Starting a Business in Israel

Yes, foreigners can open and operate businesses in Israel. Israeli law does not require citizenship or permanent residency to start a company, allowing both individual non-residents and foreign corporations to establish a business entity. However, a key requirement arises after company registration, when opening a file with the Israeli Tax Authorities. At that stage, a local representative or director who holds an Israeli ID number (Teudat Zehut) must be appointed.

Common foreign business owners include non-resident individuals, foreign corporations seeking an Israeli branch, new immigrants (olim), and dual citizens residing abroad.

While the process is legally accessible, it involves navigating local bureaucracy, tax requirements, and Hebrew-language forms. Due to the language and procedural complexity, many entrepreneurs seek local guidance to navigate registration and tax filings efficiently.

Step-by-step breakdown:

1. Decide on a Company Structure: Most foreign investors choose a Private Limited Company (Chevra Ba’am) due to its flexibility and limited liability protection.
2. Choose a Company Name: Select a Hebrew name and check availability with the Israeli Registrar of Companies. Ensure it does not conflict with existing trademarks.
3. Choose a Company Address: Need a company address, it can also be the home address of the Israeli partner, or the address of the law office
4. Draft Incorporation Documents: Prepare the Articles of Association and gather necessary details on shareholders, directors, and capital structure.
5. Appoint a Local Representative: At least one director must have an Israeli ID. If the owner is not a citizen or resident, a legal representative is required for tax compliance.
6. Submit Registration Forms: File incorporation documents along with passport or ID copies and the registration form to the Ministry of Justice.
7. Pay Government Fees: Registration involves a mandatory government fee.
8. Provide a Local Address: Every company must list a physical address in Israel. The address can be that of the shareholder, director, representative, or a law firm.

Timeline: The process typically takes no more than 2 weeks if all documents are in order. Upon completion of the registration stage, the company receives a certificate of registration, which includes the official company name, registration number and listed address. For more information, Is it Easy to Start a Business in Israel click here .

Once your company is registered, the next steps include setting up financial operations and complying with tax regulations. This is usually done with the professional assistance of an Israeli acountant.

Opening a business bank account is necessary for the ongoing function of the newly established company, and some banks require the foreign owner to appear in person. After that, you must register with the Israeli Tax Authority for VAT (Value Added Tax), corporate income tax, and payroll taxes if you plan to employ workers. This process requires appointing a local representative who holds an Israeli ID (Teudat Zehut).

In addition, if you intend to hire employees, you’ll also need to register with the National Insurance Institute (Bituach Leumi). This stage typically requires the assistance of a local CPA, which Decker, Pex, Levi can help arrange or refer.

Note:  All business transactions are typically conducted in Israeli shekels (NIS), and taxes must be paid in local currency.

Starting a business in a foreign country always brings challenges. In Israel, foreign entrepreneurs may encounter Hebrew-language paperwork, bureaucratic delays, and complex banking procedures that differ from their home country. 

If you’re considering opening a small business (not a limited company), Israel has two primary legal structures:

1. Osek Patur: a small-scale business exempt from VAT, with limited revenue thresholds.
2. Osek Murshe: a licensed business required to collect VAT and issue tax invoices.

However, foreigners generally need some form of legal residence or permanent visa to register as an Osek Patur or Osek Murshe. Unlike limited company registration, these statuses are tied more closely to residency and immigration status.

Local professionals, especially legal and accounting experts, can help with everything from translating forms to navigating government offices, particularly valuable if you don’t speak Hebrew or are unfamiliar with Israeli bureaucracy.

Israel offers specific programs to support new immigrants (olim), including potential grants, reduced taxes, and mentorship opportunities.

Forming a company abroad can be complex, and legal missteps can delay or invalidate your registration. Working with a corporate law attorney minimizes risk and ensures your business complies with Israeli law from day one. Legal experts can also serve as your local representative, managing filings and correspondence.

Michael Decker & Co. law firm has extensive experience helping foreigners successfully incorporate and operate businesses in Israel, making them a trusted partner for business formation and compliance.

With the right preparation and legal guidance, starting a business in Israel as a foreigner is entirely achievable. Whether you’re launching a startup or a small business, understanding the legal process is key.

With proper preparation and awareness of local procedures, launching a business in Israel is within reach, whether you’re building a startup or opening a small local venture.

Article Co-written by: Maytal Chelst.