Israel

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Israel

General information about the jurisdiction

The State of Israel - is a state in the south-west Asia, proclaimed in 1948. Despite its young age, the country has huge impact on world policy and economy by refusing to sign the Treaty on the Nonproliferation of Nuclear Weapons and lack of control over some nuclear power facilities from international organizations.

The unique historical path traversed by people of Israel in the process of state formation has left a lot of invaluable monuments, seven of which are included in the UNESCO World Heritage List. Moreover, Israel is a country of world religious and a haven for thousands of pilgrims who come annually to worship the holy places.

Israel is a place that successfully combines the cultural, natural and economic conditions to live and to do business.        

1. Legislation

Company activities in Israel are regulated by Companies Act and Partnerships Act.

2. Company formation

2.1 Types of companies

The Israel law provides a lot of corporate forms such as private and public companies,  limited and unlimited companies, partnerships, noncommercial organizations etc. The most preferable for foreigners are Limited Liability Company (Ltd) and Limited Liability Partnership (LLP).

2.2. Limited Liability Company (Ltd):

  • The minimum authorized capital – not established.
  • Shares – with or without par value, bearer shares are allowed.
  • Director – at least 1, individual or legal person, no residency required.
  • Members –1-50 individuals or legal persons, no residency required.  
  • Secretary – not required.
  • Publicly available information: information about directors and shareholders. Information about beneficiary owner may be hidden by using nominee service. 
  • Company is obliged to keep and submit an annual financial report, be audited. 
  • Registered office in Israel is required. 

2.3 Limited Liability Partnership (LLP)

  • The minimum authorized capital – not established.
  • Members – 2-20 partners, individuals or legal persons, no residency required. One of the partners (general partner) must have unlimited liability, another – limited one.
  • A partner with limited liability can not pick up his contribution or a part of it and he does not take part in managing the partnership.
  • Director – general partner acts as a director.  
  • Secretary –is required.
  • Publicly available information: information about the partners.
  • Company is obliged to keep and submit an annual financial report, be audited.
  • Registered office in Israel is required.
  • LLP is not subject to corporate tax and partners pay income tax.

3. Taxes

There is a territorial principal of taxation in Israel, which means that resident companies pay taxes on their entire global income and non-resident companies are subject to tax only the income derived from sources in the Israel.

Corporate tax - 25%

VAT – 16% (some activities and export are exempt from VAT)

Tax on dividends from foreign companies – 25%,  tax on dividends from Israel companies – 0% (in case when the source of income is in Israel).

Tax on dividends paid by Israel company - 20% (25% in case when foreign recipient owns not less than 10% of shares of the company during 1 year).

Tax on royalties – 25%.

There are some features of holding companies taxation.

For legal entity to be resident, it can not place its shares on the stock exchanges, average total cost of investments must be at least €10 million (the proportion of such investments in the assets should not exceed 75%), a company must receive only passive income and control only companies that are residents of countries Israel has agreements on avoidance of double taxation with. Any legal person complying with these criteria has the right to distribute the income with the tax rate of 5%.    

4. Currency control

None

5. Agreements on avoidance of double taxation

Israel concluded more than 40 agreements on avoidance of double taxation, including Ukraine.

6. Features

Israel actively prevents the activity of offshore companies and money laundering. False information about company activity will lead to criminal responsibility. Israel is a police state, in a sense, with low level of corruption which promotes doing business in a legal way.

Moreover, any company formed solely or the purpose of obtaining tax benefits may qualify as an abuse and may considered as non-existence for taxation.

Some types of business such as catering, restaurants, shops require license of local authorities.