Doing Business in Israel

7/31/2019 Doing Business in Israel

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Doing Businessin I srael

2009


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Copyright2009UHYInternationalLtd 1

Contents

1. Introduction............ ............................................. .......................................... 22. Businessenvironment ........................................ ......................................... . 33. Foreigninvestment........................................ ....................................... ........ 74. SettingupaBusiness........ ........................................... ............................... 145. Labour ........................................... ............................................... ................ 186. Taxation.......................... ............................................. ................................. 227. Accounting&reporting....................................... ...................................... 308. UHYfirmsinIsrael...................... ........................................... .................... 379. UHYofficesworldwide ....................................... ...................................... 41


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2. Business environment

GeographyIsraelislocatedontheeasternshoresoftheMediterraneanSea,joining

AsiatoAfrica.ItswesternborderistheMediterranean,tothenorthare

LebanonandSyria,totheeastistheKingdomofJordan,andtothesouth

areEgyptandtheRedSea.Israelsbordersencloseatotalareaof

approximately22,000sqkm(8,500squaremiles),includingtheGolan

Heights(1,200sqkm),butexcludingGaza,JerichoandtheWestBank

AdministeredTerritories,whichincludeareasadministeredbythe

PalestinianAuthority.

Jerusalem(population600,000)isthecapitalofIsraelandthehistorical

capitalofthreeoftheworldsmajorreligions,Judaism,Christianityand

Islam.TelAvivisthebusinesscentreandhubofIsrael(GreaterTelAviv

area:population1.9million);andHaifa(population470,000)andAshdod

arethetwoofthemajorportcitiesofIsrael.Eilatisatouristresortcityand

portcitylocatedontheGulfofAqabaintheRedSea.

Despiteitssmallsize,Israelcontainsalmosteverytypeofgeographical

terrainfromdesertintheAravaandNegev;tohilly,mountainous

landscapesinthenorth(Galilee);tosnowcappedmountainsinMount

Hermon.Itcontainsanabundanceofagriculturalland. Extensive

irrigationhasmadevariouspartsofthedesertproductive.TheJordan

Riverflows

southward

through

Lake

Kinneret

(Sea

of

Galilee)

into

the

DeadSea.LakeKinneretisanimportantsourceofwaterandfish,in

additiontobeinganattractivetouristandrecreationarea.TheDeadSea,

whichis425m(1,300ft)belowsealevel,isthelowestpointonearthanda

majorsourceofminerals,includingpotash,bromideandmagnesium.Its

watersarerenownedfortheirhealingqualities.

Historyandgovernment

ThemodernStateofIsraelwasestablishedin1948.Inits60yearssince

establishment,Jewishimmigrantsfromallovertheworldhavesettledin

Israel.Israelspopulationhasincreasedfrom870,000peoplein1948to

about7milliontoday.Thisfigurecomprisesapproximately80%Jewswiththeremaining20%comprisingMuslims,Druze,Christiansandothers.

Since1948,thestatehasfoughtwarswithitsArabneighbours.Since1979,

IsraelhassignedpeacetreatieswithEgyptandJordan.Israelhasalso

signedseveralinterimagreementswiththePalestinianNational

Authority,creatinganautonomousterritoryforthePalestiniansinreturn

forpeace.Thepartiesarecurrentlynegotiatingafinalstatusagreement. In


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February2009,BenjaminNetanyahu,leaderoftheLikudParty,succeeded

EhudOlmertasPrimeMinister.MrNetanyahuleadsalarge,party

coalitiongovernment.

Israelis

aparliamentary

democracy

consisting

of

separate

legislative,

executiveandjudicialbranches. AllcitizensofIsrael,regardlessofrace,

religionorsex,areguaranteedequalitybeforethelawandfulldemocratic

rights.Freedomsofspeech,assembly,pressandpoliticalaffiliationare

embodiedinthecountryslawsandtraditionsandintheDeclarationof

Independence.

Thelegislature,knownastheKnesset,consistsofasingleelectedchamber

with120members.Itiselectedeveryfouryearsandcomprises

representativesofvariouspoliticalparties.Israelusesasystemof

proportionalrepresentation.Electionsareuniversal,countrywideand

secret.

ThePrimeMinister,headstheexecutivebranchofthegovernment.Upon

invitationofthePresident,thePrimeMinisterformsacabinet,which

usuallyintroducesnewlegislationtotheKnesset.

Thejudiciaryisindependentofthelegislatureandexecutivebranches.The

SupremeCourt,sittinginJerusalem,isthehighestjudicialbodyand

functionsbothasthecourtofappealfordecisionsofthedistrictcourts,

andtheHighCourtofJusticeforcasesnotwithinthejurisdictionofany

othercourt.TheDistrictCourtisthefirstcourtforcertainjudicialissuesas

wellastheCourtofAppealsforcasespresentedbeforetheMagistrates

Courtsandothercourts.Alltypesofcourtshaveclearlydefined

jurisdictions.

ThePresident,theofficialheadofstate,haslimitedformalpowersandis

electedbytheKnessetforafiveyearterm,withalimitoftwoconsecutive

terms.

TheStateComptrolleriselectedbytheKnessetandactsasombudsman,

reportingpubliclytotheKnessetontheoperationofthegovernmentand

publicsectors.

TheBankofIsrael(thecentralbankofIsrael)servesastheeconomic

advisortothegovernment.Italsooutlinesandcarriesoutthemonetary

policyofIsrael,controlslocalbanks,suppliesnotesandcoins,and

managestheStatesforeigncurrency.


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Unitsofmeasurement

Currency

IsraelsunitofcurrencyistheNewIsraeliShekel(NIS),whichcomprises100Agorot.(FortheNISexchangerateinrelationtoforeigncurrency,see

ForeignExchangeControls,section7).

Internationaltime

IsraelistwohoursaheadofGreenwichMeanTimeinthewinterandthree

hoursaheadduringIsraelisummertime.

Weightsandmeasures

Israelusesthemetricsysteminallweightsandmeasuresexceptforland

whichismeasuredindunams.Adunamequals1,000sqm(approximately0.23acres).Industryalsoconformstootherinternationalmeasurementsas

required.

Workingconditions

WorkinginIsrael

OverseasvisitorsinIsraeldonotnormallyneedtoapplyinadvancefora

visa.Anordinarytouristvisa(B2),validfor90days,iscompletedon

entrytothecountry.Itmaybeextendedforlongerbyapplicationtothe

InteriorMinistry.

ForaforeignnationaltoworkinIsrael,apermitmustbeobtainedfromthe

MinistryofLabourtoenabletheInteriorMinistrytoissuethenecessary

permit.

UndertheLawofReturn,immigrantsareentitledtopermanentresident

status,ortoanA1visa,whichentitlestheimmigranttotemporary

residentstatus.

Businesshours

Mostbusinessesotherthanretailstoresoperateafivedayweek,closingon

Fridaysand

Saturdays,

with

Sunday

anormal

working

day.

Usual

businesshoursforcommerceandindustryare8am9amto4pm5pm,

SundaytoThursday,andfrom8amto1pmifopenonFriday.

Banksareopendailyfrom8.30amuntil12.30pm.Twotothreetimesa

weekbanksreopenintheafternoons.

OnSaturdays(theJewishSabbath)almostallbusinessesandofficesare

closed.StatutoryholidaysareinaccordancewiththeHebrewcalendar.On


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theeveoftheholidays,businessesusuallyceasedoingbusinessinthe

earlyafternoon.


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3. Foreign investm ent

General

ApositiveandopenattitudeprevailstowardsforeigninvestmentinIsrael.

Governmentpolicyisaimedatprovidinginvestmentincentivesto

industriesthatincreasethecountrysexportsandcreatejobs.Thereare

limitedrestrictionsonsectorsinwhichaforeigninvestormayinvest,other

thanwheretherearedefenceconsiderations.

Priorapprovalforaninvestmentisgenerallynotrequiredexceptfor

investmentinregulatedbodiessuchasbanksandinsurancecompanies.

Israelisalsocommittedtotheprinciplesoffreetrade,shownbythelarge

numberof

free

trade

agreements

to

which

it

is

party.

Israelibusinessassociationsactivelyseekoverseaspartnersforinvestingin

Israelicompanies.Inthelightoftherelativelysmalldomesticmarketin

Israel,exportopportunitiesandinternationalbusinessconnectionsare

veryimportanttoIsraelibusinesses. Theyaregenerallysupportiveof

governmentpolicyregardingincentivesandoftenviewforeigninvestors

asafurtheropportunitytoexpandbusinessandimprovestandards,rather

thanasacompetitivethreat.

Toreachitsgoals,Israelofferssubstantialbenefits,incentivesand

concessionsthroughvariouslawsandregulationsmorefullydiscussed

below.TheyareavailabletobothforeignandIsraeliinvestors.Themain

exceptionsarethat,incertaincases,largertaxreductionsareavailableto

foreignownedenterprisescomparedwithIsraeli ownedenterprises;and

incomefromforeigncurrencydepositsofforeigninvestorsheldinIsraeli

banksistaxexempt.

Thegovernmentsmajortoolsforforeigninvestmentarethe

EncouragementofCapitalInvestmentLawandtheR&DIndustrial

EncouragementLaw,throughwhichgrantsof20% 66%oftheprojects

totalexpenditureareavailable.

EncouragementofCapitalInvestmentLaw

UndertheEncouragementofCapitalInvestmentLawthestatusof

approvedenterpriseisgrantedtoinvestmentsmadebydomesticand

foreigncompanies,aswellasregisteredpartners,whencertain

qualificationsaremet.


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InadditiontoApprovedEnterprisestatus,therearefourclassifications

forapprovals:

ApprovedPropertyforinvestmentsinrealestatebyforeignresidents,

investing

foreign

currency

ApprovedInvestmentforinvestmentinequityoflimitedliabilitycorporations

ApprovedLoanforloansgivenforaperiodexceedingsevenyears

InternationalTradingCompanyforforeigncompaniestradingmainlyabroad.

TherequesttoobtainApprovedEnterprisestatusmustbemadetothe

governmentalauthoritybeforestartinganybusinessactivities.

Approvedenterprises

Investmentincentivesaregiventhroughthegrantingofapproved

enterprisestatustoindustrialandtourismenterprisesapprovedbythe

IsraelInvestmentCenterinJerusalem(whichadministersthe

EncouragementofCapitalInvestmentLaw). Differentlevelsofbenefits

areprovidedinAandBnationalpriorityzonesandotherzones.

Toqualify,generally,theenterprisemustbeownedbyacompany

registeredinIsrael(includingacompanyregisteredinIsraelasaforeign

company),orapartnership,oracooperativesocietyregisteredinIsrael,

unlesstheboardoftheInvestmentCenteragreestoadifferentformof

ownership.

Atpresent,theInvestmentCenterapprovestheestablishmentorexpansionofenterprisesonconditionthattheyengageinhighquality

production,innovativehitechtechnologies,sophisticatedproducts,

tourism,etc.OnlyenterprisesmeetingtheInvestmentCenterscriteria

maybeapproved.

Incentivesforapprovedenterprises

Approvedenterprisesareentitledtoavarietyofincentives.Investorsmay

choosefromseveralcombinationstosuittheirinterest.Theincentives

include:

Grantsofupto32%ofthetangiblefixedassets Reducedtaxrates,taxexemptions,andothertaxrelatedbenefits BidFree,atreducedprice,landallocationinNationalPriority

RegionsAandB.(RegionAbeingNegev,Galileeandthe

JordanValley;BbeingtheHaifaregion).


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Toqualifyforanyoftheaboveincentives,theapprovedenterprisemust

showaminimumofpaidincapital inmostcases,30%oftheinvestment.

Investmentgrants.Anapprovedenterprisecanreceiveaninvestment

grantas

apercentage

of

its

investment

in

fixed

assets

(new

machinery

and

equipment,buildings,vocationaltrainingfacilities,daycarecentres,site

development,planningandinstallation,commercialvehicles,andland

costs).

Investmentgrantsarenottaxablebutaredeductedfromthevalueoffixed

assetsfordepreciationandcapitalgainstaxpurposes.

Theprofitsfromanapprovedenterprisetakingsuchgrantsareliablefora

25%companytaxforaperiodofsevenyears.Companiesthatown

approvedenterprisesandinwhichthelevelofforeigninvestmentismore

than25%havebeengrantedcompanytaxconcessionsforaperiodof10

years. (Applicationsforthosebenefitshadtobemadebefore31December

2001.)

Alternativebenefitsforapprovedenterprises

Alternatively,companiesmaywaivetherighttoreceivetheinvestment

grantandinsteadoptforataxholiday(totalexemptionfromtax)for

differingperiodsbasedonlocationinthenationalpriorityregion(A,B

orother).

AnotheralternativewasaddedinanamendmenttothelawinApril2005

thatcompaniesinregionAmaypaycompanytaxbutatareducedrate.

Comparedtothefirstalternative(seetablebelow),companiesthat

distributedividendsoughttopreferthesecondalternative.Theamendmentofferedtoextensiveinvestmentstotalexemptionofcorporate

taxandtaxondistributeddividends,withtheconditionthataminimum

600millionNISshouldbeinvestedinthefarperiphery,oratleast900

millionNISinregionA.

Entitlementtothealternativesbenefitsisautomaticwhentwo

fundamentalconditionsareexecuted:

Theenterpriseexportsatleast25%ofitssales; Theenterpriseinvestsaminimuminvestmentforthreeyears

beforethefirstyearitoptsforthebenefits.Theminimum

investmentis300,000NIS,or12%oftheproductiveassetsthatarediminishedandamendedtotheConsumerPriceIndex(CPI).

Thereisanexemptionforvehiclesandbuildings.

Totalexemption Reducedcompany


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fromtax taxrate

Israeliresident

Taxationburdenbefore

dividendsdistribution

0 11.5%

Dividendsdistribution:

Corporatetax 25%

Taxondistributeddividends 15% 15%

Totaltaxburden 36.25% 24.77%

Foreignresident

Corporatetax 0 11.5%

Dividendsdistribution:

Foreigncontrol(%):

49%74% 20%

75%90% 15%

91%100% 10%

Taxondistributeddividends 15% 4%

Totaltaxburden(according

totheinvestment)

23.5%,28%,32% 15%

NationalPriorityRegions

Asstatedabove,theextentofgovernmentassistancedepends,among

otherfactors,onthelocationofthemanufacturingfacilities.The

governmentdecides,occasionallyandascircumstancesdictate,onthe

definitionofthevariousNationalPriorityRegions.Atpresent,Israelis

dividedintothreeregions,andeachhasitssetofbenefits.

TheNationalPriorityRegionsapplicabletoapprovedindustrialventures

are:

RegionAforundevelopedareasfarfromthecentreofthecountry RegionBforlessdevelopedareas,closertothecentreofthe

countryandcharacterisedbymajorunemploymentproblems

RegionCforthecentreofthecountrywherethemajorcitiesandindustrialareasarelocated.

Typesofapprovedprogrammes


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ApprovedEnterprises

IncludeIndustrialApprovedEnterprises,tourismprojects,equipment

leasingfirms,leasingofindustrialbuildingsandothermiscellaneous

projects.

Investmentinindustrialorcommercialrealestate

Whenaforeigninvestorinvestsinacommercialorindustrialbuilding,he

isfullypaidinforeigncurrency,andthebuildingmustberented. Income

iseligiblefortaxbenefitsuptoaceilingof12%oftheinvestmentperyear.

Theforeigninvestormustownthepropertyforfiveyearsormore.Residentialbuilding

AresidentialbuildingmaybeentitledtoanApprovedstatuswhereat

least50%ofthespaceisrentedforatleastfiveofthefirstsevenyears;the

MinistryofHousingrecommendstheproject;theconstructionis

completedafter31July1988;andnotmorethan50%ofthespaceissold

beforetherentalperiodoffiveyearsisover.Approvedinvestment

AninvestmentinanIsraelifirmmadebyaforeignentity,usingforeign

currency,maybeeligibleforthisstatus.Itdoesnotprovideanytax

benefitsbeyondthosepertainingtootherforeigninvestments.

Approvedloan

Aforeignentitymaygivealoaninforeigncurrencytoadomestic

company.ThisloanmaybegrantedanApprovedLoanstatus.However,

thisstatusdoesnotprovideanytaxorotherbenefitsbeyondthose

pertainingtootherforeignloans.

Internationaltrading

companies

TheFinanceMinistermaygrantataxexemptionforupto10yearsto

internationaltradingcompaniesandtheirstockholders.Somebenefitsare

forupto20years. Tomeettherequirements,theinternationaltrading

companymustcontainonlyforeignresidentstockholders,theannual

turnovermustexceed25millionUSD,thecompanymustberegisteredin

Israelasaforeigncompany,businessinandwithIsraelisimmaterial,and

thecompanymustownandoperatebranchesinatleastthreecountries.

R&DIndustrialEncouragementLaw

R&D

Industrial

Encouragement

Law

established

a

research

committee

that

isentitledtoapproveaparticipationgrantof20%,30%,40%or50%of

totalR&Dexpenses.InMarch2005thelawwasamendedsoIsraeli

companiescouldsharetheknowledgethathasbeensupportedbyIsraels

chiefscientistabroad.Beforetheamendmentitwasforbidden.


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forfullscaleprojects.Whensuccessful,thecompanymustrepaythegrant

throughannualroyaltiesuptoamaximumrepaymentof150%ofthe

originalgrant.

Eureka

Anagreementsignedin1993withtheEuropeanEurekasecretariatallows

Israelicompaniestojointheprestigiousprogrammeforindustrialco

operationonR&Dtopicswhichincludesanother26Eurekamember

countries.Eurekaoperatesmorethan680projectsandhasaworking

annualbudgetofEURO1.4billion.

CIIRDF

TheCanadaIsraelIndustryandResearchDevelopmentFoundationwas

foundedattheendof1994andissimilartoBIRDF.CIIRDFfunds50%of

thejointprojectsofCanadianandIsraelicompanies.

SIIRD

TheJointIsraelSingaporeFundbeganoperatingin1997withtheaimof

fundingbinationalR&DprojectsandissimilarinconcepttoBIRDFand

CIIRDF.

TheSeventhFrameworkProgrammeoftheEuropeanUnions

CommissiononScienceandTechnology

Projectsinclude:

ECIP

TheEuropeanCommunityseekstosupportsustainableeconomicgrowth

ofthe

developing

countries

in

the

Asian,

Latin

American

and

Mediterraneanregions,primarilyincreatingjointventures.

Otheragreements

Frameworkagreementsalsoexistwithothercountries,includingHolland,

France,Spain,Portugal,Belgium,Austria,IndiaandtheGICTbilateral

fundwithGermany.


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4. Sett ing up a Business

Typesofbusinessentity

ForeigninvestorswhointendtoconductcommercialactivitiesinIsrael

maychoosefromawiderangeoflegalentities.Thechoicewilldependon

businesspriorities.Theselegalentitiescompriseinteraliacompanies,

partnerships,cooperatives,jointventuresandnonprofitorganisations.

Individualsmayconducttheirbusinesswithoutforminganyseparate

legalentity.Thereareveryfewrestrictionsontheforeignownershipof

sharesandsecuritiesofIsraelicompanies,oronforeigninvolvementin

unincorporatedenterprises,otherthanforspecificprofessionssuchaslaw

andaccountancywherelocalqualificationsarerequired.

Companies

ThemostcommonformofbusinessentityinIsraelisalimitedcompany

withcapitalstock(sharecapital). Allcompaniesareformedandregulated

undertheCompaniesLawandtheCompaniesOrdinance.

Whiletherearecompanieswithunlimitedliabilityorlimitedbyguarantee,

themostcommonformofbusinessenterpriseinIsraelisacompanywith

liabilitylimitedbyshares.Therearetwotypesoflimitedcompanywhich

aredescribedingreaterdetailbelow.

PrivatecompaniesAprivatecompanyisprohibitedfromofferingitssharestothepublicand

hasrestrictedrightsoftransferofshares.Currently,aminimumofoneand

amaximumof50shareholdersarerequired.

Aprivatecompanymustkeepproperaccountingrecordsusingadouble

entrysystem.Abalancesheetandincomestatementauditedbyan

independentaccountantmustbesubmittedtoshareholdersonceayear.

Companiesmustalsoissueanannualfinancialstatement,generallyissued

byDecember31,tocoincidewiththeendofthetaxyear.Whilenot

required,certainprivatecompaniesalsopresenttheirfinancialstatements

inaccordancewithsecuritiesregulationsthatapplytopubliccompanies

includingadoptingtheInternationalFinancialReportingStandards(IFRS).

Publiccompanies

Apubliccompanymusthaveatleastsevenstockholders,withno

maximumlimitations.Thetransferofapubliccompanysstocksisnot

restricted.IfapubliccompanysstocksaretradedontheTelAvivStock


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Exchange(theTASE),thecompanyisrequiredtopublishannualfinancial

statementsandquarterlyunaudited(butreviewedbyaCPA)financial

statements.Theformatanddisclosuresofapubliccompanysfinancial

statementsaregovernedbytheSecuritiesRegulations.Publiccompanies

arerequiredtomaketheirfinancialyearthesameasthetaxyear.

Starting2008listedcompaniesarerequiredtoadopttheInternational

FinancialReportingStandards(IFRS).

Listedpubliccompaniesmustappointatleasttwodirectorswhohaveno

businessorotherrelationshipswiththecompany;anauditcommittee

(comprisingatleastthreedirectors);andaninternalauditor.Anyofferto

thepublicmustbethroughapublicprospectus.Apubliccompanymust

alsomakeanimmediateannouncementofanymajorevent.

Starting2009,newsecurityregulations TheGoshenCommittee were

published.Theseregulationsrelatetolistedcompaniescorporate

governance,internalcontrol,externalauditorsandenhancesfinancial

disclosure.

Companyformation

Foracompanytobeconsideredincorporated,itmustberegisteredwith

theCompaniesRegistrarattheMinistryofJustice. Apartfromother

requirements,anincorporatedcompanyshouldhaveArticlesof

Association.TheArticlesofAssociationstatethecompanysname,

objectives,thecompositionofitscapitalstock,thenumberofshares

foundersreceivedforthepurchaseandthestockholdersliabilities.The

CompaniesRegistrar(asaconcessiontotheforeigninvestor)usually

acceptsthe

English

language,

although

Hebrew

documentation

is

the

norm.

TheArticlesofAssociationdefinetherulesforthecompanysmanagement

andtherelationshipbetweenthecompanyanditsstockholdersand

directors.Itwillcoverdetailsofsharecapitalandallocationandtransferof

shares;proceduresfordirectorsandshareholdersmeetings;procedures

fortheappointmentofdirectorsandtheirpowers;proceduresfor

appointingauditorsliensinthecompaniesassetsliquidationandthe

distributionofdividends.Aprivatecompanywillincludelimitationson

transferabilityofitssharesinitsarticles.

Foreigncompanies

ForeigncompaniesdoingbusinessinIsraelmustregisterwiththe

RegistrarofCompaniesandprovideaMemorandumandArticlesof

Association,listofdirectorsandotherrequiredinformation.All

documentscanbeinHebreworEnglish.

ForeigncompanieswishingtoissuesecuritiesontheTASEmustpublisha

prospectusandpresentfinancialreports.Thefinancialreportsshouldbe


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publishedinbothHebrewandEnglishandpreparedinIsraelicurrency

accordingtoaccountingprinciplesgenerallyacceptedinIsrael.Companies

incorporatedintheUSarepermittedtopreparetheirfinancialstatements

inUSdollars,inaccordancewithaccountingprinciplesgenerallyaccepted

intheUS.Incertaincasesalreadytradedcompaniesinforeignstock

exchange(likeNASDAQ)canregisterintheTASEandarerequiredto

publishonlythematerialthecompanypublishintheforeignstock

exchange.

Capitalstructure

Capitalstructuresmayconsistofmorethanoneclassofshare.Themost

commonformofsharecapitalissuedisordinarysharesandpreference

shares.Redeemablesharesmayalsobeissuedifpermittedunderthe

articlesofassociation. Otherformsofcapitalincludefoundershares

(managementshares)anddeferredshares(warrants).

Asageneralrule,theTASEencouragestheissueofshareswithequal

votingrightsandrestrictsthedisparitybetweentheparvaluesofdifferent

votingshares.Onlyoneclassofsharemaybelistedfortradingonthe

parallellistoftheTASE.

AnIsraelicompanymaydistributeitsretainedaftertaxearningsbyway

ofdividends.Thedividendscanbedistributedfromearningsbutshould

notexceedthenominalretainedearnings.

Partnerships

PartnershipsareregulatedbythePartnershipOrdinance(NewVersion)

1975.Otherthancertainprofessionalpartnerships,theymayhavenomorethan20partners.Partnershipsoflawyersandaccountantsmayhaveupto

50partners. Partnershipsmaybegeneralorlimitedandmustbe

registeredwiththeRegistrarofPartnershipsifthereisanintentiontocarry

onabusiness.

Generalpartnership

Eachpartnerhasjointandseveralliability.Eachpartnerispermittedtoact

onbehalfofthepartnershipandisheldtobeitsagent,andeachpartners

activitiesandactionsarebindingontheremainingpartners.Eachpartner

isseparatelyassessedfortaxonhisorherrelatedshareofprofits.

Foreigners

can

be

partners

unless

precluded

by

laws

relating

to

specific

professions,wherelocalqualificationsareprerequisitestomembership.

Limitedpartnerships

Limitedpartnershipsmusthaveatleastonegeneralpartner,whohas

unlimitedliability.Thelimitedpartnersliabilitiesarelimitedtotheextent

oftheircapitalcontribution,asspecifiedinawrittenagreementbetween


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theparties.Thelimitedpartnersareprohibitedfromtakingpartin

managingthepartnership.

Foreignpartnerships

Foreignpartnerships,

general

or

limited,

may

operate

in

Israel

on

conditionthattheyprovideinformationtotheRegistrarofPartnerships,

includingdetailsofthepartnersandofatleastoneIsraeliresidentwhois

willingtoacceptlegalnoticesontheirbehalf.Registrationrulesarethe

sameasforIsraelipartnerships.

Otherformsofbusinessorganisations

Jointventures

Jointventuresaredistinguishedfrompartnershipsbytheseparateliability

attachedtoeachparticipantsownobligations.Thelegaldocumentation

shouldbeclearthatjointandseveralliabilitycannotbeimplied.

Soleproprietorships

Anyindividualmayoperateasasoleproprietor.Therearenostatutory

auditrequirements,buttherearetransactionrecordingrequirementsand

thetaxauthoritieshavetherighttoexaminethebooksandrecords.A

businessnamemayberegistered(doingbusinessas)butthebusinessis

notaseparatelegalentityandtheproprietorhasunlimitedliabilityfor

businessdebtsandobligations.

Cooperatives

Cooperativesocietiesexistmainlyinagriculture,marketing,retailing,bus

transportandtrucking.TheCooperativeSocietiesOrdinancegoverns

theiractivities

and

the

co

operatives

must

register

with

the

Registrar

of

CooperativesattheMinistryofLabour.

Nonprofitorganisations

Aspeciallawenactedin1980governsnonprofitorganisationswhich

permitsactivitiestobeconductedthroughanassociation. An

associationmusthaveamanagementcommittee,ageneralmeetingof

membersoftheassociationandanauditcommittee.


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5. Labour

Employeremployeerelations

Employer employeerelationshipsaregovernedbyseveralmechanisms

arrangedinaspecificorderthatcreatesaformlikeapyramidwhereeach

levelcantcontradictthelevelabove,onlytoexpandit.Thelawsarethe

highestlevelandtheydeterminetheminimumrightsthatemployeesare

entitledto.Followingthelawsarethecollectiveagreements,widening

ordersthatextendthecollectiveagreementstotherestoftheeconomy,

collectivebargainingandpersonalemploymentcontracts.Thecollective

bargainingismadebetweentheemployersorganisations,thetrade

unionsandthegovernment.Collectivebargainingoperatesintheprivate

sectoras

well;

however

there

is

agrowing

trend

towards

personal

employmentcontracts.

Unions

ThedominantlabourorganisationinIsraelistheHistadrut,thegeneral

federationoflabour.Thelabourcourtshaverecognisedtherightto

establishotherlabourorganisationsandthispossibilityexists,however

therearentcountrywideunionssuchastheHistadrut.

Employmentlegislationandregulations

Theworking

week

is

43

hours

by

the

working

and

resting

hours

law.

Theminimumwageslawdeterminesthattheminimumwageperanhour

is20.7NISandperamonthis3,850.18NIS.

Theretirementageisthesameformenandwomen:67.

Annualvacationlaw

Minimumannualpaidvacationsrangefrom10workingdaysafter1year

ofemploymenttoamaximumof24daysdependentonthenumberof

yearsofemployment.Thisisinadditiontothe11statutorynationaland

religiousholidays

Equalopportunitiesinemploymentlaw

Thislawrulestheemployeesmustreceiveequalpayforthesameworkat

thesameplaceofemployment,aswellasequaltreatmentontermination

ofemployment.Italsoforbidssexualdiscriminationinadvertisingand

fillingjobvacancies,exceptwherethisisdictatedbythenatureofthe

work.In1998thesexualharassmentinaworkplacelawwasenacted.


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Womenlabourlaw

Thepurposeofthislawistostandardisewomensemploymentrightsand

itdealswithmaternityleave,thewomenrightstobeabsentfromwork

suchas

after

an

abortion

and

medical

examinations.

The

law

also

obliges

employersnottodismissawomanbecausesheispregnantandnotto

employawomanwhilesheisonmaternityleave.Thislawincludes

deliberationandpunishmentclauses.

Employmentofworkersbyemploymentagencieslaw

Thepurposeofthislawistocomparetheconditionsandtermsofthose

employedthroughanemploymentagencytothoseemployedbythe

corporationitself.Inordertodosothelawobligesagenciestoseveral

termstoreceivetheirpermit,termsoftheemploymentanddeliberation

clauses.

Collectiveagreementslaw

Thislawdealswithcollectiveagreementsandwideningorders.Thelaw

detailstypesofcollectiveagreement generallythoseconnectedtocertain

industriesandtoaspecificfactoryoraspecificemployer,theunion

structuretoeachtypeofcollectiveagreement,thetermsoftheformatof

thecollectiveagreementsuchasthewritingterm.Thelawalsodetailsthe

rightsandtheobligationsofemployersandemployeesandthetermsto

receiveawideningorderanditspurpose.Thelawincludesdeliberation

andpunishmentclauses.

Severancepaylaw

Thislawdetermineswhoisentitledforcompensationuponseverance,the

rateofthecompensation,whatwillbeincludedinthemonthswagefor

calculatingthecompensationandseveralmoremechanismsconcerning

exceptionalsituationsandterms.

Earlynotificationtoterminationofemploymentlaw

Inordertoendtheemployer employeerelationshipbydismissalor

resignation,bythislaw,theinitiatorhastogivetotheotherparty

notificationpriortoterminationitself.Thislawdeterminesthetermsfor

thenotification.

Inadditiontotheabove,thereareregulationsforspecifiedsituationsand

workers,suchastheequalopportunitiesforpeoplewithlimitations

regulations,thewomenworkregulations,theseverancepayregulation

andregulationsconcerninghealthandsafetyinplacesofwork.


21/42


22/42


Skilledworkers

Theprocedureistoobtainaworkpermitpriortoarrivalbutforeigners

mayenterIsraelonaregularvisitorsvisaandapplyfortheMinisterof

Labourlater.

With

arecommendation

from

the

Minster

of

Labour

the

foreignworkerthenappliestotheMinistryofInteriorandwillneedto

provethathe/shehasadequatehealthinsurancecoverage.TheMinistryof

Interiorwillthenissueavisitorspermitofwork(B1)andamultiple

entrypermitforaperiodofuptoayearwiththepossibilityofextension.

Familiesmayaccompanyforeignspecialists.Eachdependentmustobtain

thenecessaryentryclearancefromthelocalIsraeliconsularofficebefore

enteringthecountry.AdependentthatwishestoworkinIsraelwillneed

toobtainaseparateworkpermit.

Non skilledworkers

Applicationsmust

be

approved

before

the

individual

travels

to

Israel.

In

somecasestheapplicationprocedurecanbeshortened.Thisusually

applieswhenthereisashortageofworkersinspecificindustriessuchas

agricultureandconstruction.TheIsraeliemployerwillneedtosubmita

bankguaranteetotheInteriorMinistrythattheforeignworkerwillleave

thecountryonterminationoftheemployment.

Therearenorestrictionsonthenumberofforeignemployeesonapayroll,

subjecttotheirhavingbeengrantedworkpermits.

Specialarrangements

Foreignpersonnelgenerallymakeminimalsocialsecuritycontributions

andareentitledtolimitedbenefits.Medicalcareforforeignworkersisoftenarrangedbytheiremployers.Foreignresidentsarenotsubjecttothe

NationalHealthInsurancelaw.

Jointbi nationalagreementsexistforthepreventionofdoublepayments

ofsocialsecuritycontributionsrelatingtopersonsworkingabroadfor

periodsof12to36months.ThecountrieswhichIsraelhassuch

agreementsareAustria,Belgium,France,Germany,Italy,theNetherlands,

Sweden,SwitzerlandandtheUnitedKingdom.


23/42


6. Taxation

Thetaxsystem

Ingeneral,Israelitaxescanbeclassifiedintothreemajorcategories:

IncomeTax CapitalGainsTax ValueAddedTax(VAT).

Israelemploystheclassicalsystemofcorporatetaxation,inwhichincome

istaxedatthecorporatelevelandupondistributiontoshareholders.A

partnershipisnotataxableentity;itemsofincomeandlossarepassed

throughtothepartners.

Incometax

AccordingtotheIsraeliIncomeTaxOrdinance,Israeliresidentsaresubject

totaxonapersonalmethod.Asaresult,incomegeneratedbyIsraeli

residentsissubjecttoIsraelitaxwithnodistinctionastohowitwas

generatedorderived.

Foreignresidentsaresubjecttotaxonincomegeneratedorderivedfrom

Israelisources,subjecttotaxtreaties.

Ingeneral,afiscalyearisafullyearstartingonJanuary1andendingon

December31.Withfewexceptions,accountingshouldbeconductedin

Israelicurrency

(NIS).

Incomefortaxpurposesisusuallyreportedontheaccrualbasis.The

incomeofprofessionalscanbereportedonacashbasis.Inaddition,

passiveincomereceivedbyindividualsorcompaniesandincomefrom

servicesthatdonotrequireinventorycanalsobereportedonacashbasis.

Theamountsubjecttotaxationisknownastaxableincome.Itcomprises

thegrossincome,lessapprovedexpensesanddeductions,andother

adjustments,whereapplicable.

Themaximumtaxrateonindividualsintheyear2009is46%.Thetaxon

interestis1015%,subjecttoseveralconditions.

Taxoncompanies

CompaniesareliableforcompanytaxandcapitalgainstaxontheirIsraeli

sourceincomeandonotherincomereceivedinIsrael,whetherornotthey

areresidentinIsrael,unlessprovisionsofadoubletaxationtreatystate

otherwise.Residentcompaniesarealsoliableforcapitalgainstaxontheir

worldwidegainsand,wherecontrolandmanagementareexercisedfrom


24/42


Israel,companytaxonforeignbusinessincome.AnIsraeliresident

companyisdefinedasfollows:

AcompanyregisteredinIsraelwhosemainactivityisinIsrael.However,

if

registered

in

Israel

as

aforeign

company,

it

will

be

deemedanIsraeliresidentcompanyonlyifitsorequests.

AcompanycontrolledandmanagedinIsrael.Taxrates

ThetaxableincomeofIsraelicompaniesissubjecttoacompanytaxof26%

fortheyear2009andwilldecreaseto25%fortheyear2010.

DividendspaidtoIsraeliindividualsorforeignresidents(bothindividuals

andcompanies)aresubjecttowithholdingtaxesof25%.Inthecaseof

existing,validtaxtreatiesbetweenIsraelandothercountries,withholding

taxesaredeterminedineachtreaty.DividendspaidtoanIsraelicompany

byanotherIsraelicompanyaresubjecttowithholdingtaxesof0%.

Approvedenterprises,foreigncontrolledcompanies,andforeigninvestors

maybesubjecttodifferenttaxrates.

Adjustmentsforinflation

Highinflationratesintheearly1980sledtotheenactmentoftheIncome

TaxLaw(AdjustmentforInflation)1985.Thislawprovidesfortaxestobe

calculatedonrealincomeratherthanonprofitresultingfrominflation,as

measuredbytheIsraeliConsumerPriceIndex(CPI),thusprotecting

equityfrominflationaryerosion.

USdollaradjustedreports

TheIncomeTaxLawpermitscertainenterprisestopresenttheirfinancial

reportsandtomanagetheirbooksofaccountsinUSdollars,ortolink

theirIsraelicurrencyfigurestotheexchangerateoftheUSdollarrather

thantheCPI.

Qualifyingentitiesmaybeoneofthefollowing:

Acompanywhosepaidincapitalcontainsforeigninvestmentof25%ormore;

Apartnershipofforeignresidents,whoseentireinvestments(includingloans)aremadeinforeigncurrency;

Acompanywhoseincomeisderivedmainly(atleast90%)fromoperatingvesselsoraircraftininternationalroutes.


25/42


Capitalgainstax

Capitalgainstaxisimposedonthedisposaloffixedandintangibleassets

wherethedisposalpriceisinexcessofthedepreciatedcostfortax

purposes.Regarding

real

estate

in

Israel,

aLand

Appreciation

Tax

is

levied,therulesforwhicharelargelysimilartothoseforcapitalgainstax.

TheIncomeTaxOrdinancedealswithothercapitalgains.

Taxablecapitalgains

Fortaxpurposes,capitalgainsaredividedasfollows:

InflationarygainthepartofthegainderivedfromlinkagetotheConsumerPriceIndex(CPI).

Realgainthedifferencebetweenthetotalcapitalgainandtheinflationarygain.

Theinflationary

gain

has

been

exempt

from

taxes

since

January

1994

and

subjectto10%taxontheaccruedportionuntilthen.Thetaxrateonreal

gainsis25%20%forindividualsand25%forcompanies.

Benefitstoforeignresidents

Foreignresidentsaresubjecttothesametaxrates,butintheeventthat

theyinvestforeigncurrency,theymaychoosetocalculatethegainsinthe

originalcurrencyratherthanIsraelicurrency.

Inaddition,theinflationarygainonthesaleofsharesofanIsraeli

company,purchasedoriginallywithforeigncurrency,isexemptfromtax

ifthe

calculation

is

based

on

the

changes

in

the

specific

exchange

rates

to

theIsraeliShekel.

Salesofstocks

CapitalgainsonthesaleofsecuritiestradedontheTASEaresubjecttoa

taxof20%forindividualsand25%26%forcompanies.

Gainsfromthesaleofstocksofcompaniestradedabroadonapproved

stockexchangesbyIsraeliresidentsaresubjecttotaxregulationsasif

tradedontheTASE.ForeignresidentsinIsraelareexemptfromtaxon

gainsfromthesaleofstocksofIsraelicompaniestradedabroadon

approvedstockexchangeunderseveralrestrictions:

ThegainsarenotfromapermanentfactoryinIsraelbelongingtotheforeignresident;

Thestockswerepurchasedbytheforeignresidentaftertherecordingofthecompanysstocksinanapprovedstockexchange

abroad.


26/42


Capitallosses

Capitallossesmaybeoffsetagainstrealcapitalandlandappreciation

gains.Allcapitallossesmaybecarriedoutwithnolimitations.

Valueaddedtax

ValueAddedTax(VAT)isanindirecttax,basedontheconsumptionof

goodsandservicesinIsrael.

VATisleviedateachstageofthesalesanddistributionchain,including

imports,basedontheaddedvalueofeachstage.

Ateachstage,VATiscollectedfromthebuyerandtransferredtothe

CustomsandExciseDivisionattheMinistryofFinance,afterdeducting

VATpaidtosuppliers.Therefore,thefinalconsumerbearstheVAT

chargedbythesupplierwithoutbeingabletodeductit.

VATrates

VATinIsraelisuniformforalltaxabletransactionsattheprevailingrateof

16.5%.

SometransactionsaresubjecttoVATattherateof0%,suchas:

Exportedgoods Freshfruitandvegetables Hotelservicesandcarrentalstotouristswhopayinforeign

currency

Saleofintangibleassetstononresidents TransportationofcargoandpassengerstoandfromIsrael Insurancepremiums Certainservicesrenderedtononresidents.

Payrolltaxes

For2009financialinstitutions(banksandinsurancecompanies)paya16%

payrollandprofittaxinsteadofVAT.Thepayrolltaxwillincreaseto

16.5%starting2010.Approvednonprofitinstitutionspaya7.5%payroll

taxinsteadofVAT.

Othertaxes

Nationalinsurance(socialsecurity)

Bothemployersandemployeespayfornationalinsurance. The

employeesshareincludescompulsoryhealthinsurance.


27/42


Acquisitiontax

Thepurchaseofrealestateissubjecttoanacquisitiontax,tobepaidbythe

buyer. Thetaxisbasedonthepurchasepriceoftheassetasfollows:

Residentialdwellings0.5%5% Other3.5%5%.

Bettermentlevy

Ataxrateof50%isimposedonrealestate,ifitsvalueincreaseddueto

changesinbuildingrightsoruponrezoning.Thetaxispayablewhena

buildingpermitisissuedoruponsaleoftheasset.

Landbettermenttax

Asstatedpreviously,saleofrealestateissubjecttocapitalgainstaxes.

However,special

rules

apply

to

the

sale

of

shares

and

rights

in

companies

inwhichthemajorassetsconsistofrealestate.Thesaleofresidentialreal

estatebyindividualsisexemptfromtaxifcertainconditionsaremet.

Customduty

CertaingoodsimportedtoIsraelaresubjecttocustomduties.Therates

varyandareusuallybasedonCIFvalue.Varioustradeagreementswith

theUSA,EuropeanCommunityandEuropeanFreeTradeAssociation

reducedutiescomparedwithimportsfromothercountries.

Purchasetax

CertaingoodssoldinIsraelaresubjecttopurchasetax.

Municipaltax

Municipalitiesimposeannualtaxesonrealestate,dependingonlocation,

actualbuiltareaanduse.

Specialtaxfreezones

EilatFreeTradeZone

Companies

doing

business

in

Eilat

or

residing

there

are

exempt

from

VAT;

individualsresidingreceivetaxcredits;andemployersreceivearebateon

labourcostspaidinEilat.

FreePortZones

TheportsofHaifa,AshdodandEilatcontainareaswhichhavebeen

declaredFreePortZones.CompanieslocatedintheFreePortZonesare


28/42


eligibleforbenefits,includinglowercompanytaxrates(inEilat),lower

withholdingtaxondividends(inEilat),exemptionfrompropertytaxand

unrestricteduseofforeigncurrency.Atpresent,theFreePortZonesLaw

hasnotbeenimplemented.

Taxtreaties

Israelhassignedtaxtreatieswithseveralcountries.Thefollowingtable

summariseswithholdingtaxratesondividends,interestandroyaltiesin

accordancewithvarioustaxtreaties.


29/42


Dividends

(%)

Interests(%) Royalties

(%)

Nontreatycountries 25 25 25

Austria 25 15 10

Belgium 15 15 10/0

Belarus 10 0/5/10 5/10

Brazil 15/10 15 15/10

Bulgaria 12.5/10 5/10 12.5

Canada 15 15 15

CzechRepublic 15/5 10/0 5

Denmark 25 25 10

Finland 15/10/5 10/5 10

France 15/10/5 10/5 10

Germany 25 15/0 5/0

Greece 25/10 10

Hungary 15/5 0 0

India 10 10/0 10

Ireland

10

10/5

10

Italy 15/10 10 10/0

Jamaica 22.5/15 15/0 10

Japan 15/5 10 10

Mexico 5/10 10 10

Netherlands 15/10/5 15/10 15/10

Norway 25 25 10

PeoplesRepublicof

China

10 7/10 10

Philippines 15/10 10 Upto15

Poland 5/10 5 5/10

Romania 15 10/5 10

Russia 10 10/0 10


30/42


Dividends

(%)

Interests(%) Royalties

(%)

Singapore 5/10 7 5

Slovakia 5/10 2/5/10 10

SouthAfrica 25 25 0/15

SouthKorea 15/10/5 7.5/10 2/5

Spain 10 5/10 5/7

Sweden 0 25 0

Switzerland 5/15 5/10 5

Thailand 10/15 10/15 5/15

Turkey 10 10/0 10

UnitedKingdom 15 15 15/0

UnitedStatesof

America

25/15/12.5 17.5/10 15/10

Uzbekistan 10 10 5/10

Ingeneral,suchtreatiesareintendedtoavoiddoubletaxationsothattaxes

arenotpaidinbothcountriesonthesameincome.Eachcountrycollects

taxesonincomederivedfromitsterritoryaccordingtoitstaxlaws,with

allowancesfortaxespaidintheothercountry.Theincomeofaforeign

citizenorresidentissubjecttotaxinIsraelonlyonincomederivedfrom

Israelisources,andtheincomeofanIsraelicitizenorresidentissubjectto

theforeigncountrystaxonincomefromsourcesintheforeigncountry.

Suchtreatiesgenerallycovercorporationsandindividualsresidinginboth

countriesorholdingdualcitizenship.


31/42


7. Account ing & report ing

ThebankingsystemIsraelhasawelldevelopedandmodernbankingsystemthatprovidesa

widerangeofbanking,financialandcreditservices. Thefollowing

featurescharacterisethesystem:

Ahighdegreeofconcentration,withtwomajorbankinggroupsaccountingforapproximately60%ofthetotalassetsofthe

commercialbanksinIsrael.ThesetwogroupsareBankLeumiand

BankHapoalim.ThreeothersignificantbankinggroupsareIsrael

DiscountBank,MizrahiTefahotBankandFirstInternationalBank

ofIsraelwhichaccountforanother33%.

Liquidityregulations(currentlybeingeased)thatlimitthevolumeoffreecreditavailabletothepublic.

ArelativelyhighlevelofinternationalactivitiesandinteractionwithmajorforeignbanksbyIsraelicommercialbanks.

Centralbank

TheBankofIsraelisthecountryscentralbank.TheBankofIsraelLaw

57141954,asamended,andotherlawsdealingwithbankingand

monetarymatters,determinethefunctionsandpowersoftheBank(andits

governor)asnotedbelow:

TheBankactsasthegovernmentsbankerandfiscalagentandasthepublicsectorsdealerinthelocalfinancialmarkets;

Ithasthesolerighttoissuecurrency; ItisresponsiblefordevisingandimplementingIsraelsmonetary

policy;

Itactsasthebankerforcommercialandotherbanks,fulfillingtheroleoflenderoflastresort;

Itmaintainsthecountrysforeigncurrencyreservesandpublishestherepresentativeexchangeratesofthenewshekelagainstthe

principalforeigncurrenciesdaily;

Itregulatesandsupervisescommercialandotherbanks,includingtheirforeignactivities,inordertoensuresoundpracticesandprotectthepublicinterest;

Itisresponsiblefortheavailabilityofexportfinancing; Itisresponsibleforforeignexchangecontrols.

TheGovernoroftheBankactsasthegovernmentsofficialeconomic

adviser.TheBanksprimaryfunctionsareinthefieldofmonetarypolicy,

whereitsupervisesanddirectsthefundsmadeavailableasloanstothe


32/42


public.Incarryingoutitsmonetarypolicy,theBankofIsraelmust

navigatebetweenwhataresometimesconflictingmacroeconomictargets,

suchaspromotingfullemployment,loweringandcontainingtherateof

inflation,improvingthebalanceofpayments,andmaintainingeconomic

growth.

Commercialbanking

CommercialbanksinIsraelprovideallthecustomarywholesaleandretail

bankingservicesandalsoprovidemerchantbanking,underwritingand

portfoliomanagementserviceseitherdirectlyorthroughsubsidiaries,as

follows:

Shorttermfinancing Financialinstruments Investorservices Underwritingservices Mortgagebanking Otheradditionalservices.

Internationaltransactions

Israelibanksareexperiencedindealingwithinternationaltransactionsas

fundsaretransferredtoandfromIsraelregularly,forbothbusinessand

privatepurposes.Thebanksmaintainsubsidiariesandbranchesabroad

andhaveafullrangeofinternationalconnections.Thebanksfacilities

havegrowninlinewiththegrowthofIsraelsexportandimports.

Investment/merchantbanking

Investmentbankingisconductedbythecommercialbanksandby

investmentbanks(subsidiariesoftwolargebanks).

Commercialbankslegislationarenotallowedtoinvestmorethan20%

controlinnonfinancialinvestment.Theseinvestmentsarealsolimitedtoa

percentageofthebanksequity.Merchantbanksmayforacertainperiod

exceedtheselimits.

Fullinvestmentbankingservicesareoffered,includingraisinglongterm

capitalthroughpublicissuesorprivateplacementsofsharesor

debentures,

with

or

without

convertible

warrants

or

options.

Companies

areassistedinpreparingforcapitalissuesinthelocalandoverseascapital

markets.

Leasingcompanies

Leasingcompaniesareactiveinprovidingassetbackedfinancetoindustry

andcommerceandtoprivateindividuals.Awiderangeofequipmentis


33/42


leased,includingheavyandlightindustrialequipment,computersand

peripherals,andmotorvehicles.

Investmentinstitutions

Insurancecompanies

Insurancecompaniesareregulatedandtheirinvestmentactivitiesfrom

insurancefundsarestrictlycontrolled.Commercialfinancingisgenerally

permissibleonlyfromtheirownequityfunds.

Pensionandotherfunds

Pensionfunds,severancepayfunds,mutualfundsandunittrustsinvestin

securitiesdesignatedbylawandarenotsourcesforcommercialfinancing.

Financialmarkets

TheTASE

TheTelAvivStockExchange,establishedin1953,isthetradingplacefor

securitiesissuedbypubliccompaniesandgovernmentbonds.About643

companiesarelisted.Duringtherecentyearsvarietyofinvestmenttools

wereadoptedinTASE,whichincludesecuritiesandgovernmentbonds,

shares,options,derivatives,mutualfunds,bonds,ETFs.Thesemarket

securitiesaretradeddaily.Itisestimatedthatsharesdailytradevolume

sumstoNIS2,000M.

Tradingin

securities

and

raising

capital

from

the

public

are

regulated

by

theSecuritiesActtoprotecttheinterestofinvestors.TheSecurities

Authorityauthorisestheissuanceofprospectuses,checksfinancialreports

andspecialtransactions,supervisestheTASEandinvestigatesissues

regardingtheSecuritiesAct.

Toissuesecuritiestothepublic,theissuermustissueaprospectus

accordingtospecificrequirements,similartothoseprevailingintheUS.

Prerequisites

ListingstocksontheTASEissubjecttotheapprovaloftheSecurities

AuthorityBoard

and

to

certain

prerequisites:

Theissuedcapitalstockisfullypaid TheArticlesofAssociationdonotlimitthetransferabilityofthe

listedsecurities

Thereisanadequatespread,bothinvalueanddistribution,ofthelistedsecurities


34/42


Theofferingandissuanceshouldbeinequaltermsandpricetoall,eventhoughitispermittedtomakecertaindistinctions

regardingcertaininvestorsorissuance,asdeterminedinthe

guidelinesoftheTASE

TheArticlesofAssociationprovidethatvotinginthegeneralmeetingwillbethroughcountingvotes

ThecompanyagreestoabidebytherulesoftheTASEanditsBoard.

Listingrequirements

ForacompanytolistitssharesontheTASE,itmustmeetcertaincriteria.

RegardinganInitialPublicOffering(IPO),certainmajorfinancialcriteria

apply,suchas:

Yearsofbusinessactivity. Stockholdersequitybeforeandafterregistration. Publicsequity.

Bondtrading

ThemostsignificantgroupofbondslistedontheTASEisgovernmentand

privatecompanybonds. TherearebondslinkedtotheCPIortoforeign

currencies,principallytotheexchangerateoftheUSdollar,andseveral

aretradedinforeigncurrency.

Duetothereductioningovernmentexpenditureandbudgetarydeficit

togetherwiththeGovernmentsbudgetarypolicy,thebondrefinancing

needsof

the

government

have

been

reduced

since

1986.

As

aresult,

there

havebeenincreasedprivatecompanybondissueswhichareclaiminga

greaterproportionoftheoverallmarket.Thereformofthelocalcapital

markethasalsoeasedthewayforcompaniestoraisecapital,andpublic

issuesofsharesingovernmentcompanieshavebroadenedthescopeof

tradingontheTASE.

TASEtradingsystems

InAugust1997,theTASEsuccessfullyintroducedafullyonlinetrading

systemallowingforfluent,simultaneous,highlyliquidtradingactivity

devoidoftradingarenas.Allsharesarenowtradedinthisonlinetrading

systemincludingconvertiblesandbonds.

Thefuturesandderivativesmarketopenedin1993. Callandputoptions

aretradedontheTA25index,basedonthe25shareswithintheTASE100

withthehighestmarketvalue.


35/42


Israelicompaniestradedonforeignstockexchanges

Morethan150Israelicompanieshavesoughttoraiseequitycapital

throughoverseascapitalmarkets.Thesecompaniesaremainlyhightech

orsoftware

companies.

Most

are

traded

in

the

US

over

the

counter

(NASDAQ)orarequotedontheAmericanortheNewYorkStock

Exchanges.CertainofthesecompaniesarealsotradedontheTASE.There

arealso30IsraelicompanieslistedinLondoneitherontheAlternative

InvestmentMarketorontheLondonStockExchange,andontheNouveau

Marche.

ProhibitionofMoneyLaunderingLaw

TheProhibitionofMoneyLaunderingLawwaspublishedin2002.Thelaw

obligatesfinancialinstitutionssuchasbanks,stockexchangesandmoney

changerstonotifytotheauthorities(IRS,ProhibitionofMoney

Launderingtaskforce)theidentificationofthepersonorcompanyrequestingservicessuchasinvestingmoney,openinganaccountonbehalf

ofsomeoneelse,theamountofmoneyanditsorigin.

Accountingprinciples

AsofJuly2006,alldomesticlistedcompaniesinIsraelhavebeenableto

useInternationalFinancialReportingSystems(IFRSs)insteadofnational

accountingstandards.During2008Israellistedcompaniesreplacedfully

nationalGAAPwithIFRS.

Asformostofprivatecompaniesstilluse,IsraeliGAAPwhichincludes

diverseprinciples

regarding

presentation,

accounting

policy

and

disclosure,itshouldbementionedthatmostofthenewIsraeliGAAPnew

pronouncementsaretranslationsofIFRSpronouncements,whichare

primarily:

SinceJanuary12004thefinancialstatementsarereportedinnominalvaluesandarenotadjustedforchangesinpurchasing

powerexpressedintheriseoftheIsraeliConsumerPriceIndex

(CPI);

Principlesregardingconsolidationoffinancialstatementsorproportionateconsolidation,andpresentationofinvestmentson

anequitybasis;

Requiredaccountingpolicyforinterimfinancialstatements; Accountingrelatedtoconstructionofbuildingsheldforsaleand

contractedprojects;

Accountingpolicyandreportingrulesonseverance,retirement,pensionandvacationpay;

Disclosurerequirementsandthepolicyoftransactionsbetweenrelatedparties;


36/42


Anevaluationofthepresentationofmarketablesecuritiesinfinancialstatements;

Taximplicationsinfinancialstatements; Accountingpolicyofconvertiblesecurities(warrantsand

convertibleliabilities);

Structureofcashflowstatements; Treatingandpresentingofsubsequentevents; Accountingprinciplesofnonprofitorganisations; Presentationofearningpershare,includingconsiderationof

convertiblesecurities;

Investmentgrantsfromtheperspectivesofpresentationandamortisation;

Structureofthefinancialstatementspresentationforindustrial,commercial,publiclytradedandothercompanies

Accountingpolicyforventurecapitalfunds; Disclosureregardinguncertaintiesderivedfromyear2000.

Onemergingissues,IsraelihightechcompaniesfrequentlyapplyIFRS&

USGAAPincludingStatementsofPositionoftheAmericanInstituteof

CPAs.

Theprovisionsoflawsrelatedspecificallytocertainsectors(suchasbanks,

insurancecompanies,municipalities,etc.)andtocompanieslistedonthe

TASE(suchasIsraeliSecuritiesRegulations)areofprimaryimportance.

Theseprovisionsdetermine,interalia,theaccountingpolicy,presentationanddisclosureinthefinancialstatements.

Recordingof

transactions

AccordingtoIsraeliGAAPtransactionsarerecordedandthefinancial

statementsarepreparedonthebasisofhistoricalcostandaccordingtothe

followingbasicaccountingprinciples:

Goingconcern; Theaccrualsormatchingconcepts; Theprudenceconceptorconservatisminthatonlyrealisedprofits

atthebalancesheetdateareincluded,whereasprovisionsforall

losses,includingthoserealisedafterthebalancesheetdateare

included;

Theaccountingprinciplesareconsistentlyapplied.Incertaincases,someprofessionalpartnershipsandindividualsusecash

basisaccounting.

Otheraccountingprinciples

SomeoftheotheraccountingprinciplesinIsraelrelatetoassetvaluation;

purchaseofanotherbusiness;consolidatedfinancialstatements;


37/42


38/42


8. UHY fi rm s in I srael

UHYShtainmetzAminoach&Co.CertifiedPublicAccountants(Israel)

88Igal

Alon

Street

TelAviv

Israel

Tel: +972777700000

Web: www.cpa.co.il

Email: [email protected]

UHYShtainmetzAminoach&Co.isrankedasoneofIsraelslargestand

leadingaccountingfirms.Thefirmprovidescomprehensiveaccounting

servicesof

the

highest

quality

and

professional

expertise,

and

in

particular

themostcomplexaspectsofdomesticandinternationaltaxationmatters.

Thefirmsclientsincludemorethan1,700Israelicompaniesand

representativesofoverseasfirms,amongthemsubsidiariesofthelargest

groupsandholdingcompaniesintheIsraelieconomyaswellasbusinesses

fromallsectorsoftheeconomysuchasmultinationalcompanies,high

techfirms,constructionandrealestate,industrial,tradeandservices

concerns.

SpecialEmphasisonTaxMatters

Thefirmsuniqueprofessionalstructureenablesittoprovidethemost

creativeand

efficient

tax

strategies

and

offer

unique

insights,

which

generateenormoussavingsandeffectiveresultsforclients.Thefirmhas

acquiredexperienceandextensiveknowhowintaxconsultingfor

internationaltransactions(rolling),taxarrangements,voluntarydiligence

procedures,andtrusteeshiparrangementsforoptionsandsharesunder

clause102.

PCAOBregistered

UHYShtainmetzAminoach&Co.isoneofthefewaccountingfirmsin

IsraelauthorisedtosubmittotheU.S.SecuritiesAuthority(SEC)the

reportsofcompaniestradedontheNASDAQmarketandotherU.S.stock

exchanges,as

well

as

the

reports

of

their

subsidiaries.

ProfessionalPublications

ThefirmhaswrittenandpublishedTheTaxationofPensionandProvident

Fundsdossier.This700pagesdossieristheleadingpublicationofitskind

inIsraelandisdistributedasaprinteddossierandasadigitaldossier.The

dossierhassoldover2,000copies,amongothers,totheIsraelTax

AuthoritywhichpurchaseddozensofcopiesforuseoftheIncomeTax


39/42


Commissionandincometaxofficials.ThefirmisaregularauthorforYeda

Lemeyda,NetoPlus,andKolAtidHashavimswebsite.

DynamicGrowth

Establishedin1987,UHYShtainmetzAminoach&Co.isledby:Reem

Aminoach,KobiShtainmetz,EhudAvrahami,ShmulikHirshfeld,Ofer

Cheredman,AlonBer,HadassSharim,LimorBenDavidandKobiIttah,

whobringtothefirmextensiveexperience,comprehensiveknowhowand

uniqueinsightsandcreativestrategiesintoaccountingandtaxationissues

forthebenefitofclients.OferCheredman,whowasuntilrecently

DepartmentalDirectoroftheIncomeTaxAuthority,specialisesin

internationaltaxationandmergersandacquisitions,andservedasa

professionalconsultanttotaxassessmentofficers.KobiIttah,theformer

DirectoroftheIncomeTaxAuthoritysDepartmentofPensionand

ProvidentFundsandformerCEOoftheAtudotPensionFund,joinedthe

firmin2007,reflectingtherapidgrowththatthefirmiscurrentlyundergoinginitsactivities,professionalismandvolumeofclients.

ComprehensiveServices

Thefirmscomprehensiveaccountancyservicesinclude:preparingand

auditingfinancialreports,evaluationsandprofessionalopinions,

arbitrationmanagement,trustservicesincludingtrusteeshipsforbond

offeringsandhedgefunds,generalandongoingfinancialandeconomic

consultingandallaspectsoftaxationincludingtaxplanning,representing

clientsbeforethetaxauthoritiesandinternationaltaxation.Servicesare

tailoredtoeachindividualclientsneedsinawiderangeofareas,and

includethemostsophisticatedtaxplanningandguidanceforpublicandprivatecompanies,formultinationalcorporationsandnonprofit

organisations.

PensionsandProvidentFunds

ThefirmisIsraelsleadingspecialistinthetaxationaspectsofpension

plans,providentfundsandretirementplans.Thefirmspartners,in

cooperationwithKobiIttah,havewrittenabookofabout700pagesonthe

subject.Thisbookisconsideredtobetheleadingpublicationonpension

plansandprovidentfundsinIsrael.Itisupdatedinanongoingmanner

andincludesallthelatestamendmentsonthetopicofpensiontaxes. One

ofthefeaturesofthepublicationisanonlinedatabankontheInternet.

OnLineAccountancy

UHYShtainmetzAminoach&Co.isoneofthepioneersofonline

accountancybyprovidingitsclientswithdirectonlineaccessatalltimes

tothelatestaccountancyandtaxinformation.Thefirmhasestablisheda

protectedInternetsitethroughwhichclientscanreceiverealtime


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informationabouttheirbusinesses.UHYShtainmetzAminoach&Co.is

oneoftheonlymajorfirmsinIsraeltosupplythisservice.

GlobesSurvey(LeadingIsraeliFinancialnewspaper)

InasurveyconductedonJune2008amongaccountantsbytheIsraeli

financialnewspaperGlobesthe10qualitativeIsraelifirmswereranked

accordingtothreeparameters:taxes,inspectionandhandlinghightech

companies.Thefirmwasrankedamongthe10leadingfirmsinevery

parameter.

Partners

ReemAminoach,KobiShtainmetz,OferCheredman,ShmulikHirshfeld,

EhudAvrahami,AlonBer,KobiIttah.

ManagementProfile:

ReemAminoachEducation:CertifiedPublicAccountant,M.B.A.,TelAvivUniv.;B.A.,

(summacumlaude),AccountingandEconomics,TelAvivUniv.During

thecourseofhisstudieshereceivedaletterofhonorfromtheKnesset

(Israellegislationinstitute),andascholarshipforexcellencefromthe

PublicAccountantsofficeforexcellenceintaxationandascholarshipfor

excellencefromtheWolfeFundandmore.OtherCurrentPositions:

Director&ChairmanoftheAuditingCommitteeofZimLtd.;Directorof

OferBros.AssetsLtd.AreasofExpertise:OngoingBusiness

Accompaniment.MilitaryRank:Colonel(Res.).

KobiShtainmetzEducation:CertifiedPublicAccountantandQualifiedLawyer,M.A.,

Economics,TelAvivUniversity;LL.B.,TelAvivUniversity;B.A.,

AccountingandEconomics,TelAvivUniversity.PastPositions:Director,

MizrachiTefahotBankandChairmanoftheBanksAuditingCommittee.

AreasofExpertise:SpecialistinCorporateTaxation,Approved

Enterprises,andInternationalTaxationandoneofthecountrysleading

expertsinFinancialTaxation.

ShmulikHirshfeld

Education:CertifiedPublicAccountantandQualifiedLawyer,LL.B.,Bar

IlanUniversity;B.A.,Accounting.OtherCurrentPositions:MemberoftheTaxCommittee,IsraelBarAssociation;LecturerintheIsraelBarassociation

onTaxationissues;LecturerintheSecuritiesTaxationsectorandCreative

TaxPlanningatMATI,JohnBryceandmore.PastPositions:Department

ofTaxation,SomekhChaikin(KPMG);TaxDepartment,Gornitzky&Co.

Lawyers;DirectorofHalmanAldubi. AreasofExpertise:Expertisein


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HadassSharim

Education:CertifiedPublicAccountantandaqualifiedlawyer.LL.B.,B.A.,

BusinessAdministration,TheCollegeofManagement.Professional

Background:PartnerandTaxationManager,EhudPorat&Co.;Senior

Supervisor,IsraelTaxAuthority.AreasofExpertise:RulingArrangements,

CompaniesTaxation,RealEstateTaxation.

LimorBenDavid

Education:CertifiedPublicAccountantandaqualifiedlawyer.LL.B.

ProfessionalBackground:CapitalMarketFieldatKantor&Co.

9. UHY off ices w orldw ideForcontactdetailsofUHYofficesworldwide,orfordetailsonhowto

contacttheUHYexecutiveoffice,pleasevisitwww.uhy.com

Doing Business in Israel

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