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Starting a business in Israel

August 3, 2023 444 Time to read: 7 min. Comments: 3

Israel’s stable economy is a favorable environment for starting your own business. Starting a business in Israel is quite easy. The state does not complicate this process, but rather helps private business to develop. Small and medium businesses are the main budget-forming countries. New companies open here every day. Statistics show that private business brings about 40% of the country’s GDP. A transparent business system, as well as loyal taxation, contribute to the favorable development of this area.

How to start a business in Israel

First of all, you should decide on the direction in which you want to develop your business. The Israeli state actively supports small and medium-sized businesses, so starting your own business will be a good idea. There are a number of areas, opening a business in which you will definitely not lose money and achieve success:

  • Renting out real estate;
  • Sale of real estate objects;
  • Hotel and restaurant business;
  • The sphere of domestic services;

  • IT startup;
  • Medicine;
  • Beauty services.

Types of business formations in Israel

The most common in Israel is the legal form of LTD Company. Other organizational and legal forms:

  • Individual entrepreneurship;
  • Joint-Stock Company;
  • Partnership (partnership);

  • Non-profit, public organization;
  • Foreign company.

Company Registration

The next step, after you have chosen the scope, concept and developed a business plan, will be the legal registration of the business. Legal clearance is a mandatory step, otherwise you may get in trouble with the law. In Israel, financial discipline is strictly observed.

The main steps of a businessman on the way to a successful business in Israel:

  1. Registration of a bank account;
  2. Submission of documents to the tax office;
  3. Accounting with the National Insurance Office;
  4. Confirmation of insurance accounting for tax;
  5. Registration.

Private Ltd Company

An LTD, or chevra baam, in Israel is a large business that can work with other companies and even have access to the international market. A Limited Trade Development (LTD) may have several founders. As the name suggests, LTD owners are not liable for the company’s debts. The authorized capital of Chevra Baam is $ 2,700


  • Uniform income tax (Mas Akhnasa) – with high profits, this is a significant advantage;
  • No need to pay Bituach Leumi (social insurance);
  • The image of an LTD is higher than that of an individual entrepreneur – this is already a real business with shareholders, directors and employees;
  • Legal liability – chevra baam is an independent legal entity, unlike an individual entrepreneur, where the owner is personally responsible;
  • You can choose a unique name and register a trademark;
  • Transparency of accounting – accounting is carried out using a double entry system;
  • Founders and shareholders can receive salaries and be entitled to social benefits, unlike individual entrepreneurs


  • High cost of accounting services and annual reports;
  • High state duty to the Register of Companies, which must be paid annually;
  • There is no opportunity to freely use the company’s money – money can be withdrawn through salaries, dividends or investment in assets;
  • When opening a bank account, you need to provide a lot of documents.

Public Company

business plan developmentAdvantages and disadvantages of public limited company. The main advantage of a joint-stock company is the lack of liability of shareholders for the debts and obligations of their company: if the company is threatened with bankruptcy, shareholders are not required to pay debts from their own funds. A significant plus is the possibility of public trading in shares as a means of attracting investment. The third advantage is a single corporate tax. The owner of a public company can register a trademark, which significantly affects the image of the company.

The disadvantages of public company include high fees for accounting services and reporting. An annual fee must be paid to the Registrar of Companies. The money available on the account of the company cannot be freely used, as individual entrepreneurs do.

Foreign Company

A foreign company wishing to enter the Israeli market can choose from two options for registering a foreign company:

  • affiliated undertaking;

  • representation.

A subsidiary is a local private limited company owned and operated by a foreign company. All of its shareholders can be foreign persons, but at least one representative from among the residents of Israel is required. He will act as a tax guarantor. A subsidiary can count on tax benefits, as it is considered a local company. A subsidiary is an independent company. It is not responsible for the obligations of the head office.

A representative office in Israel is opened by foreign companies that do not plan to do business in the country. This type of company is suitable for market research, brand advertising. A representative office cannot conclude contracts and engage in trade either on its own or on behalf of the parent company.


It is important to understand here that even the lack of profit cannot be a reason for not filing a tax return. Reports must be prepared in accordance with the established frequency. The main taxes include the following list:

  • Sales tax (VAT) – rate 17%;
  • Corporate – 23%;
  • Health tax, health insurance contributions – from 3.5 to 17.5%;

  • Income tax (personal income tax) – is charged on a progressive scale depending on the amount of income. The rate is from 10 to 50%;
  • Tax on dividends – from 25 to 32%.

Self-Employment (Atzmai)

If you are an atzmai (part or full self-employed), you will need to file tax returns with the tax authorities. You also need to make your own contributions to the pension fund so that you can count on a decent pension in old age.

Osek Patur

In Israel, there are two forms of private enterprise – esek patur and esek murshe. They differ from each other not only in how they are taxed, but also in how they are managed and controlled.

Features of Osek Patur:

  • The annual turnover of the business must not exceed 99,893 shekels;
  • Report to the VAT accounting service is submitted once a year;

  • Not available to lawyers, doctors, architects and some other professionals in private practice;
  • No need to pay VAT.

Osek Murshe

Features of Osek Murshe:

  • All trade transactions are subject to VAT;
  • You can recover taxes from business development expenses;

  • No limits on annual turnover;
  • Anyone can register.

Setting up a business as a foreign citizen

It should be noted right away that having your own enterprise in Israel will not give a foreigner any privileges in relation to the accelerated acquisition of Israeli citizenship. Also, the business owner may not expect to receive any prerogatives regarding the procedure for visiting the country.

Another important point is that a foreigner cannot register his own business without the participation of a representative of a resident. A representative can be both a legal entity and an individual. He acts as a guarantor to the Israeli tax authorities for the timely filing of returns and payment of taxes.
Is Israel a good country for business?

Yes, the Israeli government supports starting a new business and offers a loyal tax system.

How much does it cost to start a business in Israel?

In 2023, the cost of registering a company in Israel – $ 715.

Can a foreigner own a business in Israel?

Yes, a foreigner can register a company in Israel.

How do I set up an LLC in Israel?

To open a company in Israel, you have to go through several procedures:

  • To register an LLC in Israel, the assistance of a lawyer is required. Next, you need to prepare a package of documents, part of the incident.
  • The lawyer will register your company and open a special bank account. Then you need to notify the following services:

MAAM (mas ereh musaf) – Value Added Tax (VAT) Administration;

Mas Akhnasa – Tax Administration;

Bituach Leumi – National Insurance Institute.

Why are millionaires moving to Israel?

Clear taxation, all conditions for developing a new business or scaling an existing one.

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    Emily Smith

    Why are salaries so high in Israel !?

    January 24 2024, 14:25
    Maya Laoshvili

    Hello, Israel is a country with a stable developed economy and offers its citizens high standards of living and labour remuneration.

    February 09 2024, 11:40
    Aaron Cohen

    Good day, Israel is a country with a stable developed economy and offers its citizens a high standard of living and remuneration.

    February 29 2024, 18:40
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