For those who are interested in doing business in Jerusalem, you have to consider the cost of starting and maintaining a business. In order to conduct business, you must look beyond basic costs to provide your products and/or services. Whether you are considering an Osek Morshe, Chevra Ba’am, Osek Patur, partnership, non-profit optimization, or a kibbutz or moshav, read through this guide to understand the true cost of the business types in Israel.
The Israel Ministry of Foreign Affairs sets forth and maintains all of the business compliance regulations companies must adhere to monthly and annually. Any business type can register as a public or private company. For detailed information on each of the business types in Israel, please read through our past Israel business guide.
Regardless of the business type selected, the registered agent of the company must complete Form No.1 of the Company Registrar. This is the application that allows a business to be formed. Both domestic and foreign companies follow the same registration process.
After completing the form, the Memorandum of Association and Articles of Association must be filed. The Memorandum of Association goes over the identity of the company, objectives, and shareholder responsibilities. The Articles of Association provide the rules that govern the conduct of the company.
All registration documents must be in Hebrew in order to complete the registration process. However, companies can choose to provide copies of all forms and addendums in English or Arabic.
Once the documents are compiled, Israeli law requires the documents be reviewed and verified by a lawyer. Businesses can expect to pay a minimum lawyer fee of NIS 1,862. Any business that is not VAT-expect will also need to pay VAT on top of the lawyer fee.
After the documents are verified by the lawyer, the company can move on to the file step of the registration process. This includes paying the registration fee set forth by the Israel Ministry of Foreign Affairs. The fee is currently 2,224 NIS.
Once the company is registered, the registered agency will be provided a Certificate of Incorporation. It must be easily visible to all employees and clients. Additionally, the company will register a 9-digit company number. This number will be required when submitting taxes and annual reports.
Aside from registration fees, it is important to remember that taxes must be paid. Typically, the tax year in Israel lines up with the regular calendar year. All tax documents must be filed within five months of the end of the fiscal year. Additionally, the Israel Ministry of Foreign Affairs requires businesses to file monthly returns for any tax payments received.
The current corporate tax rate is 23% for all non-VAT exempt businesses. Examples of VAT-exempt businesses include an Osek Patur and non-profit organizations. In addition to the 23% corporate tax rate, companies will need to file supplementary tax instalment for non-deductible business expenses.
Any monthly returns must be filed and fully paid by the 15th of the next month. Businesses have the opportunity to pay these monthly tax fees at a bank or post office. Furthermore, all businesses must have detailed bookkeeping. These details will be used to determine income tax and VAT.
Many companies may attempt to operate out of their personal home, but you quickly realize how it is not the best space to conduct business. Small companies can take advantage of our private office rental plans that are designed to meet their needs. However, for domestic and foreign Osek Morshe, Chevra Bamm, and partnerships, a larger commercial space may need to be acquired to appropriately run the business.
Aside from the cost of purchasing or renting the property, it must be converted into a functional space for the business. These costs will vary on several factors, including how much capital will be used to pay for the costs and what percentage needs to be financed.
Businesses must also pay municipal taxes on the property. Those who will have the property vacant while getting the business started, a one time 6 month exemption on municipal taxes can be granted. The taxes vary from region to region and are affected by the type and size of the property.
Registration fees, taxes, and commercial property expenses are easy to determine. However, each type of business in Israel needs to consider additional business fees. These fees may not be required for some companies and can vary greatly in cost:
Jerusalem is a wonderful area to build a successful Osek Morshe, Chevra Bamm, Osek Patur, or other business types. Public and private businesses must be prepared to pay for predictable and unforeseen costs that are associated with doing business in Israel.
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