Israel

Ease of Doing Business Rank: 35

Overview

 

Geographic location

Israel is a Middle Eastern country on the eastern end of the Mediterranean Sea.

Lebanon lies to the north, Egypt to the west, the Red Sea to the south and Jordan to the east.

Spoken language

Hebrew is Israel’s official language. According to a 2011 Government Social Survey of Israelis over 20 years of age, 90% of Israeli Jews and over 60% of Israeli Arabs have a good understanding of the language.

The same survey found 49% of inhabitants speak Hebrew as their native language, followed by Arabic (18%), Russian (15%), Yiddish (2%), French (2%), English (2%), Spanish (1.6%) and other languages (10%).

English and Russian are the most commonly spoken foreign languages.

Population

The 2019 population estimate is 9.0 million.

According to data from the Israel Central Bureau of Statistics, Jerusalem is the largest city (919,438), followed by Tel Aviv (451,532) and Haifa (283,430).

The country has five additional cities with populations of more than 200,000 and eight cities with populations of more than 100,000, plus other smaller urban centers.

Popular industries

The top industries in Israel are technology, tourism, mining and manufacturing, diamonds, pharmaceuticals, agriculture and transportation.

Education

The Times Higher Education World Rankings includes six Israeli universities in its top 1,000 global rankings.

The Legatum Prosperity Index ranks Israel’s educational system 27th out of 149.

Popular entity types

The most common type of business entities in Israel are Private Limited Liability Company, Public Limited Liability Company, Foreign Company, Partnership and Self-Employment.

The overwhelming majority of businesses are in the form of a Limited Liability Company.

Israeli incentives for business

Israel offers a foreign corporate tax credit to offset foreign tax paid. Credit limits are determined by the income source and unused credits can be carried forward for five tax years.

Qualifying bio- or nano-technology companies may enjoy cash and tax benefits under the Preferred Enterprise regime which favors projects which contribute to the country in prescribed ways. Companies must generate income from factory-manufactured goods or the sale of semiconductors produced in another factory, related services, software royalties or permissions or R&D.

Large enterprises that significantly contribute to the Israeli economy may qualify for the Special Preferred Enterprise regime which also offers cash and tax benefits.

Qualifying technology companies may benefit from the Preferred Technology Enterprise regime providing they remain under the revenue threshold and demonstrate a significant investment in R&D and R&D employees, as well as marked revenue and employment growth.

Large technology companies may enjoy cash and tax benefits under the Special Preferred Technology Enterprise regime.

Companies with more than 25% of their share capital and their combined share capital and investor loan capital owned by foreign residents may qualify for Foreign Investor Company status. FICs benefit from reduced corporate tax of up to 25%, depending on the level of foreign ownership.

Israel also offers a tax holiday for new or expanding companies in lieu of government cash grants. The duration depends on the development area.

The country also offers significant research and development incentives which include deductions for R&D expenses, including capital costs. Qualifying companies must operate in industry, agriculture, transportation or energy. Israel also has an Angel’s Law that allows three methods for the amortization of acquisitions.

Foreign investment in Israeli corporate bonds traded on the Tel Aviv stock exchange may also qualify for a tax exemption.

History & Features

 

Main cities for business

Tel Aviv is the commercial center of the country. Jerusalem is the capital and economic center. Ramat Gan is home to the country’s Diamond Exchange District.

Popular historical & tourist attractions

Israel has a rich cultural and religious history. Jews, Christians and Muslims consider Israel their biblical Holy Land.

The country has 9 UNESCO World Heritage sites, including Masada. This fortress includes the most intact Roman camps and fortifications in existence today.

The Baha’i Gardens in Haifa are another UNESCO site. Plants hang from 19 terraces and climb the northern slope of Mount Carmel. The central terrace holds the Shrine of the Bab in a gold-domed building.

The city of Jerusalem includes many sacred sites. The Old City features the Western (Wailing) Wall, the Church of the Holy Sepulcher, the Dome of the Rock, and Al-Aqsa Mosque.

The Israel Museum holds some of the oldest and some of the most revered documents in the world. These include the Dead Sea Scrolls and ancient biblical manuscripts. The gardens also contain works by Rodin, Picasso, and other noteworthy sculptors.

No visit to Jerusalem would be complete without a visit to Yad Vashem. This poignant museum recounts the history and atrocities of the Holocaust.

Caesarea National Park features ruins from the Roman era. The ancient amphitheater built by Herod the Great over 2,000 years ago still serves as a concert venue.

The Dead Sea is unique in the world. It sits well below sea level and is more than ten times saltier than the ocean. This makes the water very buoyant and some say the mineral-rich waters benefit the skin.

Israel also has outstanding beaches and resorts. Near Tel Aviv, you’ll find 100km of sandy Mediterranean coastline. However, the Dead Sea, Sea of Galilee, and Red Sea also offer definitive experiences. For instance, Eilat, on the Red Sea, offers swimming, watersports, and countless nightclubs, restaurants and bars.

The Sea of Galilee isn’t just an area for swimming and relaxation. This region was mentioned in biblical texts with links to the life of Jesus Christ. Tiberias and Safed, two of Judaism’s four holy cities, are in this area.

Israel also has several geological features worth exploring. Israel’s desert, the Negev, includes the Ramon Crater. It is the largest crater in the world and about 500 meters at its lowest point.

History

Ancient texts suggest Israelites have ruled this region since 1250 BC. During the “Period of the Kings” between 1000 and 587 BCE, rulers established Jerusalem as the capital.

In 587 BCE, Babylon (Iraq) captured Jerusalem and exiled the Jews. From that year forward, the region was controlled or ruled by foreign powers. Persian, Greek, Roman, Byzantine and Arab forces occupied Israeli lands for centuries.

By the 11th century, Christian crusaders had invaded. From the 13th to the early 16th century, warrior-slaves called the Mamluks dominated and the region became a province of present-day Syria.

Ottoman Turks conquered the region in the early 16th century and it became a part of the province of Ottoman Syria for the next four centuries.

During World War I, Britain seized Palestine from the Ottoman Empire and governed under a temporary administration. This led to competing nationalist movements amongst the Jews and the Palestinian Arabs and resentment of British authority. Revolt and war between Arabs and Jews followed in the 1930s and 1940s.

During World War II, Nazi Germany systemically exterminated about 6 million Jews during the Holocaust. In 1948, the British Mandate in Palestine was set to expire. The Jewish majority declared an independent State of Israel as British forces withdrew.

However, the day after the declaration of independence, Arab forces invaded Israel. This led to a series of four full-scale wars between Israel and Arab states in 1948, 1956, 1967 and 1973. In each instance, Israel defended its territory successfully.

Today, Israel operates under a democratic parliamentary republic. The country has an advanced free market economy.

Other relevant facts

According to the Israeli Democracy Institute, most inhabitants identify as Jew (67%), followed by Ultra-Orthodox (12%) and Arab Israeli (21%).

As of 2019, most inhabitants are Jewish (74.2%), followed by Muslim (17.8%, Christian (2.0%), Druze (1.6%) and other faiths or no faith (4.4%).

Additional Information for Business

According to Forbes’ 2019 Best Countries for Business, Israel is the 24th best country in the world for conducting business.

The 2019 Index of Economic Freedom rates Israel 27th globally and states, “Strong trade and investment ties outside of the Middle East insulate Israel’s technologically advanced free-market economy from regional political instability. Competitiveness is enhanced by strong protection of property rights, efficient coordination of regulatory processes, and a sound judicial framework that sustains the rule of law.”

World Bank’s “Doing Business” rankings rate Israel 35th for ease of doing business in the world.

Other countries

Check out some other countries we serve below.