Doing Business in Israel: The Complete Guide
Doing Business in Israel THE BEST WAY
Doing Business in Israel
Israel has become a hotbed for technology startups and international businesses in recent years. With a highly-educated population, pro-business environment and culture of innovation, Israel offers unique advantages for companies looking to establish operations here. This comprehensive guide covers everything you need to know about doing business in Israel.
The most common structures for foreign companies are a private company, partnership, branch office or representative office. Each has different advantages in terms of liability, taxes, and ease of setup.
The corporate tax rate is 23%. VAT is 17% on most goods and services. There are also mandatory social contributions for employees. Tax treaties with many countries help avoid double taxation.
Yes, Israel offers many incentives like R&D grants and tax breaks for new immigrants and companies in special economic zones. There are also subsidies for establishing activities in peripheral regions.
Israel has a skilled workforce, but hiring can be challenging due to strict labor laws. There are high social benefits costs per employee. Hiring foreign experts requires work visas and permits.
You must submit monthly/quarterly tax reports and annual financial statements. All foreign companies must appoint an Israeli accounting firm for reporting. There are also data protection and privacy regulations to follow.
Overview of the Israeli Economy
- Israel has a population of 9 million people and GDP of around $400 billion.
- Major industries include high-tech, agriculture, manufacturing, tourism and diamonds.
- Highly educated population with emphasis on STEM fields. Israel has highest number of startups per capita worldwide.
- Strong venture capital and private equity presence. Funding for startups reached record $25 billion in 2021.
- Israel has free trade agreements with major markets like EU, Canada, UK and China.
Establishing a Business in Israel
Choosing a Business Structure
- Main options are private company, partnership, branch office, representative office or individual freelancer.
- Most common for foreign companies is to open a private company or partnership.
Business Registration
- Register new companies with the Corporations Authority and Registrar of Companies.
- Name approval required and takes around 2-3 weeks.
- Full registration process takes 1-2 months.
Hiring Employees
- Main options are full-time employees, part-time, freelancers, contractors and service providers.
- Average salary for a skilled worker is around ₪10,000 per month.
- Hiring employees requires submitting report to the tax authority within 12 days.
Banking, Accounting and Legal Services
- Open a business bank account at one of Israel’s major banks such as Hapoalim, Leumi or Discount.
- Hire an accounting firm to handle tax reporting, payroll, invoices etc.
- Work with a business lawyer for legal counsel and reviewing contracts.
Key Tax Considerations
- Corporate tax rate is 23%
- VAT is 17% for most goods and services.
- Tax treaties with many countries allow avoiding double taxation.
- Mandatory social benefits include healthcare, paid leave, pension and severance pay.
- Tax year is calendar year but reports must be submitted monthly or quarterly.
Incentives for Businesses
- Government provides subsidies, grants and tax incentives for R&D and tech projects.
- Attractive tax incentives in special economic zones like Haifa and Be’er Sheva.
- Multinational companies can take advantage of Israeli R&D centers.
- Foreign high-tech employees may be eligible for tax discounts for first 10 years.
How to Succeed in Business in Israel
Israel is home to thousands of successful startups and multinational companies. Its thriving economy, skilled workforce and pro-business environment make it an attractive option for entrepreneurs and businesses worldwide. This comprehensive guide covers key tips for building a successful business in Israel:
Research the Market Thoroughly
- Conduct in-depth market research to identify opportunities, competitors, regulations and challenges unique to Israel.
- Focus on niche sectors where you can provide value. Examples include tech, biotech, cleantech, defense and agriculture.
- Analyze target consumers and positioning of competitors already in the market.
Choose the Right Business Structure
- Popular foreign business structures are private company, partnership branch, representative office or limited liability company.
- Consider implications for taxation, legal liability, setup costs and operating ease. Get professional advice.
- Register at the Israeli Corporations Authority and comply with all reporting rules.
Develop Networks and Partnerships
- Network extensively at industry events and conferences to meet potential partners, clients and talent.
- Partner with an Israeli company to leverage local expertise and accelerate go-to-market.
- Join organizations like tech hubs, chambers of commerce and industry associations to build connections.
Secure Funding and Incentives
- Research government grants, tax incentives and subsidies available for your sector and location.
- Obtain venture capital funding – Israel attracts more VC per capita than anywhere globally.
- Lower costs by locating operations in special tech zones like Tel Aviv or Be’er Sheva.
Adapt Your Offerings for the Israeli Market
- Israelis appreciate direct marketing and communications – ensure your branding resonates locally.
- Adjust offerings to match Israeli consumer preferences and needs. Get feedback from local focus groups.
- Provide service/content in Hebrew – work with native-speaking translators and local staff.
Conclusion
Israel provides an advantageous environment for global businesses looking to tap into the local ecosystem. With proper guidance on regulations and key decisions like business structure and location, foreign companies can thrive in the Israeli market. Partnering with knowledgeable local professionals is key to success.
With the right business model, partnerships and utilization of incentives, foreign ventures can thrive in Israel’s business landscape. Stay persistent through initial hurdles and immerse yourself in the local ecosystem. Focus on relationships, innovation and adding true value for Israeli consumers and businesses. read my next article about Complete Guide to Marketing in Israel