The Registrar of Companies (Ministry of Justice), as well as the Tax Authorities (Ministry of Finance), makes it a compulsory procedure for every company operating within Israel to register with them. With Hebrew and Arabic taking precedence, it is preferred that these documents be submitted in these languages. However, English works just fine too. The Articles of Association, however, do require to be translated into Hebrew.
Registering a Business
There are quite a few basic steps to registering a business venture with the Companies Registrar. A particular list of documents needs to be submitted, which is as follows:
Form No. 1 of the Companies Registrar (Application Form for Company Registration)
Memorandum of Association (Establishing the corporate identity and brand image of the company, along with the responsibilities of the shareholders)
Articles of Association – This Document establishes the code of conduct of a company. In case of not submitting this as a formal document, standard articles of the Companies Ordinance shall be in effect for said company.
Registration Fee for a company, currently, is NIS 2,614.
Once the registration is done, the registrar will be issuing the applicant company with a Certificate of Incorporation, along with a company number, which consists of 9 digits. These documents are required to be verified by an Israeli lawyer. Most commonly, the entire procedures with regards to company registrations are handled and managed by a lawyer, including the representation of the company at the Companies Registrar Office.
The Next Step: Tax Authorities
After successful registration with the Companies Registrar, it is extremely important for a company to register itself with the relevant Tax Authorities. This procedure comes once operations have started effectively. The representative, usually a lawyer in this case too, needs a filing number, which is usually the same as that issued by the Companies Registrar. Form 4436 is used for this registration, which requires the basic information about a company.
Good to Know:
World Bank Doing Business is a project dedicated to providing key performance indicators of countries in providing business regulations and their enforcement over 181 different economies. Out of these, Israel is at the 24th position. It also further gives a detailed summary of the costs as well as procedures involved in setting up a business in Israel.
Monthly and Yearly Tax Filings
One regular calendar year is generally considered to be the Israeli tax year too. Multinational companies operating within Israel may sometimes use their own fiscal years, however. It is imperative for all companies in Israel to file their audited annual tax returns within five months after the end of their fiscal year. Extensions can be obtained upon request.
Monthly returns also need to be filed on accounts, along with their respective tax payments. Small companies are sometimes eligible for bi-monthly tax returns.
Taxes to be filed
Company Tax – Percentage of a Company’s Monthly Sales Revenue
Supplementary Company Tax Installments with Respect to certain non-deductible expenses
Tax withheld from salaries and remittances to suppliers
The 15th day after a month’s end is usually preferred as the deadline by the tax authorities for monthly tax returns. These can be easily paid at a bank or a post office. A computer-generated penalty is usually to be faced upon late submission, even if it is of one day.
For such tax returns filing, detailed bookkeeping on behalf of businesses and companies is required. Accounting records must also be continuously updated as Israeli authorities may choose to inspect them at any given time.
Tax Receipts and Stationery
Once a VAT registration number is obtained for the company, it should be prominently displayed on all invoices and receipts. It is also about time to order stationery for the company. This may include letterheads, envelopes, and the usual stuff.
Getting the Business License
There is a certain category of businesses and companies that require a particular licensing requirement. This may include a specific license to operate under the Business Licensing Law, given the special nature of the company’s operations. This license is usually applicable to and covers many different corporations and professional services offered by individuals. Once a particular higher Government Authority approves the request, the license can be obtained from the respective municipalities. These need to be renewed annually.
Requirements for these include submitting a detailed drawing of operations facilities and premises too. Detailed information can be easily obtained from local municipalities. It is very important to make sure that a new company does not violate the local laws of where it is established. Such information can be gathered from the Israel Police website, as well as the local municipalities.
A Business Bank Account
Next comes a bank account for the company. It is always a good idea to have the company independent in its finances, and not dealing through the bank account of another person. For this procedure, the Company’s Articles and Regulation Certificate are to be presented, duly attested by an accountant or an attorney. One must also include an attorney’s approval of signatory rights for the company.
It is very important to remember taxes on the local level, which ensure smooth running of operations. These are supposed to be paid by the consumer, and not the business owner. Vacant properties have a one-time, 6-month exemption from such taxes.