Company Formation in Israel
Updated on Friday 22nd March 2024
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Being a country with a market economy based on high-technology and agricultural products, and also having a very strong diamond industry, Israel is certainly a good choice for foreign entrepreneurs who set up a company on its territory. The recommendation is to address our team of company formation specialists who can assist you in the process of starting a business in Israel.
Legal structures in Israel
Here are some of the legal entities you can choose from as a foreign investor in Israel: a private or public limited liability company, a representative or a branch office, etc. The most common among foreign investors is the limited liability company because it is more convenient for their needs.
Requirements for opening a limited liability company
In order to open an LLC company in Israel, some demands have to be met and these are as follows:
- a minimum share capital of $1;
- at least one director;
- minimum one shareholder (can be individuals or companies).
The director and the shareholder can be of any nationality and reside anywhere in the world. One of the differences between this type - the private one, and the public limited liability company, for example, is that in order to incorporate the latter, you need at least two directors and seven shareholders.
List of company registration procedures in Israel
The first step of the process of opening a company in Israel is obtaining the company registration papers that first need to be certified at an attorney's office; you will need to submit an application to register your company, signatures of the shareholders etc.
Then you need to file the association articles with the Registrar of Companies at the Ministry of Justice. Declarations of serving capacities must be signed by both the directors and the shareholders.
Furthermore, you have to register with the Income Tax Department for company taxation. The confirmation document may come after a few weeks, but our specialists in company formation can assist you in this procedure as well as with all the others and complete them as soon as possible.
You also need to register with the Ministry of Finance for VAT where you have to file some documents with the company's information. Finally, in order to form a company in Israel, you will have to register with the National Insurance Institute.
Preparing the statutory documents in Israel
All companies in Israel must have a founding document, where investors will state the capital, the company type, the company’s registered address, the business activities, matters concerning its management and many others, as required by the legislation.
Corporate structures in Israel gain legal recognition through the memorandum of association and the articles of association, which have to be submitted to the Registrar of Companies, working under the Israeli Ministry of Justice.
It is important to know that the Registrar can accept documents in English, even though the national languages of the country are Hebrew and Arabic. This possibility applies to the English language only, therefore if you have any corporate documents issued in another foreign language, outside the 3 mentioned above, you will have to prepare certified translations.
What are the main taxes charged to companies in Israel?
Whether you open a company in Israel or you have a foreign business which you plan to expand in Israel, you will be required to pay a set of taxes. The taxes usually charged in Israel are the corporate tax, the value added tax, excise taxes, property taxes, employment taxes (insurance contributions). Currently, the following apply:
- the corporate income tax, charged at a rate of 23%;
- the value added tax (VAT), charged at a rate of 17%;
- the real estate capital gains tax, which is applied to a variety of properties, including leases made for a period of 25 years and longer;
- the transfer tax on the purchase or real estate, imposed a rate of maximum 10% from the value of the property sale (the tax is paid by the buyer);
- national insurance contribution for employees (the only payroll tax applied in Israel), paid by employers at a rate of 3.55% for a salary of maximum ILS 7,522 per month or at a rate of 7.6% for a salary of minimum ILS 7,522 and maximum ILS 49,030.
Can investors make changes to their Israeli company?
Yes, according to the Israeli Government, once businessmen have registered a company with the Registrar of Companies, there is the possibility to make various changes to the data initially registered. This can happen as, throughout the lifetime of a business, various modifications can be required, such as the change of ownership due the selling the company, or changing of office and many more.
Companies that need to modify certain provisions of the articles of association must address the Registrar of Companies, to inform on the modification brought to the document. The modification will be reflected in the Registrar’s file in a period of maximum 30 business days.
Please know that although the process of company formation in Israel can be completed online, the modifications brought to any corporate data registered during the incorporation are submitted following different routes.
The Israeli Government stipulates that there are 4 main options concerning this, as follows:
- send the documents via post to the Jerusalem Corporations Authority;
- leave the documents in the deposit box of the same institution;
- use the deposit boxes located in other district offices;
- submit them in person at the Jerusalem Corporations Authority – for this, an appointment must be made.
It is also important to know that your company must have a corporate bank account registered at a local bank. The same is true if you are interested in offshore incorporation, as you will need to set up an offshore bank account.
You can rely on our team if you are interested in offshore company formation, as we can represent clients in a variety of corporate matters, including in tax registration, obtaining business permits or accounting services. For additional information on how to register a company in Israel or how to incorporate another type of business entity in Israel or in other countries, please contact us.