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Is it Easy to Start a Business in Israel

Joshua Pex
Joshua Pex

Is it Easy to Start a Business in Israel?

Israel is a small country but one with a strong and stable economy. Starting a business in Israel, even as a foreign national, is easy in comparison to more than 190 other countries in the world, according to the Doing Business report of 2020 – Economy Profile of Israel. Israel is called the “Startup Nation”, known for innovation and technologies. But on the other hand, many sectors of the government are highly bureaucratic and insist on enforcing on outdated laws and regulations, some going as far back as before the state of Israel was established.

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Our law firm in Israel assists local and international clients to register a business in Israel, obtain a visa to Israel, purchase property, sign contracts, employ workers and provides all legal assistance necessary in order to run a successful business in Israel. If you are an American investor who wants to start a business in Israel, or invest in a local company to receive a visa to Israel, you may find our article about the B-5 visa for USA citizens helpful.

Most Israelis who are in contact with foreign individuals and companies can speak passable English and are glad to conduct business with international investors. The recent report of the “Doing Business” project declared that Israel is one of the 42 economies that achieved the biggest improvements in more than three aspects regarding the business establishment. Advocate Michael Decker provide information expanding on the “Doing Business” report in this article; explaining the main procedures of setting up a Limited Liability Company in Israel, obtaining a construction permit, connecting to the electricity company and more.

“Doing Business” Report

“Doing Business” is a project that conducts a detailed assessment of the costs, requirements, and procedures for local small and medium-sized limited liability companies in 190 countries, and creates rankings to each of them.

The 2020 report conducted by the “Doing Business” states that Israel jumped significantly from 49th to 35th place in ease of doing business. Accordingly, as has been already mentioned, starting a business in Israel is fast and easy. The procedures that showed the best quantitative rankings are paying taxes, protection of minority investors, starting a business, and resolving insolvency.

Setting Up a Limited Liability Company in Israel

To establish limited liability Company in Israel there are the number of steps that must be undertaken:

  • The company registration documents, such as application to register the company, the declaration (affidavit) by the initial director of being competent to serve in the role, and signatures of initial shareholders’ on articles of association, must be authenticated by an Israeli lawyer.
  • On average, this process takes two days and costs about NIS 1,862 + VAT.
  • Filing an application to the Registrar at the Ministry of Justice. This procedure also takes two days and costs NIS 2,645 and NIS 2,176 (online).
  • Registering for taxes and VAT at the Ministry of Finance, Income Tax Department, and at the National Insurance Institute. By registering at the Ministry of Finance, the company will be automatically registered at the National Insurance Institute. The registration process is free of charge and takes 7 days.

Read more on our website, in this article, about the process of registering a company in Israel.

Procedures Regarding the Construction Permits

To obtain permission to start construction in Israel, you are first required to submit an application to the local municipal authority. This requires the assistance of an architect, engineer and  sometimes a lawyer. You can read more information regarding municipal building plans in this article on our website.

These are the necessary stages to obtain a construction permit in Israel, and an assessment of the time it takes and costs, according to the Doing Business in Israel report for the year 2020:

  • To request information from the Municipality regarding the land. It takes 30 days and costs NIS 193. A survey map application may be submitted simultaneously, which takes 7 days and costs NIS 1,710.
  • To obtain the building permit from Local Committee, takes 135 days and costs, on average, NIS 42,556.
  • After obtaining the building permit there is a requirement to obtain a marking report from the authorized surveyor, which is free of charge and takes 7 days.
  • External building inspection that prepares a report about construction safety and general evaluation. This procedure takes only a day and costs NIS 24,600.
  • A certificate of completion. This service is free of charge and takes one day.
  • An inspection from the Fire Department. Free of charge and takes a day.
  • Approval from the Front Command, since the construction must ensure bomb shelter, it is free of charge, and takes 2 days.
  • An inspection from Local Authority. Free of charge and takes a day.
  • A certificate of completion from Local Authority. Free of charge and takes 7 days.
  • Application for a water and sewage connection for the building; takes 14 days, costs NIS 57,000

Registration of the Property

The issue of real estate and property law in Israel is highly complex in comparison to other countries. Much of Israel’s land belongs to the government, therefore is limited in terms of use and will be difficult to purchase or even lease for foreign citizens. In addition, Israeli property laws are still based in part on laws from the  time of the British Mandate and even the Ottoman Empire, long before the state of Israel was established in 1948. This is one of the reasons why having a professional Real Estate lawyer in order to assist you with any purchase of property, in addition to a real estate agent, is a requirement for any foreign citizen purchasing or leasing property in Israel.

Here are the basic steps required in order to register property in Israel:

  • Obtaining land registration extract from the Land Registry Office. It is possible to receive the extract online in less than one day for NIS 15.
  • Check the Municipality record and obtain tax clearance from Municipality. If all municipal taxes are paid, then the Municipality prepares a certificate for transfer of title. This process of certification lasts 25 days and costs NIS 111,9.
  • File a report on the transaction with the tax authority. It takes 21 days and costs NIS 448, 381.15
  • Have a real-estate lawyer draft a sale-purchase agreement, which takes 4 days and costs NIS 85,939.72
  • Register at the regional Land Registry. This takes 7 days and costs NIS 38.

Procedures Regarding the Electricity Connection

  • Apply for electricity connection to the Israel Electric Corporation. The application should contain the building permit, information stating the required power voltage, the building specifications, and the date when the company needs the electricity. Afterward, the Israel Electric Corporation will specify the initial costs and require 10% of the payment in advance. This process is otherwise free of charge and takes about 11 days.
  • Complete technical coordination process. During the 33 days the agreement between the customer and IEC starts to work. Consequently, by the end of the technical coordination process the IEC sends to the customer the bill for the rest of the payment (70%).
  • Await completion of external works by IEC. To start the external works the customer pays the required 70%. The completion takes 60 days and costs NIS 19,902.95. The inspection of the internal wiring and installation the meter takes a day.

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We hope that this information has answered the question – Is it Easy to Start a Business in Israel? If you have any need for legal assistance in Israel or if you have any questions, do not hesitate to contact us.

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