WAIT!
There are 3 ways an Int'l company can register their business here in Israel. Which is best for you?
First, before we go into the options, I'm going to stress that this is a conversation that must include your accounting and legal teams – companies need to be protected while also minimizing what they'll need to pay the government. Don't decide without consulting both professionals.
Second, I will be intentionally vague regarding the Pros and Cons of each option as they vary depending on the types of business, location of management and IP, location of various staff etc. Each of these factors and their myriad nuances affect the ultimate decision.
Of course, for our clients we're there at every stage of this conversation, as it's not only about understanding the answers but ensuring that the right questions are being asked. But I digress.
Without further ado, your options for registering your foreign business in Israel.
(1) Open an Independent Company in Israel
The foreign business registers a new company in Israel and lists various individuals as the owners (shareholders). These people can be the same as those who own the foreign entity, or they can be different ones.
(2) Open a “Daughter” Company in Israel
In this option, a new company is formed just like in the previous case BUT here there is only one owner, and that's the foreign entity. Here, the new Israeli company is colloquially referred to as the Daughter Company with the foreign entity referred to as the Parent Company.
(3) Open a Branch (i.e. Register as a Foreign Company)
In this last case, there is no new Israeli entity created. Rather the foreign entity reaches out to Israel's Tax Authority to register and open a “Tik” (government file). A Tik allows the foreign business to conduct itself fully here in Israel (incl. hiring employees and submitting VAT reimbursements), but everything is still considered as a direct income/expense of the foreign entity.
Each of the above options has its own consequences regarding profit sharing, transfer pricing, and taxes. Now you know the possibilities so you can set yourself up for success and avoid the classic, “If I only would have known…”
Happy hunting.
Setting up a business abroad is a daunting task even before you add the challenges of working in a different language and culture. We work with our clients to ensure that their operational and financial considerations always lead the conversations with the relevant local professionals. Then we top it all off with full and transparent communication with all of the global players.
FogelCFO: Outsourced flexibility; In-house approach.