Israel offers an attractive environment for international companies looking to set up operations. With its thriving innovation ecosystem, strong economic fundamentals, and business-friendly policies, Israel provides immense opportunities for enterprising businesses seeking growth and success.
Economic and business landscape
Israel has robust macroeconomic fundamentals, as evidenced by steady GDP growth, moderate inflation, fiscal discipline, and a resilient financial system. These provide companies with a stable base to operate.
As a global tech hub, Israel offers access to cutting-edge technologies, research institutions, specialised talent, and collaboration opportunities that enhance business productivity and competitiveness.
Israel actively supports businesses through various incentives like tax breaks, grants, flexible labour laws, and initiatives to reduce red tape. These considerably lower operational expenses and regulatory burdens.
Israel provides easy access to major markets in Europe, Middle East, Africa, and Asia. Its trade agreements with key countries further enable businesses to expand their market reach.
Benefits of registration
Registering in Israel opens attractive benefits like preferential corporate tax rates, tax reliefs for tech/R&D activities, relaxed foreign exchange controls, protection of IP assets, access to skilled workforce, world-class infrastructure, and an overall environment conducive for business success.
Israel offers significant incentives that make it highly attractive for international businesses across sectors seeking new growth avenues and opportunities to scale greater heights.
Company structures for registration in Israel
I. Private limited company, also known as LLC or Chevra Ba'am, is a popular legal entity chosen by businesses registering in Israel. Its key features are:
- Asset protection
Forming a private limited company shields the personal assets of the shareholders from business-related risks and liabilities. Their liability is restricted to the extent of their capital contributions and shareholding.
- Flexible management framework
The management structure is flexible, allowing shareholders to define policies and profit-sharing terms through a charter. Operational decisions can be taken jointly or delegated to directors appointed by them.
- Capital contribution
There are no mandated minimum capital requirements in Israel for establishing a private limited company. The shareholders agree and contribute the capital they deem suitable as per the company’s proposed activities.
In summary, the private limited structure offers businessmen key benefits like limited liability, operational flexibility, autonomous decision-making and ease of raising capital from shareholders, making it an attractive vehicle for doing business in Israel.
II. Join-stock company structure or Chevra Tziburit offers the prospect of listing publicly traded shares along with access to larger capital pools. Key aspects include:
- Share listing and trading
It allows listing and trading of shares on stock exchanges. This enables wider public shareholding and participation in the company’s value growth.
- Stringent reporting
Being public entities, heightened transparency and disclosures are mandated through regular financial statements, independent audits and public filings.
- Enhanced governance
Adherence to sound governance practices is ensured through formation of boards, shareholder rights assurances and business ethics.
- Capital raising flexibility
Issuing shares to the public significantly expands capital and growth financing options, suiting high-growth firms.
- Compliance requirements
Securities compliance, filings, and oversight regulations apply owing to public funding access.
Thus, the JSC structure in Israel offers the visibility and capital access for spurring expansions while needing higher transparency and monitoring. It is apt for maturing businesses seeking to tap public markets.
III. Partnerships enables two or more individuals to pool their expertise, capital, and infrastructure for jointly operating a business enterprise in Israel. Key aspects include:
- Flexible framework
The operational framework and division of responsibilities can be structured as per the partners’ strategic objectives and strengths.
- Combination of competencies
Partnerships allow combining complementary capabilities in terms of industry expertise, technical skills, infrastructure, networks, and resources.
- Liability aspects
Unlike limited companies, the liability of partners is generally unlimited, potentially exposing their personal assets to business risks.
- Tax treatment
Registered partnerships receive tax exemption benefits in Israel. Individual partners account for their share of income and losses for tax purposes.
- Formalization of terms
Entering a partnership agreement clearly defining rights, roles, and responsibilities is strongly advised for avoiding disputes later.
- Variable participation
It enables different partner roles like active business involvement, dormant participation or investor-type capital contributions if desired.
Registering partnerships in Israel can enable entrepreneurs to supplement individual capabilities and catalyse growth leveraging collaborative synergies with other trustworthy partners.
IV. Sole proprietorship
A sole proprietorship is an unincorporated business owned and managed by one individual. Key aspects in Israel include:
The registration process only requires selecting a unique name and obtaining a business identification number.
- Unlimited liability
The owner assumes unlimited financial liability for all business obligations and debts.
- Autonomous decisions
The sole owner exercises complete authority over strategy and operations, enabling nimble decisions.
- Taxation policy
Income tax rates depend on total earnings. Startups and SMBs in Israel can avail some deductions and incentives.
- Record keeping
Proprietors must maintain accounts and submit mandatory filings as per regulation.
- Limited scalability
Scaling hinges on the bandwidth of the sole owner in terms of effort, skills, and finances.
In summary, sole proprietorship allows commencing operations in Israel swiftly, albeit with more restricted growth prospects. The structure suits individual entrepreneurs, prioritizing control and flexibility.
Company registration process
I. Name approval step's details
- Name selection. Select a unique name aligned to naming guidelines. Confirm name availability by searching the registry.
- Name reservation. Reserve the chosen name by filing for name approval with the Companies Registry online or through authorized agents.
- Fee payment. Pay the prescribed name reservation fee. Fees depend on reservation timelines and mode of payment.
- Name approval formally reserves the company’s proposed identity before registration and ensures exclusivity.
II. Document filing step's details
- Documents' lead-up. Prepare the Memorandum and Articles of Association covering all mandated disclosures like objectives, capital structure, rights, and management details.
- Signing. Founders and shareholders sign the documents as per their roles and ownership shareholding.
- Submission. File the finalized documents with the Registrar of Companies online or directly, along with founder identification and fees.
- Review and approval. The Registrar reviews the documents for completeness. Clarifications may be sought before approval.
- Registration certificate. On approval, the Certificate of Incorporation is issued, confirming the company’s registered legal status in Israel.
Correctly preparing and filing the founding documents while meeting stipulated guidelines is key for successfully registering your company in Israel.
Israeli bank account opening
Opening a business bank account is an important post-registration step for company operations in Israel. There are many large banks in Israel, such as Bank Hapoalim, Bank Leumi, Israel Discount Bank, as well as a number of smaller and digital banks. Key aspects include:
- Bank selection. Evaluate leading banks on parameters like costs, digital platforms, services offered and business orientation to determine the optimal fit.
- Documentation. Prepare all required information related to incorporation, ownership structure, identities, and addresses for submission.
- In-person verification. Banks may require in-person verification, especially for overseas individuals before account activation.
- Capital needs. Some banks mandate minimum capital requirements to open accounts. Evaluate business needs.
- Multi-currency functionality. Opt for multi-currency accounts if operating across geographies for convenience and cost savings.
- Fee consideration. Compare prevailing account charges for transactions, cash management services and special requests across banks.
- Online banking platforms. Assess user-friendliness, real-time information access and payrolls/tax payment integration within online platforms.
- Expert consultation. Engaging accounting specialists early on can guide regulatory compliance and account choice suiting business needs.
Selecting the right bank in Israel and account type after thorough evaluation of business activities, costs, and functionality needs is advised for seamless operations.
Israel's taxation framework
Israel has a multifaceted tax structure that companies must comply with. Key tax rates include:
- Corporation tax on global taxable income at a base rate of 23%.
- VAT at 17% applies on goods and services supplied in Israel, with exemptions for certain sectors.
- Capital gains tax at 25% applies on the sale of securities, with possible reductions based on holding period.
- Mandatory social security contributions rates vary based on salaries.
Thorough understanding of Israel's elaborate tax system across direct and indirect taxes is essential for ensuring accurate compliance and financial planning for businesses operating in Israel. Professional Israel tax support is highly recommended.
I. Sectoral licensing needs
- Financial services (securities trading, banking, and insurance require licences from the ISA regulator).
- Healthcare (practising medical professionals and healthcare institutions require licences from the Ministry of Health).
- Education (The Ministry of Education issues licences for setting up and operating schools, colleges, and coaching institutes).
- Tourism (accommodation, travel, entertainment, and transport services require Ministry of Tourism licenses).
- Food services (restaurants and catering services necessitate food safety licences and hygiene compliance certificates from local authorities).
II. Licensing & compliance process
Typical stages include:
- Identify applicable licences: assess licensing needs based on activity area.
- Prepare documentation: compile all prerequisite application documents and information.
- Submit application: file application for obtaining a licence to operate in Israel, with all necessary payments to the respective authority.
- Inspection: regulator may conduct verification visits of facilities and processes.
- Review & queries: additional information may be sought while evaluating applications.
- Licence issuance: licences are issued to compliant applicants upon regulator's approval.
- Renewal: periodic licence renewals will need timely submissions as mandated.
Specific requirements may change periodically. Hence, engaging legal experts on licensing business in Israel for latest advisory can be prudent for commencing operations.
Key guidelines for company registration in Israel
Consideration of the following pointers can enable smooth establishment of operations in Israel:
- Market evaluation. Conduct comprehensive industry evaluation and formulate a robust business plan ahead of incorporation.
- Appropriate legal structure. Optimal legal entity choice based on taxation, compliance needs and growth strategies.
- Unique name approval. Verify name uniqueness by checking the registrar database before reserving approval.
- Expert engagement. Leveraging professional advisory in legal, finance, accounting, and compliance spheres reinforces fool-proof processes.
- Tax compliance. Full adherence to tax codes, correct deduction and filings enables avoiding penalties or business disruptions.
- Licensing compliance. Meeting prerequisites and ensuring adherence to conditionalities for securing permits and licences for regulated sectors.
- Local networking. Tapping into industry associations fosters relationships, exchanges, and partnerships.
- Legislative vigilance. Regular monitoring of legal or compliance policy amendments to promptly account for changes. To keep abreast of all the requirements and any innovations in local business legislation, we recommend that you order a consultation on registering a business in Israel.
- Technology focus. Consistent R&D and innovation investments considering Israel's technology leadership globally.
- Cultural fluency. Progress by gaining more profound insights into work ethics, client perspectives and professional conduct norms locally followed.
In summary, entrusting experts, planning thoroughly and being adaptable position businesses to extract the most benefit from Israel's thriving business ecosystem.