Country GuideIsrael

From Global Connections

Foreign direct investment (FDI) inflows into Israel reached USD4.6 billion in 2014,  according to UNCTAD's 2015 Global Investment Report. This represented a decrease of almost 50 per cent over the previous year.

Israel ranked 53rd in the World Bank's 2016 Doing Business rankings, falling from 50th in the previous year. Israel's primary strength was in the 'Protecting Minority Investors' category, where it ranked eighth in the world. The rankings recognized that Israel made paying taxes more costly for companies by increasing the corporate income tax rate, the rate for social security contributions paid by employers for the upper wage bracket, and municipal taxes.

Key facts about starting a business in Israel:

  • It takes five procedures and approximately 13 days to start a new business in Israel; this process is detailed in the Doing Business in chapter.
  • Employers that wish to employ foreign employees must apply to the Authority of Immigration in writing; employment regulations are discussed in detail in the Labor chapter.
  • Requesting and obtaining a building permit from the Local Committee takes approximately 135 days and costs ILS42,556.
  • Companies must file financial statements in accordance with Israeli GAAP (exceptions exist for publicly traded companies and banks); further details can be found in the Auditing chapter.
  • Among other requirements, companies that wish to list securities on the Tel Aviv Stock Exchange must have been operating for a minimum of 12 months; this is discussed further in the Finance chapter.

Israel's attractiveness as an investment location can be attributed to a number of factors, including its liberal investment policy and high investment in research and development (R&D). Nevertheless, in order to make an informed decision, it is critical to understand the nuances of any local system. The manner in which people conduct business in Israel may differ from the home countries of investors. Furthermore, variations on these distinctions may exist, depending on the region and the industry in which a company operates.

Hebrew and Arabic are the official languages of Israel, although English is widely spoken. Business attire is typically smart-casual. A handshake is the typical business greeting and will be used at the beginning of a meeting. Business cards may be presented after initial introductions. Gift giving is not expected as part of business interactions.

Those looking to establish a business in Israel may look across the Middle East for alternative options. However, Israel can be differentiated on the following factors:

  • Israel is economically stable, with an annual growth rate of 2 to 3 per cent and unemployment under 6 per cent.
  • The World Bank rated Israel's judicial processes 14 out of 18, above the OECD (Organization for Economic Cooperation and Development) high-income average of 11; details of the country's judicial processes can be found in the Legal Overview chapter.
  • Tax relief is granted to companies located in a National Priority Region; this is further detailed in the Taxation chapter.
  • Israel ranked third in the world for innovation in the World Economic Forum's Global Competitiveness Report.
  • The Israeli government provides a number of incentives in support of R&D collaboration; discussed further in the Trade chapter.
  • Israel has three modern, deep-water harbors at Haifa, Ashdod, and Eilat that serve international shipping needs; discussed further in the Infrastructure chapter.

While there are significant opportunities for investment in Israel, a number of challenges remain. Corporate tax rates are relatively high, and the time needed to pay taxes is higher than the average across OECD high-income countries. Investors must also remain aware of the geopolitical instability arising from the region's political environment.

This guide has been developed to provide businesses with an overview of Israel, its legal system, start-up and market entry considerations, tax and customs requirements, and a general summary of the factors that may affect the decision to do business in Israel. However, the information contained in this document is generic in nature, and you should not act or rely on it without obtaining specific professional advice.

Useful Links

1 Israeli Corporations Authority
2 Ministry of Finance
3 Ministry of Foreign Affairs
4 Israel Patent Office
5 Israeli Law, Information and Technology Authority
6 Ministry of Economy and Industry

 

Download Country Guide - Israel (2.83MB, PDF)

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