The three main ways to do business in Israel
| Structure | Best for | Tax on profits | Main obligations |
|---|---|---|---|
| Israeli subsidiary (Ltd) of a foreign company | Foreign companies hiring R&D, sales or support teams in Israel | 23% corporate tax, often on a cost-plus basis | Annual audited financials, transfer pricing documentation, payroll, VAT |
| Israeli private company (Ltd) | Founders raising investment, growing businesses, profits above personal-tax levels | 23% corporate + dividend tax on distribution | Registrar of Companies, audited financials, corporate tax return |
| Osek Murshe / Osek Patur (sole trader) | Freelancers, consultants, small businesses, new olim starting out | Personal marginal rates up to 47% + surtaxes | VAT reporting (Murshe), advance payments, Bituach Leumi |
How to choose
- Coming from abroad with an existing company? A subsidiary usually keeps IP and investors at the parent while limiting Israeli tax to a fair local profit.
- Raising money or planning an exit? An Israeli Ltd (or a foreign parent with an Israeli subsidiary) is what investors expect.
- Working alone with modest income? Start as Osek Murshe or Patur and move to a company once profits justify it.
- New oleh? Foreign-source income may be exempt for 10 years — the structure should protect that, not undo it.
Typical setup sequence
- Structure and tax planning call (which entity, where IP sits, how profits flow).
- Incorporation with the Israeli Registrar of Companies (for Ltd / subsidiary).
- Opening tax files: income tax, VAT and withholding (deductions) file.
- National Insurance registration for the business and employees.
- Bank account, bookkeeping and payroll set up with your bank and accountant.
- Ongoing: VAT returns, advance payments, annual reports and transfer pricing.
What Tax-IL handles for you
- Choosing the structure and modelling tax under each option
- Coordinating incorporation and Tax Authority / VAT / Bituach Leumi registrations
- Transfer pricing policy for subsidiaries of foreign groups
- Tax rulings and incentive applications (Preferred / Technology Enterprise)
- Ongoing annual reporting coordination with your accountant
Planning to set up in Israel?
One free 15-minute call. Tell us what you're setting up and where you're coming from — we'll map the right structure and next steps.
- Licensed Israeli tax advisors
- Reply within one business day
- Confidential — never shared
Frequently asked questions
Can a foreigner open a business in Israel?
Yes. Non-residents and foreign companies can own an Israeli company. Opening a sole-trader file (Osek) generally requires Israeli residency or the right to work in Israel.
Should I open a company or an Osek Murshe?
It depends mainly on expected profit, liability and investment plans. Below a moderate profit level an Osek is simpler and cheaper; above it, the 23% corporate rate plus dividend tax can be more efficient — we model both.
How long does it take to start a business in Israel?
A company can usually be registered within days once documents are signed; tax files and the bank account typically take a few more weeks.
Do I need an Israeli director?
There is no residency requirement for directors of an Israeli company, but practical issues like banking and signatory rights are easier with a local representative.
Figures reflect Israeli rules as of 2026 and change periodically. This page is general information, not tax or legal advice. See also corporate tax services.