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Key Features of Doing Business in Israel

Registering a company in Israel is quite easy, with the country 56th on the ease of starting a business ranking compiled by World Bank Group Ease of Doing Business scale; you can set up a company in Israel in less than a month
Illustrative photo of computer use. (Nati Shohat/Flash90)
Illustrative photo of computer use. (Nati Shohat/Flash90)

Israel is an exciting place to do business. The country is a hotbed for innovation, with startups numbering in the thousands and with government creating many opportunities for companies – both new and old – to grow and succeed. This has had results, with the economy is growing and has been for a long time, with growth rates between nearly 2.5% and 5% for the last five years. In fact, it has outperformed both the EU and the US every single year since 2006.

The country particularly shines in tech, where it, by its own admission, stands on the world’s medals platform. Israel is working hard to stay there, with huge investments and a lot of attention dedicated to keeping the technological edge the country uses to stay ahead economically and strategically.

With the economic, cultural and business landscape so inviting there is a lot of interest in setting up a business over there. For that reason here we’ll provide some key elements for you to be aware of if you’re thinking about moving to Israel. With them in hand, you’ll be in a better position decide if and how you’d get involved.

Ease of registering a company

Registering a company in Israel is quite easy, with Israel ranking at 56th on the easy of starting a business according to the World Bank Group Ease of Doing Business scale (the country ranks 53rd overall on the scale ). You can set up a company in Israel in less than a month.  To do so you need to:

  • Obtain company registration documents certified by an attorney (3 days)
  • File with the registrar of companies, Ministry of Justice (2 days)
  • Register for taxes at Ministry of Finance, Income Tax Department (7 days)
  • Register for VAT at Ministry of Finance, Customs and VAT Department (1 day)
  • Register with the National Insurance Institute (5 days)

A lot of help for startups (And a lot of startups)

And once you’re registered there are a lot of tools available to you to help your business get started, especially if you’re trying to get a startup going, as the country does particularly well in that regard, with some experts comparing Israel to Silicon valley.

In fact, according to a Financial Times article, the sector raised an astounding $4.4 billion in venture capital in 2015, which doesn’t include foreign subsidiaries like Google, Oracle and Facebook who also have factories in the country and employ almost 230,000 people. What’s more, investment has been rising 30% rise year on year. The country outspends all but South Korea on R&D.

One of the ways for the individual startup business to access that kind of money is through one of the country’s over 200 startup accelerators. These offer you the opportunity to find funding, advice, ideas and locations to work from. And if your business isn’t a success, then you won’t have to pay a dime. Check out this list of 10 top startup accelerators in Israel to get a look at the reviews of companies.

The government puts a great deal of effort into helping startups, with the Office of the Chief Scientist working hard to boost the startup scene. According to some reports they provide 85% of the seed funding to help startups get started. A second institution that helps a lot is the army, where a huge number of young people are trained up to become highly skilled hackers who go on to become fantastic programmers.

A shortage of personnel

That said, it isn’t all rainbows and sunshine as there is a drastic shortage of trained personnel in the tech sector. In fact, there are reports that large numbers of engineering positions are not getting filled due to the high demands of the tech sector, the leveling of interest among students to study such subjects, as well as the difficulty for foreign workers to get visas to work in the country.

This has caused salaries to rise over the last years and though they do not yet match Silicon Valley, they are certainly getting close. In response, the government is making overtures to sections of the population that are underrepresented in tech, as well as considering making it easier to bring in foreign workers to do the work.

The first step has already been taken in this regard, with the country now offering special visas that will let tech workers reside in the country for up to five years, whether as employees or as founders of new tech companies. In this situation, people will even be eligible for     support from the Office of the Chief Scientist.

The UN blacklist

There is another area of uncertainty that people looking to do business in Israel face and that is the Boycott, Divestment and Sanctions movement, which aims to increase economic pressure on Israel to end the occupation and give more rights to Arab citizens. This has been gaining ground in recent years, most recently with a UN resolution that is creating a database that lists companies who do produce goods or do business with settlements in the occupied Westbank.

This will make it harder for companies in Israel to do business with companies outside of it and creates a more uncertain economic climate for many companies and many kinds of products. That is something that should certainly be measured and weighed if you plan to do business in Israel, as well as who you are planning to do business with.

Last thoughts

Israel offers both many opportunities as well as some unique problems not found anywhere else. These need to be considered carefully and fully if you’re going to try to do or start a business in the country. If you’re a small tech company with your own staff, then Israel would indeed seem to be a great opportunity. If you’re trying to scale up, however, then it might be better to try elsewhere, as you might not be able to find the staff.

For other sectors, different but equally important issues need to be considered. For example, if you do decide to set up your business in the country, can you avoid ending up in the database which might make selling abroad more difficult?

Still, all that said, the opportunities far outweigh the risks, particularly if you’re capable of getting an Israeli passport, which will allow you to sidestep most of the problems, in terms of visas and such, that outsiders face.

About the Author
Ethan Dunwill currently resides in Hong Kong and works as an independent blogger.
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