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Investment in Israel

Michael Decker
Michael Decker

In this article you will read about ways to invest in Israel and the possibilities for Americans to receive a long-term B-5 investors’ visa. Our law firm specializes in immigration, relocation, visas and investment in Israel and we will be glad to assist you and your family in the process of immigrating to Israel or obtaining an Israeli investor’s visa.

Investment in Israel

General information: Israeli market and US – Israeli economic relations

According to the US Department of State’s Investment Climate Statements, Israel, known as the “Start-Up Nation” thanks to its entrepreneurial spirit, invests strongly in scientific research and education. This strategy enables the country to get the highest quality workforce and to become a leader in innovation in various sectors.

American firms represent almost two-thirds of the more than 300 Research and Development centers established by multinational companies in Israel. The country has the third most companies listed in the NASDAQ, following the United States and China. Several Israeli government agencies, all led by the Israel Innovation Authority, fund incubators for early stage technology start-ups. Israel provides large support for technologies and new ideas while developing traditional industries as well.

Moreover, in recent years, private venture capital funds have flourished in Israel. The resilient tech sector, low debt and strong growth preceding the Covid-19 pandemic crisis enabled Israel’s economy to weather the worldwide recession.

Furthermore, Israeli laws encourage industrial R&D and capital investment, seeking to provide supportive conditions for companies that aim to invest in Israel. These laws provide for benefits and incentives such as reduced tax rates, grants, tax exemptions and other tax-related benefits.

The US-Israel bilateral commercial and economic relationship is strong materialized by favorable trade of goods and extensive commercial links, especially in R&D and high-tech. According to the US Department of Commerce, in 2019, the total stock of Israeli foreign direct investment (FDI) USD in the United States was up to $36.6 billion USD.

The Israeli Government continuously takes new actions to remove some trade barriers and encourage capital investment, including foreign investment.

HOW TO INVEST IN ISRAEL? What are the different possibilities?

There are several ways to invest in Israel, presented as follows:

Investing in Israeli Government Bonds

Israeli Government Bonds are considered very safe, as Israel has never defaulted on its bonds since its creation and its bonds have strong credit ratings (AA- for Standard & Poor’s). The yield for the Israeli 10Y Government Bonds is around 2.50% as of July 2022.

Investing in Israel’s capital market via Israeli bonds, stocks and mutual funds.

This can be done by opening an investment account, physically or remotely, with one of the Israeli brokerage firms that are part of the Tel Aviv Stock Exchange (TASE). Investment in such accounts can be made as individuals (single or joint), as an organization (for-profit or non-profit) and through U.S. retirement funds with a minimum entry limit of 20,000 NIS.

Moreover, there are other ways to invest through the Public Equity Market. On the one hand, for a US based investor, it is possible to put capital into American Depository Receipts (ADRs) in order to invest in the stock of public Israel companies. There are more than 100 companies whose ADRs are easily investable. On the other hand, the best way to invest in a diversified portfolio of Israel stocks is via an Israel-focused Exchange-Trade Fund (ETF). This method offers diversification at low cost and trades like a stock in US exchange. The iShares MSCI Israel Capped ETF, traded on the New York Stock Exchange, is one of the most popular options for investors looking for exposure in Israel. Beside this original option, a newer and progressively popular way to invest in Israel is the BlueStar Israel Technology ETF and is traded on the New York Stock Exchange as well. Finally, investing in the Jerusalem Portfolio represents one of the best methods to invest in Israel Public Equities. It is a combination of Israel ETFs which provides maximum exposure to all sectors in the Israel economy.

Investment in Israel

Investing in Israel Start-Up companies

This can be done by purchasing equity in early stage start-ups either as an angel investor or through a venture capital firm. However, these ways imply relatively large investment principles, ranging between $150,000 to $2,000,000 USD. It should be noted that venture capital implies huge risks and little liquidity.

Investing in Israeli Real Estate

There are two ways to proceed with such investments. The first one is by directly purchasing physical real estate such as a house, apartment, office, building etc. The second way is to purchase stocks and/or bonds of real estate companies or Real Estate Investments Trusts REITs) on the TASE. In this method you get cash flow and dividends, up to 90% of the profits of the REITs, from the companies that built, sell and rent out the real estate, without owning any property.

Investment visa to Israel for American citizens

The B-5 visa – the first Israeli investment visa for citizens of the USA – was implemented in May 2019. In addition to its role in encouraging investment in the Israeli economy, this visa was considered to be “mutual”. Thanks to the E-2 investment visa, Israeli citizens finally receive the opportunity to do business in the US and acquire legal status there. In exchange, Israel was required to allow American investors to obtain legal status in Israel.

The B-5 investor visa is issued to investors who want to reside in Israel together with their families in order to develop the business initiative only and will leave when the visa expires.

Since the implementation of the B-5 visa, US citizens can now receive legal status in Israel even if they are not otherwise eligible to immigrate in Israel through the Aliyah process according to the Right of Return and do not have any family / marital ties with someone Jewish / Israeli.

How will investing in an Israeli business make it possible to receive a B-5 visa?

The American entrepreneur should meet several conditions to be eligible for the B-5 visa. First, the investor must purchase or invest in an active business in Israel, acquiring at least 50% ownership, with the investment constituting “a significant sum”. It should be sufficient for the operation of the business initiative and should prove unconditional commitment to the business. Moreover, the investor should be the owner and legal holder of controlling interest in the capital invested, which is from a legal source. Then, the business initiative may cause financial growth in the economy and create workplaces and contribute to achieving the state’s financial goals. Finally, the business initiative should be active and support more than the investor himself and his family, or at least has the potential to grow significantly in a reasonable period of time. However, the business cannot employ only foreign workers. There is a need to strike a balance between bringing in foreign experts and managers and creating job opportunities for Israeli citizens.

The visa is open to the business owner and also to senior managers and / or employees who are essential to the functioning and development of the company (holding a B-51 visa). A manager is defined as someone who oversees “the overall functioning of a business enterprise or a key part thereof” or whose role is “the intention or determination of the objectives of the enterprise or its main departments”. An expert worker has “special skills or skills that are essential for the effective and successful functioning of the business enterprise”. As with any employment of a foreign expert, the company must prove that it was necessary to “import” a foreign worker who has skills that are difficult to find in the Israeli economy.

Investment in Israel

What about the family of the entrepreneur/foreign workers in the company?

The foreign investor must prove that the business will be profitable enough to cover the needs of the investor and his family while also contributing to Israel’s economy.

An investment visa in Israel allows the family of the investor, and of foreign workers/managers, to obtain permanent status in Israel (a B-52 visa for a spouse or a B-53 visa for a child under the age of 21). The visa allows the family members to reside, study and work in Israel. They can even work outside the framework of the business in which the head of the family has invested. However, investors and their employees/family members are not entitled to social services due to Israeli residents. In all matters of benefits, national insurance and health insurance, they can only purchase private alternatives.

How long does an Israeli Investment visa last?

The validity of the visa is two years to begin with. The visa can then be renewed for one year at a time. In certain circumstances, as long as the business is still active, the B-5 visa can be extended even beyond 63 months (5 years).

CONTACT OUR ISRAELI IMMIGRATION LAWYERS – INVESTMENT VISA IN ISRAEL

Thinking about investing in Israel or helping a foreign interested party find an investment opportunity? Need help to get an investors visa? Contact our immigration law firm in Tel Aviv and Jerusalem and arrange a consultation meeting now. Our law office specializes in immigration, status, corporate and company law in Israel. Our expert lawyers will help you succeed in applying for an Israeli B-5 visa.

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