Setting Up a Company in Israel

Israel's innovation economy — the "Startup Nation" — is one of the world's highest-density technology clusters per capita. Its Companies Law (1999) provides a familiar common-law-influenced corporate framework. Foreign investors can own 100% of an Israeli company without restriction, and the Israel Innovation Authority (IIA) administers R&D grant programmes that can cover up to 50% of approved technology development budgets.

Key facts for 2026

Corporate structures

The Private Company Limited by Shares (Ltd) is the standard vehicle — analogous to a UK private limited company. It requires at least one shareholder, one director, and a registered address in Israel. No minimum paid-up capital is required. A Public Company (equivalent to a PLC) is required for listed entities. Foreign companies can register a Foreign Company (branch or representative office) if they prefer not to incorporate a separate Israeli entity, though this brings the foreign parent within Israeli jurisdiction for certain tax purposes.

Tax incentives — Preferred Enterprise

Israel's Law for Encouragement of Capital Investments provides a "Preferred Enterprise" status for qualifying industrial and technology companies. A Preferred Enterprise in a development area A (geographic periphery) pays 7.5% corporate tax on its qualifying income; elsewhere the rate is 16%. A "Preferred Technology Enterprise" — for companies deriving income from intangible assets including patents and software — pays a further reduced rate. These rates apply on qualifying income, not total turnover, and require annual certification.

Israel Innovation Authority (IIA) R&D grants

The IIA (formerly the Office of the Chief Scientist) administers grant programmes covering up to 50% of approved R&D costs for early-stage technology companies and up to 30% for later-stage ventures. Grant recipients must maintain their IP in Israel — a key constraint that affects exit and restructuring planning. Foreign-owned Israeli subsidiaries are eligible if R&D activity is conducted in Israel.

The incorporation process

• Prepare Articles of Association (standard template available from the Corporations Authority).
• Submit the incorporation application online to the Israel Corporations Authority — typically approved within 3–5 business days.
• Obtain a Company Number and register with the Israel Tax Authority for corporate tax and VAT.
• Open a corporate bank account — requires the Corporations Authority certificate and full KYC documentation.
• Register with the National Insurance Institute (Bituach Leumi) for employee social insurance.
• For IIA grants: submit a research plan and budget to the IIA before commencing the grant-funded work.

Frequently asked questions

Official sources

• Israel Corporations Authority
• Israel Tax Authority
• Israel Innovation Authority (IIA)
• Companies Law, 1999; Law for Encouragement of Capital Investments

This guide is general information prepared by ARM Management and is current as at July 2026. It is not legal advice; tax rates, grant eligibility and IP transfer rules change over time. Confirm with the relevant authority or an Israeli advisor before incorporating.