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Employing in Israel

At a glance

Employment in Israel

Israeli labor law applies to employees located in Israel and is comprised of a set of cogent statutory rules, regulations, and case law. In addition, there are collective agreements and expansion orders which apply to all or certain sectors of the labor market

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Payroll & Tax in Israel

In both 2015 and 2016, Israel made paying taxes more costly for companies by increasing the profit tax rate and by increasing the corporate income tax rate, the rate for social security contributions paid by employers for the upper wage bracket and municipal taxes.

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Immigration / Work Permits in Israel

Foreign workers are required to have the proper visas and work permits in Israel, as established by immigration laws.  Work permits must be secured for employees, and sponsored by a locally licensed and incorporated entity, which can be a problem for companies just entering the Israeli market.  If you have yet to complete the incorporation process you can use an outsourced management company or GEO to sponsor the employee for the necessary permits.

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Incorporation

The Israeli Companies Ordinance (ICO) defines a company as a corporation formed and registered in Israel, in accordance with Israeli law.

The Israeli Company Law 5759-1999 mentions the following as the main types of companies that can be established in the country:

  • Private Company;
  • Public Company;
  • Branch or foreign company.
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GEO Solutions or DIY Employment in Israel?

GEO Solutions or DIY Employment

Companies entering Israel must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities.  A GEO or Israel Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Israel entity established that can run payroll.

A DIY approach will typically take 6-9 months until there is a properly incorporated WFOE ready to run payroll and cost up to 6 figures if registered capital is required. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally, Shield GEO is responsible for all compliance issues related to the employment.

Using Shield GEO Employer of Record Services in Israel

Payroll Israel
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

 
Grossed income Tax Rate (%)
0-63,240 NIS 10
63,241-108,000 NIS 14
108,001-167,880 NIS 21
167,881-239,760 NIS 31
239,761-501,480 NIS 34
501,481-811,560 NIS 48
811,561 and above 50

An employer is required to open a withholding tax file and withhold income tax from employment remuneration paid to employees, for work performed in Israel. The withholding tax file should be opened with the tax authorities prior to making remuneration to employees or payments to other recipients.

Israeli banks must withhold tax, on remittances from Israel, unless the remittance is related to imported goods. An exemption or reduction in tax withholding may be obtained for certain cases such as when a treaty applies or when the payments are for services that are rendered entirely abroad. Failure to withhold will result in a denial of the relevant expense and possible penalties.

Tax Returns Supplied

Yes

Corporate Income Tax Rate

25% on taxable profits, effective January 1, 2016.

Sales Tax

VAT: 18%

Withholding Tax

Subject to any foreign tax treaty, the standard dividend withholding tax is 20% for shareholders who hold under 10% of the company and 25% for 10%-or-more “material shareholders.” Dividends payable to Israeli companies are tax-exempt.

Work Permits
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+1 877 457 7691
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