How to register a company in Israel. Complete information about setting up a business in Israel, including tips and tricks.
We might write a lengthy intro about how to open a business in Israel but we do suspect that no one read intros anymore. We certainly don't. So let's we go straight forward to the point and dive right into all the necessary information to know all about how to open a company in Israel. We shall now cover the essence of everything there is to know about registering a company in Israel.
Also, we will provide expert information about what to avoid, as well as clear out all misconceptions and confusions about Company Formation and Registration in Israel.
The companies law in the State of Israel works very similarly to the common law system of Britain, such as the U.S, Australia, etc. This means that the establishing of a Company in Israel is fairly easy from the shareholders side.
First and foremost, the relevant authority in Israel is the Department of Justice, and specifically the Companies Registrar. This is the authority by which one may register his company in Israel. The Israeli company registration with this administrative agency is a very efficient, and to our view, it is one of the most efficient authorities in the country. With ample funding, the Companies Registrar is a very easy, efficient, professional and modern governmental body to work with.
Shareholders
The shareholders are the owners of the new Israeli company.
Israeli law mandates that all companies must have someone as a shareholder, at least 1 shareholder as a minimum. That shareholder may be a person, or it may be a legal entity, such as a company, a partnership. In default there is a maximum of 50 shareholders of a company, but that number may be increased in the articles of association, and the maximum limit can be lifted altogether as "unlimited".
Can Foreign Citizens Open a Company in Israel?
The most relevant question in this article is whether a foreign national can register a company in Israel.
With a few exceptions, all nationals, of any country, are permitted to hold shares of an Israeli company. This means that if a foreigner wishes to set up business in Israel, he is completely free to do so. The ownership of the shares is registered under that person's current number of a valid passport with an expiration date which is farther than 6 months.
Can a Company Own Shares of an Israeli Company?
As mentioned above, just to show you how flexible an Israeli company formation might be, if a company wishes to establish and/or own shares in an Israeli company, as a parent-company, that company can freely do so. That company simply needs to provide its private-company-number. In other words, there is no need for any constitutional documents of the parent-company.
Can a Foreign Company Own Shares of an Israeli Company?
In case a foreign company wishes to be a shareholder, or the incorporator of, an Israeli company, it may certainly do so. It is required in this case the constitutional documents of the parent-company, i.e., the certificate of incorporation and the articles of association.
One more document which is required in the case of a foreign parent-company shareholder, is a "certificate of good standing". Such document simply serve as evidence that the parent company exists as of the time of incorporation of the Israeli company. This documents exists in many countries in the form of a "company extract", which states that the company is active. In Hong Kong, for example, such document will be the "Business Registration License", which is being renewed every year.
Certification of Documents
before submitting them to the Companies Registrar, identifying documents must be certified properly per the below instructions.
In case of a live person, such as a person-shareholder, or a person-director, a notarized copy of all passports must be created by a notary. Plus, apostil must be added to the notarized copy.
In case you don't know what is an "Apostil", it is merely another documents which is attached to each of the notarized documents, which legally certifies the documents for international purposes. This way legal documents can travel internationally and be accepted by foreign states, which are parties to the apostil convention. It should be noted that in case a company is incorporated in a country which is not a party to the apostil convention (for example China), then an international certification of the aforementioned notarized documents must take place at the local Israeli embassy.
In case of a legal entity, such as company or a partnership. all documents must have an attached notary translation to the English (or Hebrew) language, and be apostilled as abovementioned.
Trust-held Shares of the Israeli Company
A trust can also be a shareholder of the new Israeli company. whatever the uses of the beneficial owner, its trustee may open a company and hold its shares on his or her behalf, providing them with freedom and with full flexibility of being a shareholder of his company.
in concordance with the aforementioned, a trustee can be a local person, a legal entity such as a company, a foreigner person, and a foreign company.
Class of Shares
In Israel the class of shares is very flexible, allowing the incorporator of the Israeli company to define almost any class of shares they wish.
The most ordinary type of shares is the "ordinary shares", "Menayot Regilot", which have voting rights, dividend rights, and equity rights. However, any type of preferred shares may be created, as well as double or triple share types. For example, we have come to incorporate a company for a client, which requested three share types, the first being voting shares, the second being dividend shares, and the third being equity shares – which hold the right for any surplus after full liquidation.
Par Value of Shares
The shares of an Israeli company can have a par value of any size. The par value can be a nominal amount, or a substantial amount. Alternatively, the shares might have no par value at all, and it is simple a matter of the preference of the incorporating shareholder(s). furthermore, do demonstrate how flexible is the company formation in Israel, the par value can actually be stated in almost any currency, including USD, EUR, YEN, AUD, CAD and even Emirati Dirham, if one so desires.
Directors
In Israel a new company may be registered with a minimum of 1 director. This means that any person who wishes to be a director might be so, without any restrictions, provided that he is legally eligible to do so. Eligibility usually concerns only declarations about not having done any bankruptcies in the past. Of course, such declarations are confined to local bankruptcy in Israel, and so any foreigner (almost any) is eligible to be a director.
Is an Israeli director required? No. The sole director, and in case of more than one director than all the directors, may be 100% foreigners, without any other connection to Israel.
All directors must provide basic identifying information such as passport copies, home address, etc.
The directors do NOT need to work in Israel. They do NOT need to live in Israel. They do NOT need to be present in Israel for the incorporation process. They do NOT need to study or have a spouse in Israel. Actually they do not even need to have any relevant experience in the relevant business of the company, or any experience whatsoever.
As mentioned before in this article, Israel is a wonderful and easy place of registering a company.
Corporate Directors
Part of the freedom of incorporation in Israel is capacity of a corporation, such as a company, to act as a shareholder in the newly formed Israeli company. Almost any corporation can be a director in an Israeli company, provided that such corporation is active and provides the same documents as is required by a corporation shareholder (you can read above).
If a corporate is chosen to act as a director in the company, a live person must be nominated as a representative of that corporation.
Registered Address for the Israeli Company
All Israeli companies must provide a local address as part of their registration process. The local address is NOT required to be an actual office with physical space. Rather, it can be a service address. However, it must be an actual address and cannot have a P.O box as an address.
The address is used by the state to send letters to the company, usually about compliance requirements such payment requests and filing obligations. Also, the bank account opening procedure in Israel requires the company to have a local address with which the bank may communicate in writing with the company.
What is the Procedure to Open an Israeli Company?
All Israeli company formation procedures start with a simple thing: the incorporator chooses three purposed names to the new company, sequences by preference. Choose the first name by which you wish the company to be registered. Then the second best, then the third option.
We then go and conduct a "name search" to assess the chances that any of the names will be accepted by the Companies Registrar.
The second thing is to receive from the shareholders-to-be their identifying documents. in case of live persons, the identifying document will be a good notarized and apostilled copy of their passport. In case of a legal entity, a corporation, such as company or a partnership, the identifying document will be a certificate of incorporation or its equivalent, the articles of association, and a certificate of good standing or its equivalent, as stated above.
Next, we will need to receive the full address of the new Israeli company. In case the client wishes to use our offices as a registered address for the Israeli company, we may agree on doing so for an annual subscription.
We shall then fill out a specific forms regarding general information about the company's business and its owners.
Thereafter must be signed the constitutional documents, namely:
The articles of association
Declaration of the first directors. The directors declare that they are fit to service as directors of the new Israeli company.
Declaration of the first shareholders. Here too, the shareholders declare that they are fit to be shareholders of the new company.
All of these data and documents are submitted to the Companies Registrar for the registration of the company in Israel.
At this point a state company registration fee must be paid. As of writing these lines, the state fee for registering a new company is ILS 2412, which is approximately USD 640.
Documents Which the Shareholders Receive from the State
When the company is opened by the Israeli Companies Registrar, the state sends the incorporator (us) a certified digital copies of:
Certificate of incorporation (in Hebrew)
Articles of association.
Declaration of the first directors
Declaration of the first shareholders
Custom-made Articles of Association is Possible
Usually when forming an Israeli company, the model articles are being selected as articles of association. But is it possible to draft a custom made articles of association for a new Israeli company formation? Oh yes, absolutely. The articles can be drafted with any complexity required by the shareholders, including tailor-made rights and procedures for the corporate governance of the company.
A curious tidbit, which very few Israeli practitioners know, including lawyers who work for years in the field of company formations in Israel, is that articles of association can be drafted in the English Language! That is how flexible Israel can be as an incorporation hub for the middle eastern business. Having the articles of association drafted in the English language makes it very easy for any foreign shareholders to be fully involved in the Israeli company formation process.
Opening an Israeli Company Remotely is Possible
In case the incorporating shareholder do not wish to physically come to Israel, and wishes to do everything remotely, he or she can absolutely do everything remotely.
There are two ways to open an Israeli company remotely. The first option is to open using a local notary or the local Israeli embassy. The signature on all the documents which require signature will be certified by a local notary or by the embassy, and thereafter be apostilled so that they could be internationally used by the Israeli Companies registrar to open the company in Israel.
The second option, which is much easier and faster, is to use us a proxy. The company is first opened by us as share subscribers and directors, and thereupon all shares are transferred to the designated shareholders, as well as all posts of directors, and we resign from the directorate.
The results of the two ways of setting up a company in Israel are the same, take almost the same time, costs the same, and require from the local side almost the same effort.
Times: How Long Does it Take to Set Up a Company in Israel?
To anyone who wishes to set up a company in Israel, this datum may come as a surprise. To set up a company Israel it takes merely 24-72 hours from the moment of submitting all documents properly.
However, we have already seen many cases of unprofessional third-party service providers who made mistakes in filling out forms properly, and by which wasted dear time for their clients in their new Israeli company formation application being declined on the basis of incomplete or incorrect application or procedure.
Costs: How Much Does it Cost to Open a Company in Israel?
There are two key components to the costs of setting up a company in Israel.
The first component in the costs of Israeli company formation is the state fee, which is mentioned above, at a current rate of USD 640.
The second component is the service fees. You may find the all about the different prices of company formation packages in this link, starting from USD 2,100.
Annual Compliance for the Company
Like every asset, such as a car or a house, each Israeli company requires maintenance. The maintenance of a company is of annual nature, and compose of general two requirements:
Annual state fee
The annual state fee is due every year, starting from the 1st of January of each calendar year.
The fee is tiered, being of a reduced rate until the 31st of March, and then full rate from 1st of April and until the 31st of December, whereupon the fee becomes overdue and will eventually accumulate penalties. Thus, unpaid state fees can eventually become a considerable burden, so it is warmly advisable to pay them on time, preferably before March 31st of each year, when they are at the reduced rate.
Annual return
This requirement is similar to the California statement of information, or to the UK confirmation statement, or to the Hong Kong NAR1. The annual report is a general report about the company's current status, such as its registered address, its current shareholders as well as their current holdings, the present directors, data about the annual general assembly, etc.
The annual return is generally due every calendar year. This requirement is often being overlooked, but in recent years we have encountered heavy penalties imposed for not submitting these reports, for overdue consecutive reports of a period as short as two years in a row. A single penalty might be over USD 2,000 and it is pointless to be imposed of such amounts as the annual report is a fairly short and simple compliance work.
So, to summarize, there are two annual requirements for each Israeli company: the annual state fee, and the annual return.
Of course there is also the ongoing requirement of having a local address. When leasing a service address, this requirement is usually also of an annual nature, so it is advisable to renew the subscription at the time of taking care of the annual compliance requirements.
Business Bank Account
Now that we told you all there is to know about forming a limited liability company in Israel, it is worth mentioning the opening of a business bank account.
We deem it wise to devote another article to the in-depth discussion about opening a corporate bank account, but we may state in short some relevant data about the bank account opening for the company, in connection with the company formation in Israel.
Unlike "continent states" such as Germany, Austria, Luxemburg, France, Spain, etc., the bank account opening is a completely separate procedure than the set up of the company in Israel. As a consequence, a company formed without opening a subsequent bank account, can exist at itself, i.e. without ever having to open a bank account. This is useful for companies without money transactions, for example companies which are designated to be holding companies of property, including intellectual property.
However, when a company wishes to be active and trade within Israel, a tax registration in Israel is required. In such case, a bank account for the company must be opened BEFORE the tax files may be opened. This is so that the tax authorities may be able to actually refund VAT charges, in cash transfer, to the company's bank account, when the company first begins its business by expending more cash than its income.
A bank account for the Israeli company may be opened in any of the Israeli banks, which are: Leumi Bank, Hapoalim Bank, Mizrahi Bank, Discount Bank, First International Bank, Bank Otzar Hakhayal, and Bank of Jerusalem. To be accepted as a wanted client, the company must elaborate and expand about its business fields and business partners, such as clients and suppliers or vendors.
The bank then decides to open the account, whereupon the company receives IBAN (international bank account number) and credentials to the online banking interface (username and an initial password).
In Israel, account fees are considered standard for a retail bank. It should be noted that all banks in Israel are retail, even though all have private wealth management departments.
One important detail to know, is that the process of bank account opening can be done without ever setting foot on Israeli soil, i.e. completely remotely.
It takes some good connections with local banks (which we have) and working your way through the bank requirements and forms (which we know how to do).
Corporate Tax and VAT
Part of doing business in Israel is the requirement of opening tax files for the newly formed company.
First of all, it should be pointed out that a company is NOT required to undergo a tax registration in Israel, UNLESS it is managed from within Israel and it wishes to start trading.
If the company wishes to start trading, a tax registration must be done. As mentioned in the previous section, this action can be done only after a local bank account was opened.
In Israel, the current applicable tax rates, as of 2024, are:
23% Corporate Tax
17% VAT, which currently is set to increase within the year to 18%.
Exceptions for Certain Nationals
We regret to add that there are a few extraordinary exceptions about which nationals can be shareholders of Israeli companies, as well as serving as directors of such. Such nationals are citizens of countries which are or were at a conflict of war with the state of Israel. In fact, these are very few countries, and they sum up with Lebanon, Syria, Iran and Iraq, each year Iraq being granted a special permit with which to do business.
Closing Statement
To conclude, we have had an in-depth written discussion about all aspects regarding to company formation in Israel, and in particular about how to set up a company in Israel.
We touched upon the shareholding requirements and flexibilities, the types of shares, their par value, the directors, who can be both of these roles, the process of the company formation including required documents, the documents produced by the state once the company is opened. Plus, we tackled in brief with the subject of bank account opening and even tax registration.
Therefore, by now you should know everything there is to know about how to open a company in Israel. Now all is left for you to do is to click the button "open a company" which is found on the menu at the top, and fill out the application form!
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