All you need to know about how to register your new Israeli Company with the tax authorities
As a business entity, all Israeli Companies who wish to do business within Israel, must obtain their tax registration with the tax authorities. Navigating the intricate landscape of Israeli tax registration requires a comprehensive understanding of the obligations that come with it.
In this post we will cover the main points about how to do Company Tax Registration in Israel.
Israeli Tax Authority logo.
1. The Israeli tax authority requires foreign-owned companies to have a local tax representative
One crucial aspect is obligation to appointment a local tax representative.
This tax representative serves as a crucial link between the taxpayer and the Israeli tax authorities, and currently it is not possible to do Israeli Tax Registration without appointing a local tax representative.
In other words, a local tax representative MUST be appointed for the tax registration process. Note that a tax representative is not necessarily an accountant, but rather a person who will take personal responsibility for the tax obligations of your Israeli Company.
Which brings us to the next point.
2. Local Tax Representative - Personal Tax Liability
According to Israeli tax codes, the local representative assumes personal liability for the tax obligations of your Israeli Company.
This means that if the Israeli Company doesn't pay its due taxes, or doesn't file its tax reports, the tax representative is subject to penalties, and he/she will be the one who will be investigated by the enforcement authorities.
Due to that risk, there are very few professional tax service providers in Israel who are willing to act as tax representatives for companies which they do not own or have any ownership interest in, and as a consequence there are very few in Israel who know how to professionally act as tax representatives.
3. Initial Requirement for Tax Registration – Local Bank Account
One basic requirement for Israeli Tax Registration is for the company to have a local bank account. Israel has several major banks: Leumi Bank, Hapoalim Bank, Mizrahi Bank, Discount Bank, and Bank of Jerusalem. Opening an account in one of them is a mandatory step for obtaining a tax registration.
In fact, the full order for tax registration is:
1. Israeli Company Formation: The first step is to incorporate your company.
2. Israeli Bank Account: in one of the local Israeli Banks
3. Israeli Tax registration.
Simulation of Tel Aviv City.
Third-Party
All tax registration actions by formations.co.il are being done by the aid of a professional third-party CPA company who have so far made hundreds of Israeli Tax Registration for foreign-owned Israeli Companies.
Upon request, these professionals will provide a competitive quote for your Israeli Company on a tailored made basis. You may contact us for a specific quote.
When is Tax Registration not Needed?
Israeli Tax Registration will not be needed several cases. One case is that the company is a holding company. For example, the company may be holding a real estate, or a vehicle such as a yacht, or maybe even virtual currencies.
Another case will be when the company conducts all its business outside Israel and has no Israeli local clients, plus the management and control of the company is conducted outside of Israel. In such case, since there's no connection to Israel, no Israeli Tax Registration will be required whatsoever.
This means in essence that in such cases, since there's no local revenue, no tax reports are required to be annually submitted at all.
Israeli Branch Office - Inherent Tax Advantage.
A special and interesting tax case is the case of a branch office.
In Israel, a branch office is a local registration of a foreign company. It can be a company incorporated in any jurisdiction – the U.S, UK, Germany, Switzerland, Japan, etc. When that foreign company wishes to do business in Israel without incorporating a local subsidiary Israeli Company, it needs to be locally registered as a branch office.
Thereafter, that foreign company can open an Israeli Bank Account and then conduct its business with local customers or clients freely.
As for the taxes of such entity, the local taxes apply with one special exception: there's no application of tax on dividends distributed. The reason is that since the entity is in essence a foreign company, when this entity distributes its dividends to its foreign owners, no Israeli tax is involved. Consider it an action between the foreign company and its foreign shareholders - why Israeli tax should be imposed?
This considerable advantage for Israeli Branch Office is not known by many, and it can be freely taken advantage of when setting up your Israeli business presence.
Conclusion
By this post we reviewed the main process and requirements to register your newly formed Israeli Company with the local tax authorities.
Our services provide you with a full array of services you will need to Establish a Company in Israel, and start your business today.
Contact us now for more information and we will reply as soon as possible without delays.
Disclaimer: The information in this blog post is not a tax advice and must not be relied on without consultation with a certified tax advisor.
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