation tax to be paid on company profits.
• Filing to tax authorities (subject to auditing by CPA).
• Each company should file, yearly, tax return audited by an Israeli CPA.
Limited Liability Partnership:
• Members (partners) have limited liability
• Profits are allocated to members who then pay Income Tax on these profits personally
• The tax residence of the member, and where the profits in the LLP originated will determine in what jurisdiction and how these profits are taxed, subject to treaty between countries.
What advice can you give me in regards to payroll and taxation requirements?
• Must register with Israel Tax Authority using form 4436
• Corporation Tax of 23%
• VAT of 17%
• VAT paid in Israel is Deductible
• Eilat is a tax free zone
• Goods/services exported from Israel are tax free
• Additional employment and social security taxes
• Pension plan
• Pension insurance provisions are taken part from the salary of employer (6.5%) and part from the employee (6%)
• Many companies see share option plans as being an important way of attracting, motivating and retaining key staff. Israel has a number of “approved” share option plans which give tax benefits to employees and employers alike and it is often possible to adapt an overseas stock option plan to fit into one of these “approved” plans. However, this is a very technically complex area and careful planning needs to be undertaken as soon as share option plans are being considered for implementation in Israel.
Israel has a very comprehensive range of compensation and benefit options available for companies to offer their employees. Pensions, private medical insurance, life and disability cover are now commonplace benefits provided by many Israel businesses to their workforce. Flexible benefit packages are also gaining in popularity, giving employees options on how they wish to “spend” their benefits allowance, which can range from “purchasing” additional holiday entitlement to obtaining full family medical cover. All benefits are taxed.
Our firms in Israel
How can Kreston grow your business?
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LONDON – Kreston Global has begun 2023 by welcoming eight new member firms on four continents: India, Uganda, Lebanon, Japan, Croatia, Bangladesh, Chile and Taiwan.
Stuart Brown, Global ESG Committee Member, recently commented on this significant development in Compliance Week.