Israel

Economic and Legal Climate

Israel, located in the Middle East, is known for its highly developed technology sector, innovative ecosystem, and strategic location. The country has strengths in sectors such as high-tech, pharmaceuticals, agriculture, and defense. Israel’s legal system is based on common law and civil law, providing comprehensive legal protections and a transparent regulatory framework. The country is recognized for its pro-business environment, robust intellectual property rights, and supportive government policies aimed at fostering innovation and attracting foreign investment.

Official Languages

The official languages of Israel are Hebrew and Arabic. English is widely spoken and used in business, government, and legal matters, making Israel highly accessible for international investors. Engaging local legal and business experts who are fluent in Hebrew and English is advisable for dealing with regulatory and administrative matters.

Banking System

Israel has a well-developed and regulated banking system overseen by the Bank of Israel. The country hosts a variety of local and international banks offering comprehensive financial services. The banking sector is known for its stability, innovation, and strong emphasis on digital banking services, supporting both domestic and international business operations.

Maintenance Costs

Maintenance costs for companies in Israel are moderate. Annual compliance requirements include renewing business licenses, filing tax returns, conducting audits, and maintaining proper accounting records. These processes are relatively straightforward but can involve some administrative efforts and costs, which are generally manageable with the assistance of local professionals.

Setting Up Costs

Setting up a company in Israel involves several costs, including incorporation fees, legal fees, and registration with the Registrar of Companies. The process includes drafting the company’s articles of association, obtaining a tax identification number, and registering for VAT if applicable. The incorporation process is efficient and can typically be completed within a few weeks if all documentation is in order.

Corporate Tax Rate

Israel offers a competitive corporate tax regime with a standard corporate tax rate of 23% on taxable profits. Additionally, the country provides various tax incentives and deductions for research and development (R&D), innovation, and investments in specific sectors, enhancing tax efficiency for businesses. The Encouragement of Capital Investments Law offers reduced tax rates and grants for qualifying enterprises.

Territorial or Non-Territorial Principles

Israel operates a worldwide tax system, meaning resident companies are taxed on their global income. However, extensive double taxation treaties and incentives are available to help mitigate the impact of double taxation and enhance tax efficiency for foreign investors.

Currency Regulation

Israel imposes no significant restrictions on foreign exchange transactions, allowing for the free flow of capital. The currency used is the Israeli Shekel (ILS), and the regulatory framework supports international trade and investment by providing ease in currency conversions and transfers.

Advantages of Setting Up a Company in Israel

1. Innovative Ecosystem: Israel is known for its vibrant tech scene, high levels of innovation, and supportive government policies for startups.
2. Skilled Workforce: Access to a highly educated and skilled labor force, particularly in sectors such as technology, pharmaceuticals, and engineering.
3. Strategic Location: Israel’s location provides access to markets in the Middle East, Europe, and Asia.
4. Government Incentives: Various tax incentives and support programs for R&D, innovation, and investments in specific sectors.
5. Strong Legal Protections: Robust intellectual property rights and a stable legal system provide strong legal protections for businesses.

Disadvantages of Setting Up a Company in Israel

1. High Costs: The cost of living and doing business in major cities like Tel Aviv can be relatively high.
2. Regulatory Complexity: Navigating Israel’s regulatory and bureaucratic landscape can be challenging and time-consuming.
3. Political Tensions: Regional political tensions and security concerns can pose risks for some investors.

Conclusion

Israel offers a highly attractive environment for setting up a company, with its innovative ecosystem, skilled workforce, and supportive government policies. Despite challenges such as high costs and regulatory complexity, the overall advantages make Israel a compelling choice for international investors, particularly in the tech and innovation sectors. Global Expand can assist you in navigating the complexities of setting up a company in Israel, ensuring a smooth and successful entry into this dynamic and vibrant market.