In recent years, Israel encouraged many international companies to conduct business activities in Israel mainly in the fields of infrastructure, medicine, food-tech, as well as investment in technological development centers and start-up companies. Read about how to establish a company in Israel.

In order to start a business in Israel, it is obligated to establish a legal entity in Israel in two options:

1^st option – Open a company in Israel with the Israeli registrar of companies

Registration of a company in the registrar of companies requires issuing shares to the company, deciding who the shareholders and directors.

The common structure of international companies in Israel characterized by subsidiary (Daughter Company) of the company abroad, which will serve as a mother company. There are cases where the shareholders of the company in Israel are individuals.

2^nd option – Branch registrar with the Israeli registrar of companies

Another option is to register a branch in Israel, a decision that requires registration with the Registrar of Companies of an Israeli legal entity without shares. In such a case there is a branch of the head office abroad.

As mentioned, since there is no registration of a company with shares, any money transfer from Israel to abroad will not be considered a dividend payment (since the dividend is a transfer of profit to shareholders). As a result, profit can be transferred between companies and countries in other legal ways, which can save tax obligations to your Israeli registered company, or branch.

This option is not so common, and has advantages and disadvantages. However, from our experience, the tax benefits of branch registration are significant.

In many cases, international companies that have not received professional advice on the subject come to us, and immediately decide to establish a company, and lose significant tax benefits that exist in registering a branch.

Open a branch VS Open a company

 

We recommend to have professional advice before starting a business activity in Israel, in order to choose the legal entity that will suit the business activity.

Consult with an expert to start your business activity in Israel:

Yaniv Angel

Managing Partner, Auren Israel

International taxation expert

yaniv.angel@auren.co.il

---

Read more:

Five important tips on your way to open a bank account in Israel

The alternatives when starting a business in Israel

The registration of a fiscal representative office in Israel