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A Foreigner’s Guide to Starting a Business in Israel

Photos taken from the top of Azrieli Center Circular Tower, currently the tallest building in Israel, at 53 stories. Azrieli Sarona, when finished, will be the tallest building at 73 stories. An even taller building, Rockefeller Center, has been commissioned and will be 80 stories tall...In the views, you can see Azrieli Sarona under construction, Shalom Tower, from 1965-1999 the tallest building in Israel at 36 stories, as well as Port of Tel Aviv with Sde Dov Airport. The Electra (Elco) Tower, also pictured, houses Google Israel and is currently the 3rd tallest building...See: https://en.wikipedia.org/wiki/List_of_tallest_buildings_in_Tel_Aviv; https://officesnapshots.com/2013/01/31/google-tel-aviv-office-design/
Photos taken from the top of Azrieli Center Circular Tower, currently the tallest building in Israel, at 53 stories. Azrieli Sarona, when finished, will be the tallest building at 73 stories. An even taller building, Rockefeller Center, has been commissioned and will be 80 stories tall...In the views, you can see Azrieli Sarona under construction, Shalom Tower, from 1965-1999 the tallest building in Israel at 36 stories, as well as Port of Tel Aviv with Sde Dov Airport. The Electra (Elco) Tower, also pictured, houses Google Israel and is currently the 3rd tallest building...See: https://en.wikipedia.org/wiki/List_of_tallest_buildings_in_Tel_Aviv; https://officesnapshots.com/2013/01/31/google-tel-aviv-office-design/

Israel is known as an attractive place for business because of its technological advancements and vibrant economy. Today, Israel is home to people engaged in an impressive range of economic sectors including heavy industry, high-tech, agriculture, pharmaceuticals, food processing, and more.

Foreign citizens have always been welcome to invest in Israel and continue to take advantage of the broad opportunities for starting a business here.

Business Classifications In Israel

An entrepreneur looking to establish a presence in Israel should start with an integrated marketing plan. When doing business outside your own country, having a written plan becomes even more critical than usual. This is not the time to just wing it. 

A typical marketing plan example includes the type of the business, marketing goals and objectives, target markets, marketing strategies, and implementation. You need to have this stage well thought out before you even start thinking about moving forward. Then it is time to dive in.

There are two business types that can be established in Israel depending on the annual business income.

Osek Patur

Osek Patur is a simpler business type that is suitable for small businesses with an annual income not exceeding 102,292 NIS (around $31,800) per the country’s 2022 threshold.

While any business may register under this classification as long as its income is within the given threshold, certain individuals such as architects, doctors, engineers, dentists, teachers, psychologists, lawyers, accountants, and other such specialists cannot register under Osek Patur.

The word “patur” in Hebrew means “exempt” but this does not mean that an Osek Patur is completely exempt in all forms of tax. It is only exempted from value-added tax, but is still liable for income tax and national insurance.

Osek Murshe

An Osek Murshe business classification does not have any income threshold limit unlike an Osek Patur.

An Osek Murshe is required to pay income tax and national insurance. In addition, it is also required to collect value-added tax on its sales with certain exemptions.

Establishing a Business as a Foreign Citizen (Steps)

Appointing a Guarantor

A foreign citizen who plans to have a business in Israel needs to appoint a guarantor, mainly to establish the legal entity of the business. The guarantor has to be a citizen of Israel and is usually a business partner. The guarantor is legally bound to accept the liabilities of the business on behalf of the foreign citizen.

Foreign citizens may also be allowed to register as private entrepreneurs given that they are married to an Israeli citizen and plan to obtain an Israeli ID card.

Registering the Business

All businesses in Israel are to be registered with The Registrar of Companies (Ministry of Justice) and the Tax Authorities (Ministry of Finance) to establish a legal entity in which this business operates.

Corporate documents upon registration are generally accepted even if they are in English except for the Articles of Association which have to be translated to Hebrew.

Opening a Separate Business Bank Account

Following registration, a separate bank account must also be opened. This process involves filling out a special form and submitting copies of company identification documents such as a passport, National Insurance card, or any other sufficient proof of identity.

Documents to be Submitted

All business owners are expected to provide their accountant with these necessary documents upon registration before they can be issued the Certificate of Incorporation and a nine-digit company number.

Only after the business has been registered with the Registrar of Companies can it proceed to register with the Tax Authorities. The business has to submit Form 4436 containing the basic details of the company.

Form No. 1 of the Companies Registrar

This form is basically the application form to register the company.

Memorandum of Association

The Memorandum of Association is required for all business types. It includes the purpose, structure, and management model adopted by the founders. This document should also include any provisions made upon restricting future changes in ownership.

Articles of Association

This document contains the rules of conduct for the company. This document needs to be translated into English.

Registration Fee

Businesses are required to pay a registration fee to the Israeli government Department of Corporations at the Ministry of Justice. The registration fee is currently at 2,645 NIS (a little over $800 USD) as of 2021.

Israel Business Culture

Business Hours

Normal business hours in Israel start at 8:30 AM and end at 5:00 PM from Sundays through Thursdays.

On Fridays, most businesses close a little earlier before sunset which marks the beginning of Shabbat. On Saturdays, businesses generally remain closed all day long.

Look out for Jewish holidays as businesses throughout Israel are put on hold during these events.

Business Language

International business in Israel is mostly conducted in English.

However, some business transactions are also conducted in Hebrew so it would be helpful for foreign investors to have a basic understanding of the language before starting a business in the country.

Punctuality

Being punctual is highly valued among Israelis. Foreign investors are advised to arrive on time for meetings and appointments. Otherwise, this could lead to cancellations, hard feelings, and perhaps a reputation as being unreliable. All of these would be good to avoid as you’re trying to find business footing.

Dress Code

A more casual look is acceptable for most workplaces in Israel because of the warm weather. Open-collared or polo shirts paired with casual trousers for men and decent tops with pants or skirts for women are worn frequently.

If you are attending a meeting with the board of directors, it would be appropriate to wear formal clothing such as a suit or something similar. Revealing clothing should be avoided during business meetings as this could lead to discomfort and unnecessary attention.

Social Relations

For Israelis, social relationships play an essential role in establishing good working relations with their colleagues and clients alike. They look at their work colleagues as an extension of their family. Socializing after work hours is common.

Shaking hands is more of a common practice rather than a simple ‘hello’ or ‘goodbye.’ However, some religious associates might not like to touch the opposite gender so avoid this practice if you are not familiar with them. Obviously, the pandemic has had an effect on this practice everywhere.

Giving of gifts, especially during Rosh Hashanah and Passover is also common in Israeli business culture. Israelis look at giving gifts as a thoughtful gesture and an expression of appreciation. Gifts of flowers and wine are more of a common practice during these times.

Dietary Customs

Due to the large presence of Jewish population in Israel, it is expected that most restaurants are Kosher certified so food restrictions would have to be addressed before doing business with them.

Final Thoughts

Israelis are typically known for being assertive and direct while having a great sense of humor. They value innovation and creativity among their employees.

It is also important to note that Israelis can be sensitive when it comes to business negotiations. Businessmen are encouraged to take their time in order to minimize any potential risks of being misunderstood by the other party so doing research prior to the negotiation is highly recommended.

About the Author
Bernard Brode is a nanotechnology product researcher and believes that it might end up being the biggest tech story of all time.
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