Doing business in Israel

From the ancient old city of Jerusalem to the beautiful beaches in tech hub Tel Aviv, Israel is a bustling country full of life and opportunities. With quite an impressive track record, world-leading investors and entrepreneurs have put Israel’s industry in the limelight, calling to international interests and grabbing the attention of industry giants looking to do business in Israel.

Through intensive research and high-tech development, Israel has been recognized as a ‘middle-eastern Silicon Valley’, being home to development centers for companies like IBM, Google, HP, Facebook, and other house-name multinationals. With high-technology concentration and a primarily knowledge-based economy, rapid development has been ushered in through quality education and a motivated populace. As a young country with great potential for business and commercial growth, Israel is keeping the doors open to business investments abroad and domestically.

After officially becoming an OECD country in 2010, Israel has invited free trade agreements with the US, the EU, Turkey, Mexico, Egypt, and a significant number of other countries. The economy of Israel is highly advanced and developed despite its small size and population relative to other highly developed nations. According to the most recent report on the UN’s Human Development Index, Israel ranked as being “very highly developed,” granting a higher standard of living compared to other western countries. Keep reading and learn how Israel can help you take that next big step towards success.

1. Israel’s government is a multi-party system based on a system of parliamentary democracy.
2. Israel is a free-market economy but also has a well developed welfare state providing many essential services to residents.
3. According to a March 2024 Dealroom report, Israel has the 7th highest number of highly successful startup companies, or “unicorns”, in the world.
   

    

2.   BUSINESS MEASURES

The World Bank Group’s Doing Business rankings of 190 countries scored Israel as one of the easiest countries to start and establish a business. Israel scored higher than the United States, France, Germany, and various other high-earning OECD countries, affirming Israel’s place as an attractive destination for entrepreneurs and expanding businesses. These rankings were calculated by measuring the procedures, time, and costs of establishing a business, and Israel is shown to be considerably more efficient, time resourceful, and affordable than many countries (see reference).

Starting a Business in Israel:

• Procedures (number): 3
• Time (days): 11
• Cost (% of income per capita): 2.7

[All numbers are for an average business and may vary]

In the World Bank assessment protection for minority investors, Israel ranks higher than the United States, France, Germany, and the regional OECD average. In the arena of conflict of interest regulation, Israel places great value on shareholders’ rights, director liability, the extent of disclosure, and corporate transparency in order to protect minority investors.

Protecting Minority Investors – Israel:

• Extent of corporate transparency (0-7): 6
• Extent of shareholders rights (0-6): 4
• Extent of director liability (0-10): 9

[With few exceptions]

Paying taxes in Israel has been ranked to have a considerably higher measure of quality for organizations compared to countries like the United Kingdom, the United States, France, and Germany. This rankings specifically takes into account the number of payments per year, total tax and contribution rate, as well as post-filing (tax audits/VAT refunds), among other considerations.

Paying taxes – Israel:

• Payments (number): 6
• Total tax and contribution rate (% of profit): 25.3
• Post-filing Index (0-100): 92

[With few exceptions]

Israel conducts trade with countries from every inhabited continent. Boosted by free trade agreements with the EU and the United States, over half of its imports and exports are accounted for by these strategic partnerships. Trading across borders in Israel is comparable to many western countries with regards to border and documentary compliance. The time and costs associated with the components of border compliance and trade documents are fair and efficient. Israel is constantly working on maximizing the efficiency of its trade and exchange with existing partners and the opportunity to form new relations.

Score of starting a Business (0-100): 94.1

Score of protecting minority investors (0-100): 78

Score of paying taxes (0-100): 89.6

Score of trading across borders (0-100): 83.4

Israel’s official languages are Hebrew and Arabic, and English is widely recognized and taught as part of the compulsory school curriculum. This helps to effectively surpass a major language barrier, creating greater opportunities for non-native speakers, language minorities, and foreign investors.

Corporate documents in Israel are also generally accepted by a company registrar. With many of the recent normalization agreements, this opens doors to cooperation in various sectors with many countries in the region. We are part of the generation of major change, with one common goal in mind, strengthening cooperation and building trust.

3.   BUSINESS PROCEDURES

• Work Visa

 In order to obtain a work visa, approval must come from the Ministry of Interior in Israel after an invitation from an employer. It follows a process similar to that of many western countries upon the procedures to obtain a work visa. Check whether you need to obtain a visa prior to visiting Israel.

• Establishing a Limited Liability Company

There are 3 processes required in order to register a business:

1. Form No.1 of the Company Registrar – application form to register a company, including details about the organizational structure and personal information about shareholders.
2. Memorandum of Association – establishes corporate identity along with goals and objectives, establishes the responsibilities of shareholders, and establishes shares issued.
3. Articles of Association – rules of conduct for the company. If a company’s own Articles are not submitted, the standard articles listed in the Companies Ordinance will come into effect for the new company.

(The fee for registering a company as of 2024 is 2944 ILS or about $800 USD.)

Note: An Israeli lawyer must verify company documents along the process of incorporation.

A company incorporated overseas must register as a foreign company with the Registrar of companies and tax authorities in order to establish a branch or local office.

Once a company is registered with the Registrar, it must register with the appropriate tax authorities.

• Partnerships

An entity that consists of people who contracted a partnership agreement holds personal liability unless they are limited partners of the partnership. Foreign partnerships are also permitted to do business in Israel.

What are the current challenges faced by an Israeli business?

Beyond the growth and success of Israel’s economy, it is important to consider some of the challenges Israel faces today. Corruption is a legitimate problem in Israeli politics and has surfaced through the investigation of bribery and influence peddling. According to the 2023 Corruption Perceptions index, Israel is the 33rd least corrupt nation out of 180, as reported by Transparency International.

The Corruption Perceptions Index ranks countries based on how corrupt their public sector is perceived to be. Meanwhile, in the Middle East, Israel ranks 2nd as the least corrupt behind the United Arab Emirates, 26th globally. While the public services sector is reported to have a moderate risk of corruption and low risk in the judiciary, corruption does not appear to be institutionalized. This means businesses are more likely able to operate and invest in Israel without interference from corrupt officials. While the justice system continues to battle ongoing corruption to protect honesty and integrity, an ineffective bureaucratic government is considered to be a source of the problem that threatens to undermine the rule of law and economic development.

THE WAR AND THE ECONOMY

The Swords of Iron war that began on October 7th, 2023, had a measurable and expected negative impact on the Israeli startup economy, alongside the economy as a whole. The mass mobilization often led to the absence of key personnel in these organizations, and there were difficulties in raising new capital for many organizations. However, in early 2024, the strength and resilience of the Israeli economy shined through. For those looking to either start or continue doing business in Israel in the near future, there are many reasons for optimism in Israel’s growth economy. 

According to surveys released by Deloitte in February of 2024, 85% of investors planned to either maintain or increase their levels of investment in Israeli tech in 2024. The government has also been active in establishing new funds to raise capital for startups and other organizations, even during wartime. In terms of global rankings, Israel has remained at the top for starting and establishing a business throughout this difficult time. There were challenges posed by the realities of the situation. However, the global continued faith in the resilience of the Israeli economy is a good reason for optimism, as the world has seen the undeterred growth of Israeli firms.

Our law office, a dynamic business law firm with high initiative, has remained at the side of Israeli business owners trying to navigate these complicated times. We aim to assist startups and businesses find their footing and carve out their own space in the Israeli corporate sphere. Here at our office, we look forward to what the future holds, and believe that maintaining investment and commitment will facilitate growth and the quality exchange of communication, information, and technology.

WE ARE THE BUSINESS LAW FIRM YOU NEED

Here at our office, you can find the business law lawyers with the expertise you need. Although our main specialization deals in Global Immigration Law, we focus on providing our clients with expert advice in all areas of business in Israel. We help solve a wide range of legal issues pertaining to commerce, real estate, tax, labor, intellectual property, contracts, and several other fields of civil law and commercial law. We are committed to delivering quality service with over 30 years of experience, ensuring our clients are given the information they need at a great value.

Our main branches are held in Tel Aviv and Jerusalem, but you can contact us directly from the comfort of your home for the legal advice you need. As we persist through a difficult time in Israel’s history, we hope the continued economic growth of our beautiful country will allow Israel to flourish and benefit the global economy alongside its own. We are here for you when you need us most. Contact us to find out more and see how our legal counsel can help you in your next step.

 :  :

03-3724722

055-9781688

office@lawoffice.org.il