Accounting and Tax Services for Foreign Companies Operating in Israel
Foreign companies operating in Israel may require local accounting, tax, payroll, transfer pricing, and financial reporting services. We assist with the Israeli accounting and tax aspects of a subsidiary, branch, or other proposed structure, with qualified advisers involved where required.
Review of Israeli subsidiary or branch structures and support with registration preparation
Preparation of accounting and tax information for bank and KYC processes, subject to the bank’s requirements and review
Israeli payroll administration and coordination with qualified employment-law advisers where required
Transfer-pricing analysis and documentation requirements based on the group’s circumstances
Group-reporting support under the framework applicable to the parent company
Accounting and tax analysis for proposed cross-border intellectual-property structures
Preparation of applicable Israeli tax and corporate reporting information within the agreed scope
Assessment of eligibility for Preferred Technological Enterprise tax benefits
Israeli Subsidiary, Branch, and Operating Structure Review
Possible operating structures may include an Israeli subsidiary, branch, Employer of Record or another arrangement. The accounting and tax review depends on the planned activity, scale, treaty position, intellectual-property arrangements, employment model and future plans. Legal aspects are reviewed separately with qualified counsel.
Accounting and Tax Support for Setting Up Operations in Israel
Once the proposed structure has been selected, we can assist with the accounting, tax and reporting aspects:
Preparation of accounting and tax information required for the registration process, with legal registration handled by qualified legal counsel
Registration with VAT, ITA and Bituach Leumi
Support in preparing information for bank-account and KYC review, subject to the bank’s requirements and discretion
Employer registration and payroll setup
Accounting system tailoring for the entity's needs
Global payroll coordination for Israeli operations
Employing personnel in Israel may involve payroll, tax, pension, insurance and employment-law requirements. The agreed service may include the following payroll and reporting activities, while legal, pension and insurance advice is coordinated separately:
Monthly payroll calculations and payslips based on employer-approved information and applicable reporting requirements
Pension, severance and study fund contributions
Reporting to Bituach Leumi and income tax withholding
Termination, severance settlements and Form 161 filings
Global payroll coordination with parent HR systems
Ongoing management & parent reporting
After setup, the agreed services may include bookkeeping, payroll coordination, tax reporting and group-reporting information. Responsibilities for financial statements, management decisions and external audit are defined separately and remain subject to applicable independence requirements.
Israeli Transfer Pricing and BEPS Documentation
For foreign companies in Israel with material related-party transactions, the firm may assist with Israeli transfer pricing analysis and documentation based on the entities, transactions, functions, assets, risks, available information, and rules applying to the relevant period:
Transfer pricing benchmarking and comparable-company data review within the agreed scope
Review of the transfer pricing method based on the activity, available data, and applicable Israeli rules
Transfer pricing functional analysis of functions, assets, and risks
Local File and Master File documentation under BEPS Action 13
Country-by-Country Reporting and CbCR coordination
Periodic transfer pricing updates and accounting support in discussions with the Israel Tax Authority
Cross-Border Intellectual Property Tax Analysis
The location and use of a group's intellectual property may affect its effective tax rate, royalty flows, transfer pricing, and transaction analysis. We assist with the Israeli accounting and tax review of proposed intellectual property structures in Israel and abroad, with qualified legal and other advisers involved where required:
Review of Israeli accounting and tax considerations for proposed intellectual property locations
Transfer pricing analysis for related-party technology, intellectual property, and service transactions
Assessment of BEPS substance, DEMPE functions, and transfer pricing documentation requirements
Financial and transfer pricing analysis of related-party cost-sharing arrangements
Financial and Israeli tax analysis of royalty models, with legal agreements coordinated separately
Support with Israeli tax ruling requests for cross-border intellectual property transactions
Review of Israeli royalty withholding tax and potential tax treaty relief
Israeli Tax Incentives for Foreign-Owned Companies
Foreign-owned Israeli subsidiaries may qualify for Israeli tax incentives or Israel Innovation Authority support, subject to the relevant program, eligibility conditions, required approvals, and law applying at the relevant time:
Assessment of potential eligibility for Preferred Technological Enterprise tax benefits in Israel
Review of Israeli dividend taxation and potential relief under the applicable incentive regime
Review of Israeli accounting and tax treatment for research and development costs
Financial information support for Israel Innovation Authority grant applications and reporting
Analysis of tax treaty eligibility, taxing rights, and foreign tax credit considerations
Fractional CFO Services for Foreign Companies in Israel
Foreign groups operating in Israel may require local financial reporting, budgeting, payroll coordination, and communication with overseas headquarters. Subject to the agreed scope and independence requirements, the firm can provide fractional CFO services and coordinate with the company’s accounting, tax, audit, and legal advisers.
Local controller and fractional CFO services for Israeli operations
Periodic financial reporting to overseas headquarters in the agreed format and currency
Israeli budgeting, financial monitoring, and variance analysis under the group reporting framework
Coordination of financial information for Israeli banking, insurance, and regulatory processes
Preparation of financial information for Israeli statutory and group audit processes
Financial information support for M&A, carve-out, or wind-down processes in Israel
FAQ
+Israeli subsidiary or branch: which structure may suit a foreign company?
A subsidiary and a branch differ in legal status, accounting, tax, employment and reporting. The appropriate structure depends on the planned activity, scale, funding, liability considerations, treaty position and group plans. The firm can assist with the Israeli accounting and tax analysis, while legal aspects should be reviewed with qualified counsel.
+How long does it take to set up an Israeli subsidiary?
The timetable depends on the proposed structure, the completeness of the documents, identification requirements and the processing times of the relevant authorities. Bank-account onboarding for a foreign-owned entity depends on the ownership structure, KYC information, source-of-funds documentation and the bank’s review. The firm can assist with the Israeli accounting and tax information and coordinate with legal and banking professionals within the agreed scope.
+Do you handle Israeli banking regulation?
Bank-account onboarding, incoming funds and foreign-currency activity may require accounting, tax, ownership and source-of-funds information under the bank’s procedures and applicable rules. The firm can assist with preparing the relevant accounting and tax information. Account approval, KYC requirements and banking decisions remain subject to the bank’s review and discretion.
+What is transfer pricing in Israel and why does it matter?
Transfer pricing concerns the pricing and terms of transactions between related parties. The applicable analysis, documentation and filing requirements depend on the entities, transactions, functions, assets, risks and rules in effect for the relevant period. The firm can assist with the Israeli transfer-pricing analysis and documentation within the agreed scope.
+What is permanent establishment risk for a foreign company in Israel?
Permanent-establishment risk depends on the facts, the relevant tax treaty and applicable law, including the nature, duration and authority of the activity in Israel. The position should be reviewed with qualified Israeli and foreign tax and legal advisers. The firm can assist with the Israeli accounting and tax information within the agreed scope.
+Can we pay Israeli developers without opening a branch?
Possible arrangements may include an Employer of Record, engagement with an independent contractor or employment through an Israeli entity. The appropriate arrangement depends on the working relationship, duration and scale of activity, control, classification risk, cost and legal requirements. Each option should be reviewed with qualified employment-law and tax advisers.
+What Israeli tax benefits are available to foreign-owned subsidiaries?
A foreign-owned Israeli company may be eligible for tax-incentive programs or Israel Innovation Authority support, depending on its activity, ownership, program conditions, required approvals and the law in effect at the relevant time. The firm can assist with assessing potential eligibility and preparing the relevant financial and tax information within the agreed scope.
