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
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.
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.
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:
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.
|Management Fee for Employer of Record Services / Monthly Payroll Costs||
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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.
|Tax Returns Supplied||
|Corporate Income Tax Rate||
25% on taxable profits, effective January 1, 2016.
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.