Doing business in Israel

Israel has no single written constitution; a series of Basic Laws sit alongside ordinary legislation, and court decisions are an important source of law reflecting the British Mandate's common law influence. Companies are registered with the Registrar of Companies at the Israel Corporations Authority, taxes and customs are run by the Israel Tax Authority, banking is supervised by the Bank of Israel, securities by the Israel Securities Authority, competition by the Israel Competition Authority and privacy by the Privacy Protection Authority. Israel is a unitary state, so there is no state-level corporate tax.

Key facts

Corporate income tax

23% standard (as at mid-2026)

VAT

18% standard since 1 January 2025

Main entity form

Private company limited by shares; one shareholder and one director allowed

Currency and exchange control

New Israeli shekel; no general exchange controls

Data protection

Protection of Privacy Law, 1981, as amended by Amendment 13 (August 2025)

New York Convention

Party

Working week

42 hours standard

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Israel is generally open to foreign ownership, and most foreign investors incorporate a private company with the Registrar of Companies or register the parent as a foreign company with a local branch. There is no general minimum share capital or director residence requirement for a private company. Restrictions and approvals arise mainly in regulated sectors such as banking, insurance, telecommunications and defence.

Key facts

• A private company limited by shares is the usual vehicle and can be set up with one shareholder and one director, with no Israeli residence requirement for either.

• Registration is with the Registrar of Companies at the Israel Corporations Authority, under the Companies Law, 1999.

• A foreign parent can instead operate through a branch registered as a foreign company, which keeps liability with the parent.

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Key facts

• Corporate income tax is 23% as standard, with reduced rates (as low as 7.5% in development area A) for qualifying preferred and technology enterprises under the capital investment encouragement law.

• VAT is 18% as standard since 1 January 2025.

• Dividends (25%, or 30% for substantial shareholders), interest and royalties (23%) paid abroad bear withholding tax unless reduced by treaty, and a tax authority certificate is needed to apply a lower rate.

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Israeli employment is governed by protective statutes, collective agreements and extension orders that apply across sectors, and by a separate system of labour courts. Employers must fund pension and severance entitlements and pay National Insurance contributions. Foreign staff need a work permit and visa, with a specific route for foreign experts.

Key facts

• The standard full-time week is 42 hours, and overtime attracts premium pay.

• Dismissed employees with a year of service are generally entitled to one month's last salary per year, though many employers replace this with monthly pension contributions under a section 14 arrangement.

• Pension and severance contributions are compulsory for most private-sector employees, on top of employer and employee National Insurance contributions and the employee's health insurance tax.

• Foreign experts typically work on a B/1 visa, issued only after the Population and Immigration Authority approves the request.

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Government procurement is tender-based and Israel is a party to the WTO Government Procurement Agreement. Most land is publicly owned and held on long leases.

Key facts

• Public contracts are generally awarded by tender, and Israel's GPA membership opens covered contracts to suppliers from other GPA parties.

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• Research and development incentives are available through the Israel Innovation Authority, though funded know-how may carry conditions on transfer abroad.

• Most land is state-owned and leased through the Israel Land Authority, and foreign persons face some restrictions on acquiring those rights.

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The Bank of Israel is the central bank and banking supervisor. Account opening involves detailed know-your-customer checks under anti-money laundering law.

Key facts

• There are no general exchange controls, so funding and repatriation of profits are not subject to approval, though withholding tax applies to outbound payments.

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• The new Israeli shekel is managed by the Bank of Israel, which also supervises banks.

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• Expect full beneficial ownership disclosure when opening an account, under anti-money laundering rules.

• Cash payments to a business above NIS 6,000 are prohibited, so business payments should run through bank channels.

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Israel is a WTO member with free trade agreements with the European Union, the United States, EFTA and a number of other partners, which lower or remove tariffs on qualifying goods. Customs is administered by the Israel Tax Authority.

Key facts

• Goods meeting origin rules can enter duty-free or at reduced rates under agreements with the EU, the US, EFTA and others.

• The Israel Tax Authority runs customs and import VAT, so importer registration sits with the same agency as tax.

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• Defence equipment, know-how and services need a marketing licence and then an export licence under the Defense Export Control Law, with dual-use items licensed separately.

• Check whether a product falls under an official standard; an optional route based on EU directives, scheduled from 1 January 2025, can simplify entry for many categories, though food, motor vehicles and fire safety items are excluded.

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Personal data is protected under the Protection of Privacy Law, 1981, which was substantially updated by Amendment 13 with new enforcement powers for the Privacy Protection Authority. Detailed data security regulations apply to databases. The European Commission recognises Israel as providing adequate protection, which eases transfers from the EU.

Key facts

• Amendment 13, in force since August 2025, gives the Privacy Protection Authority power to impose financial sanctions and removes most database registration, so privacy compliance now carries direct financial risk.

• Database owners must apply risk-based security measures and report serious incidents under the 2017 security regulations.

• Transfers abroad are permitted to adequate countries or under set conditions, and EU adequacy makes EU-to-Israel transfers simpler.

• B2B invoices above the threshold (NIS 20,000 excluding VAT from 2025, with further cuts planned) need a tax authority allocation number for the buyer to deduct VAT, which affects billing systems.

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Patents, trade marks and designs are registered with the Israel Patent Office, while copyright arises automatically without registration. Israel is a member of the Paris Convention, the Patent Cooperation Treaty and the Madrid Protocol, so international filing routes are available. Enforcement is through the civil courts.

Key facts

• File patents, trade marks and designs with the Israel Patent Office, or reach Israel through PCT and Madrid filings.

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• Copyright needs no registration, so ownership should be secured in employment and contractor agreements.

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• TRIPS standards apply through WTO membership.

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Mergers meeting turnover or market share thresholds must be notified to the Israel Competition Authority and approved before completion. Foreign investment in finance, communications, infrastructure, transport and energy may also be assessed for national security. Listed company deals are regulated by the Israel Securities Authority, and insolvency is governed by a unified law focused on rehabilitation.

Key facts

• Deals above the turnover or market share thresholds need Competition Commissioner approval before closing, with an initial 30-day review period, so build it into the timetable.

• Investments in finance, communications, infrastructure, transport and energy may be assessed by the Security Cabinet's national security advisory committee as part of licensing.

• Acquiring control of a public company above 45%, or above 25% where no one holds control, generally needs a special tender offer, and public company deals are reported to the Israel Securities Authority and the stock exchange.

• The 2018 insolvency law favours rehabilitation and replaced older, fragmented rules.

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Israel criminalises domestic and foreign bribery and is a party to the OECD Anti-Bribery Convention. Anti-money laundering law is enforced through a dedicated financial intelligence authority, and Israel is a FATF member. The regional security situation makes war-risk and business continuity planning part of normal risk management.

Key facts

• Foreign and domestic bribery are criminal offences, and Israel's OECD Anti-Bribery Convention membership means enforcement is monitored internationally.

• Financial service providers must report certain transactions to the national anti-money laundering authority, and Israel is a FATF member.

• Employees who complain about offences or integrity breaches are protected against dismissal, which supports an internal reporting channel.

• State compensation exists for war damage, but businesses should check what commercial policies exclude and plan for continuity.

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Commercial disputes are heard by the Magistrates' and District Courts, with the Supreme Court at the top, and a specialised economic department in the Tel Aviv District Court for corporate and securities cases. International commercial arbitration is governed by a 2024 law based on the UNCITRAL Model Law, domestic arbitration by the Arbitration Law, 1968, and Israel is a party to the New York Convention. Foreign judgments can be enforced under a dedicated statute, subject to reciprocity.

Key facts

• Corporate and securities disputes can go to the economic department of the Tel Aviv District Court; employment claims go to the labour courts.

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• International commercial arbitration now follows 2024 legislation based on the UNCITRAL Model Law; check with counsel how the 1968 Arbitration Law still applies to domestic cases.

• Foreign arbitral awards are enforceable under the New York Convention.

• Foreign court judgments can be enforced under the 1958 law, subject to reciprocity and other conditions, generally within five years of the judgment.

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