What are the main legal requirements for a company that would like to sell its products in Israel? In what situations is it or isn't necessary to register a company in Israel?
A foreign company may sell its products in Israel through an Israeli agent or representative, and this is probably the most popular form of commercial cooperation between Polish and Israeli companies today. However, if a foreign company wants to sell its products directly and “establish” a presence on the Israeli market, then it is necessary to register a business in Israel. A foreign company can be registered as a foreign company in the Israeli Companies Register foreign company can establish a subsidiary company under Israeli law. In both cases tax registration is mandatory. There are no restrictions on establishment of companies with foreign capital in Israel, neither with regard to the composition of the shareholders (there may be 100% foreign capital), nor with regard to the members of the company’s bodies. The only requirement is the establishment of a tax representative who is a resident of Israel.
What are the most common obstacles for foreign companies to sell their products in Israel?
In Israel, there is protection of local production and market in many areas. Protection of the domestic market from imported goods takes different forms, depending on the type of products and the structure of the market. The greatest restrictions apply to the agricultural market, which, with few exceptions, is closed, vegetable and fruit imports are minimal, and food imports are also restricted. Another import barrier is the norms and commodity standards for various products in force in Israel, which differ from those generally accepted in the EU. It should be noted that there has been recent reform in the unification of commodity norms and standards and their unification with those of the EEA countries. Import duties, which in the past were very high in recent years in many areas have been abolished.
A Polish startup is establishing a business in Israel. What are the most important tax rules in Israel? especially for startups - small, innovative businesses?
Corporate income tax in Israel is 23%, and dividend tax is 25%, or 30% for shareholders owning more than 10% of the company’s capital. It should be remembered that Poland and Israel are linked by a double tax treaty, so dividends will not be taxed in Israel.
Israel is proposing large tax breaks for innovative companies (“startups”) that implement new technologies and create new jobs, particularly in the periphery. Global high-tech companies whose subsidiaries are located in Israel, i.e. Google, Microsoft, whose annual turnover exceeds ILS 10 billion, pay income tax of 6% and dividend tax of 4%, while small high-tech companies and startups pay income tax of 12% and dividend tax of 4%. The difference in taxation between large and small companies is mainly due to the ability of these huge companies to invest in job creation in Israel.
Despite the fact that corporate income tax is 23%, most high-tech companies (no longer startups) that export their technology and products enjoy tax benefits (under the Investment Promotion Law), pay income tax at 16%, while exporting companies located in the periphery pay income tax at 7.5%.
Is it profitable for a Polish startup to move its startup to Israel? Is it possible? And if so, on what conditions?
It is difficult to say whether it is worthwhile for a Polish startup to move its company to Israel. Israeli startups rely mainly on human potential (absentees from elite universities and specialized military units are the main creators of Israeli high tech. Development units are flourishing in Israel. However, due to Israel’s high employment costs, many Israeli startup companies move their technology production elsewhere or use outsourcing to companies in the Far East u and former “Eastern Europe” (including Poland. It should be noted that the employment of foreign specialists in Israel is limited. Israel is reluctant to issue work permits and work visas for foreign specialists. A permit can be issued for a maximum of 12 months, and then it must be renewed, for a total of no more than 5 years. Each time a permit is obtained there are high administrative fees – about 3’800 euros per year.