How to Set Up an Entity in Israel

Setting up a legal entity in Israel is an attractive option for international businesses looking to access one of the world’s most innovative and technology-driven economies. Israel offers a highly skilled workforce, strong venture capital presence, and direct access to markets across Europe, the Middle East, and North America. Government incentives for R&D and a mature legal framework further support foreign investment.

While the process is relatively structured and transparent, it can be administratively demanding, particularly for foreign founders unfamiliar with Hebrew-language documentation, tax registration requirements, and local banking compliance. The main challenges typically include coordinating registrations with multiple authorities, opening a corporate bank account, and managing ongoing tax and payroll obligations. In return, businesses gain the ability to hire employees directly, establish a long-term operational presence, and streamline local operations in Israel.

Disclaimer: This content is for informational purposes only and does not constitute legal, tax, or financial advice. Always consult official sources before acting.

What does “opening an entity” mean in Israel?

Opening an entity in Israel means registering a legal business structure with the national corporate registry, obtaining recognition as a legal person, and completing tax and employer registrations. This process allows a company to operate commercially, enter into contracts, and hire employees in Israel. Foreign businesses typically choose between forming a local Israeli company, registering a branch, or operating through a subsidiary.

Entity overview in Israel

Here is a summary of the key aspects of company formation in Israel:

Step-by-step guide: How to open an entity in Israel

Step 1: Choose the right structure

Foreign companies most commonly establish a private limited company (Ltd), which provides limited liability and is taxed as a separate legal entity. Branch registrations are also possible but expose the foreign parent to local liabilities and are less commonly used for long-term operations.

Step 2: Verify business name availability

Business names must be approved by the Registrar of Companies. Availability can be checked and reserved through the online registry portal. Names must be unique and may be required in Hebrew, though an English name can be registered alongside it.

Step 3: Prepare incorporation documents

The following documents are required for incorporation and can be submitted electronically or through a local representative:

• Articles of Association (standard templates available via the Registrar of Companies)
• Incorporation application form (Form 1)
• Declaration of initial directors and shareholders
• Copy of passports and notarized signatures of shareholders and directors

Step 4: Register with the Registrar of Companies

Applications are filed with the Registrar of Companies, either online or through an authorized representative. Upon approval, the company receives a Certificate of Incorporation and a company registration number, which formally establishes the entity.

Step 5: Register for tax and social security

After incorporation, the company must register with the Israel Tax Authority for corporate income tax and VAT, and with the National Insurance Institute (Bituach Leumi) as an employer for social security contributions.

Step 6: Open a corporate bank account

Opening a corporate bank account in Israel requires extensive KYC checks, including incorporation documents, shareholder information, and source-of-funds declarations. While a local account is not legally mandatory, it is highly recommended for payroll and tax payments. Approval timelines can range from several weeks to longer for foreign-owned companies.

Step 7: Set up payroll and employment compliance

To hire employees, companies must implement compliant employment contracts, register for payroll reporting, withhold income tax, and remit social security contributions. Employment terms must comply with Israeli labor laws, including minimum wage, pension contributions, and statutory benefits.

Discover how Elemental Enzymes accelerated regulatory approvals and market entry with Deel.

Post-registration obligations

After incorporation, companies in Israel must stay compliant with local governance, tax, and employment laws. Typical requirements include:

• Tax and financial reporting: File corporate income tax returns, VAT reports (monthly or bi-monthly), and annual financial statements according to schedules set by the Israel Tax Authority and under Israeli GAAP or IFRS
• Corporate registers: Maintain up-to-date records of directors, shareholders, and beneficial owners and report changes to the Registrar of Companies within the legally required timeframe
• Compliance tracking: Monitor all tax, licensing, and corporate filing deadlines through a compliance calendar or service provider to avoid late penalties
• Licenses and renewals: Renew any sector-specific business licenses or municipal permits with the relevant ministry or local authority as required
• Recordkeeping: Retain accounting, payroll, HR, and transaction records for at least seven years, ensuring accessibility for audits or inspections
• Employment law compliance: Adhere to labor, benefits, social security, and data-protection regulations enforced by the Ministry of Labor, including compliant contracts, payroll reporting, and mandatory pension and insurance coverage

Taxes and financial considerations

Key financial obligations for companies in Israel include:

• Corporate income tax: 23%, paid via advance monthly installments with an annual return
• VAT: 18%, with mandatory registration once taxable activity begins
• Payroll/social contributions: Employer and employee contributions to National Insurance and pension schemes
• Accounting standards: Israeli GAAP or IFRS, depending on company size and structure

Discover how Climate-KIC navigated complex restructuring with Deel.

Expand internationally with Deel

Whether you’re hiring through an EOR or establishing your own local entity, Deel’s all-in-one platform gives you everything you need to expand into the United Kingdom—quickly, compliantly, and with confidence. From market entry to ongoing operations, Deel helps you hire, onboard, and manage teams seamlessly from day one.

With Deel, you can:

• Test new regions using Deel’s local entities through our Employer of Record service—hire employees compliantly, delegate payroll and taxes, and access localized employment contracts.
• Open entities with Deel Entity Setup, where our team manages everything—from incorporation and tax registration to coordination with local experts.
• Centralize your compliance and records with Deel Entity Management, including automated filings, calendar reminders, and visibility across all entities.
• Integrate with Deel Payroll and Deel HR for compliant payments, benefits, and workforce oversight—all in one platform.

For companies transitioning from the EOR model to owned entities, Deel ensures a smooth handover and consistent compliance every step of the way. Enter new markets, onboard talent, and manage your global workforce—all through one unified platform.

FAQs

How long does it take to open an entity in Israel?
Typically 2–4 weeks. Find out how long setup takes with our Entity Setup Calculator.

What is the minimum capital required?
No minimum capital is required for a private limited company.

Can foreign companies own 100 % of an entity in Israel?
Yes. Israel allows 100% foreign ownership with no local shareholder requirement.

Do I need a local director or representative?
No local residency is required for directors, though a local representative is often used for practical and banking purposes.

How much does it cost to register an entity?
Government fees are relatively low, but total setup costs, including notary and professional fees, typically range from ILS 5,000–15,000 (≈ USD 1,350–4,050). Find out the setup cost with our Entity Setup Calculator.

Can I hire employees before the entity is fully registered?
Typically, no. However, Deel’s Employer of Record (EOR) lets you hire and pay talent immediately while your entity setup is in progress.

Can Deel help me open an entity in Israel?
Yes. Deel Entity Setup manages the end-to-end process — from registration to payroll compliance—in over 100 countries. Deel’s local experts handle documentation, filings, and legal requirements on your behalf.

Does Deel offer ongoing compliance and payroll support?
Yes. Deel offers both managed services and self-service tools to help you stay compliant.

If you’re using Deel Entity Management, Maintenance, EOR, or Payroll, our team handles payroll, benefits, filings, and compliance obligations on your behalf.

For teams managing their own entities, Deel Compliance Hub makes staying compliant simple by providing real-time regulatory updates, risk alerts, and workforce insights across 150+ countries. Proactively manage compliance with our Compliance Monitor, Workforce Insights, and an AI-powered Worker Classifier, staying ahead of changing employment laws.

Can I switch from Deel EOR to my own entity later?
Yes. Deel supports seamless transitions when you’re ready.