Company Formation in Israel- An Overview
Israel is a small country which is present in the south-eastern part of the Mediterranean Sea. The main cities in Israel are Tel Aviv and Jerusalem. Jerusalem is considered as the prominent government capital of Israel, whereas Tel Aviv is a prominent business hub. Technology developments have been embraced by all parts of the country. Due to these factors an individual can go for the process of company formation in Israel.
Israel has been recognised as one of the fastest developing countries in the world. This is due to innovative methods and modern standards which are followed. There are no restrictions in terms of foreign investment in Israel. Foreign direct investment is encouraged in the country through government support.
International companies consider Israel to set up technology hubs and R & D centres due to latest developments. Due to all these factors, an investor would go for the company formation in Israel.
Benefits of Company Formation in Israel
The following are the benefits of company formation in Israel:
- Modern Facilities
Israel offers world class infrastructure and different form of facilities for companies to operate. Due to this, many global companies prefer Israel as a destination for carrying out business.
- Technology Centres
Most companies that set up branch offices in Israel due to diverse technology. Technologies in the areas of agriculture, ICT, information technology and food processing have a strong presence in Israel. Due to this, companies prefer investing in Israel. Added to this, the government also provides support for the development of different forms of business.
- Ease of Doing Business
Different types of companies can be set up for carrying out business in Israel. Due to this, there is ease of doing business in Israel.
Eligible Business Structures for Company formation in Israel
The following are the eligible business structures for company incorporation in Israel:
- Branch Office
Branch office is an entity which is formed under the parent company. There is no separate legal entity for the branch office, as it an extension of the parent company. The liability of the shareholders and directors of this company is limited to a particular extent. The branch office can carry out operations under the scope of the parent company.
- Representative Office
A representative office would be started under the foreign parent company. However, the representative office can only carry out activities which include market research and being a liaison of the parent company.
- Limited Company
A limited company is also known as a private limited company in Israel. This type of organisation has the status of limited liability. The directors and shareholders of the company have limited liability. This company would require to pay corporate tax. Annual compliance must also be filed by this type of entity. The general manager of the company would be required to run the operations of the business.
- Limited Liability Partnership
This is also known as an LLP. The members of this form of entity are known as partners. The partners have limited liability. The profits and losses of this form of entity have to be shared by the partners. Partners would also have to pay personal tax.
Eligibility Criteria for Company Formation in Israel
The following eligibility criteria have to be sufficed for company formation in Israel:
- Minimum Capital
There is no minimum capital required for forming any type of entity in Israel.
- Key Management Executives
To form a private limited company in Israel, minimum one shareholder and one director is required. The shareholders do not need to be a resident in Israel. An Israeli national is not required for forming a company. However, a foreign company which is opening a branch office or a representative office would require to appoint a representative.
- Name of the Company
The name of the company must be unique and distinctive. The name must not represent any form of existing company. The name of the company must be in local language Hebrew and it also must be translated in English.
- Residence Requirements
The shareholders do not need to be a resident in Israel. An Israeli national is not required for forming a company. However, a foreign company which is opening a branch office or a representative office would require to appoint a representative.
Procedure for Company Formation in Israel
The main authority for company formation in Israel is the Israeli corporations’ authority (ROC Israel). This authority comes under the supervision of the Ministry of Justice. The application for company formation in Israel can occur online. This would be carried out through the actions website (https://ica.justice.gov.il/Login/Login?from=companies ) which is used to carry out compliances related to company registration procedure and other processes.
The applicant has to provide at least three names for the company. This must be provided in the following link. (https://www.gov.il/he/Departments/Guides/companies_online?chapterIndex=1) The name of the company must be unique and distinctive. The name must not represent any form of existing company. The name of the company must be in local language Hebrew and it also must be translated in English.
Also the company is required to provide a physical address for the process of incorporation.
To form a private limited company in Israel, the applicant would have to appoint at least one shareholder and one director.
With the application for the company, the name reservation must also be filed. It would be ideal to appoint a local representative or a lawyer for the process of company formation in Israel. The lawyer would check if the requirements of the name of the company comply with the authority.
All the names of the directors and shareholders must be present along with their signature to register the company. If the directors and shareholders are not resident of Israel, then a copy of their passports must be provided.
The documents along with the application form must be submitted online for company formation in Israel. Once this is carried out, the authority will verify the application along with the documents to find any issues.
Once this is carried out online, you will receive a certificate of incorporation for the company. Along with the certificate of incorporation, you would also receive a verification stamp.
Registration of Foreign Company in Israel
A foreign company can open a representative office or a branch office in Israel. The incorporation procedure for a foreign company in Israel must be carried out, as if the company is being incorporated as a domestic company in Israel.
The foreign office would first take a board resolution for incorporating a foreign company in Israel. If the resolution is vetoed then the company would have to appoint a local representative in Israel to carry out the procedures related to company formation in Israel.
The company must make an application to the authority with the relevant documents for incorporating a foreign company in Israel.
Compliances for Company Formation in Israel
Once the company is formed, there would be ongoing compliances to be followed. Such compliances have to be carried out as per the requirement of the authority:
- Corporate tax has to be paid on the income which is generated by the company. Then shareholders would be separately taxed for the dividends which are paid by the company. Currently the corporate tax levied on Israeli companies is 23%.
- Annual General meeting would have to be held every year. No more than 15 months time must be between two general meetings of the company. The provisions of these meetings would be considered in the articles of association of the company.
- Annual tax returns must be filed.
- All companies present in Israel must filed business registrations as required by the municipality of the particular locality.
- Annual Meetings of the Board have to be carried out every year.
- Annual reports have to be filed with the Israeli registrar of Companies.
- If there are any changes with the company, the same has to be filed with the ROC on an ongoing basis. Such compliances would also be carried out by the representative office and the branch office.
- Corporate secretary is required for a foreign company which have a representative office and branch office.
Documents for Company Formation in Israel
All the documents must be submitted in Hebrew. The documents must bear the signature. The following documents are required for company formation in Israel:
- Application form for the registration of company in Israel
- The application form must have the name of the company which is reserved
- Information such as the telephone number must be provided by the company
- The Articles of Association also must be provided by the company
- Memorandum of Association for the company
- Form 1 of the Addendum of the Companies Regulations (Reporting, Details of Registration and Forms) 5760-1999
- Information on the shareholders and the directors of the company
- The signature of the applicant must be signed on a form by an affidavit signed in the presence of a lawyer
- Shareholders Declaration Form 2 of the Addendum of the Companies Regulations (Reporting, Details of Registration and Forms) 5760-1999. This would be considered as the first declaration of the shareholders
- Fee regarding the payment for the application
Documents for Foreign Company Formation in Israel
- Certificate of Incorporation
- Memorandum of Association
- Articles of Association
- The above documents must be legalised by a proper apostle.
- Power of attorney to the representative in Israel. This power of attorney must show that the individual has the complete authority to act in forming the company.
- List of names and relevant information related to the directors of the company.