Running local activities in Israel

1. Setting up your legal entity in Israel – you’ll need to register a subsidiary or a branch in Israel. Both are registered with the Israeli Company Registrar.  You will need a local lawyer for this procedure. We work closely with several Israeli law firms who will be able to support you.

2. Opening of a bank account in Israel – There are not very many banks in Israel. Moreover, the Israeli banks have established special branches for foreign residents who wish to open a bank account in Israel. This also applies to local companies having foreign shareholders. Among the steps you will need to do, this step will probably be the longest one. It can take weeks or months. It depends on legal documentation you will need to present, as well as anti-money-laundering regulations the local bank needs to follow. Our firm has very good relations with local banks; we can introduce you to a bank and support you with this step.

3. VAT Registration – You will not be able to open a VAT file in Israel unless you have a local bank account. Also, you will need to appoint a local VAT representative, which must be a local Israeli resident. This representative will be personally responsible for all VAT matters. Our firm can perform VAT registration for you. Also, if necessary, we can be your VAT representative; for this, we need to have collateral and control over your VAT reporting.

4. CIT registration – Only after VAT registration, you can open a CIT (Corporate Income Tax) file. Our firm can open this file.

5. Employer’s file in ITA and NSS – The opening of an ITA (Israeli Tax Authorities) employer’s file will automatically open for your local entity an employer’s file with NSS (National Social Security). Our firm can open the Employer’s file.

6. In certain cases, foreign entities employ local Israelis but have no activities in Israel (no permanent establishment) – in that case it would be possible to open only an employer’s file without setting up a legal entity in Israel.

7. Bookkeeping – you will need to use a local authorized bookkeeping system. In most cases we can use your COA (Chart of Accounts) or, if you choose, to use another COA with a lookup table to your COA in order to set reports for you. If required, we can also export files in CSV, XLSC, and other formats.
VAT reporting is part of the bookkeeping system. Withholding tax (WHT) controls and reporting is managed in the bookkeeping system.

8. Labor law legislation – Labor laws in Israel are very extensive. Although there are templates for employment agreements, we highly recommend you consult with a local lawyer when setting up your employment agreement with your employees.  We can introduce you to industry experts with whom you can engage directly. If desired, we can also participate in your consultations with a labor law expert.

9. Payroll – Employees do not pay any tax or other dues directly. The employee’s tax, national social security, national health insurance (paid to NSS), and the employee’s share of pension and other funds is calculated and withheld by the employer. Once a month, the employer reports and transfers to ITA, NSS and pension funds the withheld amounts along with the employer contributions. Because of the complexities involved and periodic updates, a good, “solid” payroll system is required.

In addition to monthly reporting, there is annual reporting to the ITA and NSS. (NSS also requires semi-annual reporting).

Our firm can support you with all of this.

10. Payroll data inputs and outputs – you will need to submit, to a payroll agency, all information needed to run the payroll. The payroll agency must be very strict; therefore, they need clear, documented instructions from you.

Also, you will need to give information on pension funds to the payroll agency. This will require communication with pension brokers when setting up the pension fund, and also on a continual basis to account for updates, terminations, etc. Also, you will be required to appoint a pension fund coordinator and communicate with him/her.

Our firm can support you with all of this.

Some of our clients have engaged global payroll agencies. In this case we cooperate with the local affiliate of the global agency.

11. Annual financial statements and annual tax filing – all companies in Israel, including local branches of foreign entities, are required to file an annual tax return. This includes audited annual financial statements (balance sheet, P&L, etc.). In Israel, the auditor can audit both the financial statements and the annual tax filing.

12. Tax withholding – the vast majority of entities in Israel withhold tax from all payments made to suppliers and service providers. When making a payment, the entity has to check the applicable WHT rate for each payee. Although most payees have obtained a 0% WHT confirmation, the paying entity is required to report on the gross payments made. There are also regulations on withholding tax from payments made to foreign payees. Reporting on payments made and tax withheld is made in the Employer’s file once a month and also on an annual basis.

13. We can support you with the following services:

a. Usage of our trust account – although a local bank account is requested, some of our clients prefer to make some payments using our trust account.

b. Official address – if you will not have a local office in Israel, you can use our office as your official address.

c. HR services – some of our clients manage their employees from their head office abroad, but need local HR services to support them in Israel.

d. Running bank activities – most payments can be made directly using a web-secured interface. This interface has an English version. We support our clients by inputting all payee details and approved payments, to be later approved by authorized signers.

e. Reporting packages in English – bookkeeping will produce a monthly reporting package. However, some of our clients require a more comprehensive reporting package, tailor-made for their use.
Also, some of our clients need tailor-made upload files for import to their system (Oracle, SAP, etc.). For this, we need to receive the requested file format and field structure.

f. NSS for expats – Foreign employees can come from countries having bilateral social security agreements with Israel. In some cases, you will need to file a special application with NSS.

g. Preparation of annual reports for audit – Some of our clients have engaged a global audit firm (usually from “The Big 4”). We work closely with such firms.

h. Tax consulting – there are various tax matters typical to local subsidiaries and branches of foreign entities.

14. Our consulting group will perform all non-assurance services while our independent audit and tax experts will run the annual audit and tax filing.

15. Contact us directly:

+972.3.647050 (t)
+972.54.4581333(m)
saar@tgs-saar.co.il

+972.3.647050 (t)
+972.50.6670205(m)
ronen@tgs-saar.co.il