Company Registration in Israel

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What is Company Incorporation in Israel?

The economy of Israel is technologically advanced as report issued by Global Standards. The prosperity of Israel's advanced economy allows the country to have sophisticated welfare state, powerful modern military said to possess a lethal nuclear weapon's capacity, modern infrastructure rivaling many western countries and a high technology sector competitively on par with Silicon Valley. Its diamond industry is one of the world's centers for diamond cutting and polishing. Agriculture, financial services, high technology, energy, industrial manufacturing, Diamond industry, tourism sectors has performed well and retain the country at high of all season on growth of country. Moreover another perspective of growth is highly managed and skilled man power, strong rules and regulation supported by implementation, good government and friendly environment for trade and industry.

Principal types of Business Entities in Israel

  1. Company
  2. In Israel, there are two forms of local company either private or public to define the liability of members defined in accordance with Israeli Law. It is necessary to register the company with company’s registrar.
    Hebrew and Arabic are the official languages of country but in practice, corporate documents in English will generally be accepted by the Registrar. However the English content to be ultimately written on Hebrew or Arabic.

  3. Private or Public
  4. A company may be registered as a "Private Company" or a "Public Company" with securities registered on a Stock Exchange. Both types of companies must present annual reports, including audited financial statements to their shareholders.
    A private company generally consist 1-50 shareholders, and one director. It must contain restrictions on the transferability of its shares.
    A public company, with a minimum of 7 shareholders, may offer stock or debentures to the public, but only after issuing a prospectus in accordance with the requirements of the Israel Companies Ordinance (ICO) and the Securities Law.

  5. Foreign Company 
  6. Company formed overseas can establish either a Branch or local office for their business/trade in Israel as long as it is registered as a foreign company with the Companies Registrar within a month of its establishment. It is benefit for foreign investor that they are allowed to have office or branch to conduct the business and trade in Israel.

  7. Partnership
  8. The Partnership Ordinance defines a partnership as an entity that consists of persons who contract to form a partnership mutually. Personal liability of the partners is not limited unless they are limited partners of limited partnerships. A foreign partnership is also permitted to do business in Israel.

  9. Cooperative
  10. it’s a form of business for cooperation and earning motive. This kind of business entity is found mainly in the agricultural sector, transportation businesses and certain types of marketing operations more often associated with agricultural products.

  11. Non-Profit Organizations (NPO)
  12. it is form of business in Israel basically more focused on nonprofit activities i.e. social enhancement motive as academic institutions, hospitals, charitable organizations and municipalities.  It is subject to a special law dealing mainly with the formation of such organizations and the way they may operate as such.

Registration of Businessin Israel

All companies in Israel must register with registrar of companies (Ministry of Justice) and the tax authorities (Ministry of Finance)

Step by Step incorporation procedure are:-

First: Submit FROM No. 1 i.e. application to register company in Israel.

Second: Draft Memorandum of Association (MOA) and Article of Association (AOA)

Third: Fee for registering a company is currently NIS 2,244/-

On completion of registration process, the registrar will issue the company with a Certificate of Incorporation and a company number.

Importantly entire verification of incorporation documents are done by Israeli Lawyers and mandates by Government of Israel.

Once incorporation certificate is issued by Registrar now it’s a duty of company to get itself registered in tax authority. It can be made at the Tax Authority upon commencement of operations/business/trade. The filing number is usually the same one as the one issued by the Registrar of Companies i.e. Corporate Identity Number. Registration is made using form 4436, which includes basic details of the company.

The Israeli tax year is the calendar year. Subsidiaries of foreign public companies may sometimes use a different fiscal year.

All companies doing business in Israel are required to file audited annual tax returns and financial statements within five months after their fiscal year.  Extensions may be obtained.

Taxes to be filed include

  • Corporate tax installments –based on a percentage of the company's monthly sales revenue gained on business/trade in Israel. It is something like advance tax to authority based on estimation finalized on year end annual return.
  • Supplementary corporate tax installments with respect to certain non-deductible expenses.
  • Tax withheld (WHT/TDS) from salaries and remittances to suppliers when applicable.
  • Value-added tax (VAT).
  • National Insurance.

These filings and payments must be made by the 15th day after the month's end and can be paid at a bank or post office.

It’s a requirement of regulatorand instruct corporate to have bookkeeping and invoice requirements for income tax and VAT compliance. Accounting records must be available for inspection in Israel by tax officials.

Once VAT registration number is obtain, it has to be print in Invoices and receipts that display on each transaction of corporate.

Some of business in Israel have “licensing requirement” to do business/trade in country. It means businesses need a license/permits to operate under the Business Licensing Law.

Many commercial enterprises and professionals must have business permits/license in order to operate/trade. Permits are basically issued by the municipalities after prior approval by other government departments such as the Ministry of Health and so on. Permits must be renewed on a particular timeframe either quarterly or annually, as the case may be.

Application forms are usually available from the municipal licensing authority. It is necessary to prepare and file detailed drawings of the premises. Procedures and directives stating all that needs to be done to receivea business license/permits can be obtained on the Israel Police Website.

Corporate should ensure and check that local regulations/rules do not prohibit your opening a business at the designated site.

It is necessary to open a commercial bank account through which all company finances will be conducted. To open the account, person is obligated to present copies of the AOA and Certificate of Incorporation, approved by an accountant or an attorney, approval of signatory rights for the company.

Apply to the concerned Municipality based on registered office address to find out what are the municipal taxes relevant to your business. These taxes are paid by the end-user and not the owner, is a kind of indirect taxes in Israel.

In a conclusion, it can be summarized as a good destination for investors to generate new area of economy and can be accelerate in high return profile. It is advisable to open business/trade subject to applicable laws and regulation of Israel.

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