Doing Business in Israel: Key Legal Considerations

The entity, and who may bind it

The first decision is what will exist locally: an Israeli company, a registered branch of the foreign company, or no local entity at all, with the business conducted directly from abroad. Each is workable and each has consequences for liability, for local filings, for employment, and for how a bank reads the client.

The decision that is more often neglected is the second one: who may bind the Israeli entity, and in what combination. Signature arrangements, the resolutions that record them, and the powers of attorney given to people on the ground determine whether a counterparty, a bank or an authority can rely on a signature without a further round of documents. Where a foreign parent expects to approve decisions, the mechanism for recording those approvals belongs in the company's documents rather than in internal correspondence.

Contracts, governing law and language

Israeli commercial parties contract in Hebrew and in English, and both are used in practice. Where a contract exists in two languages, the parties should say which version governs; where it exists only in one, the party that will have to enforce it should be able to read it without a translator.

Governing law and forum deserve a decision rather than a default. A clause choosing a foreign law and a foreign court is enforceable in principle, but it determines where a claim has to be brought and what will then have to be done in Israel to reach assets located here. A contract performed in Israel, secured on Israeli assets, or against an Israeli counterparty is often better placed under Israeli jurisdiction, and that judgment should be made when the contract is drafted rather than when it is breached.

Distribution, agency and supply arrangements have their own considerations, and the treatment of a relationship on termination is one of them.

Employment

Israeli employment law sets mandatory minimum terms that an employment contract cannot reduce, and they apply to work performed in Israel regardless of what the contract says or which law it selects. A foreign employer's standard template is therefore a starting point, not a document to be signed as it stands.

Two further points recur. The distinction between an employee and an independent contractor is decided on the substance of the relationship rather than on its label, and a relationship characterised incorrectly can be recharacterised later with retrospective effect. And employment obligations are administrative as well as contractual: an employer registers as such before the first salary is paid, and payroll is run to Israeli requirements from the beginning.

Regulation, licensing and authorities

Whether a business needs a licence, a permit or a registration depends on what it does, and the answer is not always visible from abroad. Financial services, insurance, food, health-related products, transport, education, security services and public-facing premises are among the fields with their own requirements, and imports may face standards and approvals of their own.

The general rule is that the requirement attaches to the activity, not to the entity, so it survives a change of corporate structure. It is cheaper to establish what applies before operations begin than to suspend them afterwards.

Money: tax registrations, banking and payments

Registration at the Registrar of Companies creates a company; it does not put it in a position to trade. Registration for tax purposes and, where relevant, for value added tax (VAT) — the turnover tax charged on goods and services — is a separate step, as is registration as an employer.

Banking is separate again. An Israeli bank runs its own procedure under anti-money-laundering (AML) rules, the obligations imposed on financial institutions to prevent criminal proceeds moving through the banking system, and know-your-customer (KYC) rules, which require it to identify the client, the people who ultimately own or control it, and the activity the account will carry. For a foreign-owned company that means documenting the ownership chain up to those individuals — its ultimate beneficial owners — together with the intended activity and the source of funds, meaning the origin of the money that will move through the account. The decision belongs to the bank, and no adviser can commit it to an outcome.

Cross-border payments deserve the same forethought. A transfer that the receiving bank was told about in advance, with documents that match the account file, travels differently from one that arrives unexplained.

Premises, property and investment

A business that needs premises will meet the Israeli conveyancing and leasing framework, in which title, planning permissions and permitted use are examined before signature and registration of rights is a step in its own right after it. Where a foreign investor is acquiring property or an interest in a project, the payment route has to be planned alongside the transaction, because the funds have to arrive through a bank that has been prepared for them.

Disputes, and what happens after a judgment

Commercial disputes in Israel are heard by the ordinary courts, with labour matters going to a separate court system. Interim relief exists and can be decisive early in a dispute, particularly where assets may move.

A foreign company should also think one step beyond the judgment. A judgment obtained abroad does not operate in Israel by itself: it has to be recognised here before it can be enforced against assets located here, and that is a proceeding of its own. Contractual choices about forum, security and governing law are what determine how long that road is.

How the firm works on this

We advise on the structure a foreign business will use in Israel and register it, draft and negotiate the commercial contracts that carry the local activity, prepare Israeli employment documentation, establish what regulatory requirements apply and represent the client before the relevant authorities, prepare the banking and payment framework, and act in disputes and enforcement before Israeli courts. We work alongside the client's accountants, tax advisers and foreign counsel, and report in English.