Even without Israeli citizenship, or after an extended period abroad, it is possible to open a business in Israel. Usually the difficulty does not lie in registering the business itself, but rather in the interface between residency status, tax obligations, the bank and international activity.
A returning resident must examine the date of their return and their eligibility for tax benefits. A foreign citizen is sometimes required to present identification documents and to examine economic ties to another country. These differences affect the manner in which the business is registered and the financial conduct going forward.
Does foreign citizenship prevent opening a business in Israel?
Foreign citizenship does not prevent opening a business in Israel. A foreign resident can also conduct business activity in Israel, depending on the nature of the activity and personal circumstances. When registering, it is important to consider the place of activity, the type of business and the sources of income.
The difference between citizenship and residency for tax purposes
Citizenship is a person's legal status vis-à-vis a country. Tax residency refers to the country in which a person's center of life and principal ties are located. Therefore, an Israeli citizen may be a tax resident in another country. Conversely, a foreign citizen may be considered an Israeli resident for tax purposes.
This distinction has direct implications for business conduct and tax obligations. Tax residency may affect taxable income and reporting obligations. It is therefore important to examine residency status separately from citizenship.
Residency for tax purposes and its impact on the business
Tax residency is examined according to the overall ties a person has with Israel and with other countries. Place of residence is only one of the factors taken into account. Family, employment, assets and economic ties may also be relevant. Therefore, the number of days of stay alone does not always tell the full story.
The business implications may be broader than merely opening the tax files. Residency status may affect income from abroad and reporting obligations. It may also be significant in planning future activity. We therefore incorporate the residency question into the initial financial planning.
Returning resident - what is important to check before opening a business?
A returning resident must examine their status (for tax purposes) before commencing business activity. The period of stay abroad may affect eligibility for tax benefits. The date of return to Israel may also be relevant in assessing eligibility.
An examination of assets, investments and income that remained outside Israel is also required. These may continue to exist alongside the business activity in Israel, but it is important to understand how they will fit into the overall financial picture.
Opening a business bank account for a foreign citizen
Opening a business account for a foreign citizen may require advance preparation. The bank may request documents proving the identity of the business owner and the purpose of the account. Documents relating to the structure of the business and its rights holders are sometimes required as well. Requirements vary between banks and according to the characteristics of the activity.
Documents issued abroad may need to be submitted with a notarized translation or appropriate authentication. Depending on the country of origin, an apostille may be required (an official international certification proving that a document is original and was issued by an authorized body in the country, or consular certification). It is important to check the bank's requirements for each document in advance.
Business activity and income from abroad
Income from abroad is examined according to the source of the income and the nature of the activity. Income from services, the sale of products or digital activity may be treated differently. In certain cases, the provisions of the tax treaty between the countries must also be examined.
When the business receives payments from abroad, every transaction must be documented and the related documents retained. For example, invoices, agreements and proof of receipt of payment. If the payment was received in a foreign currency, the transaction amount and the payment currency must be documented.
Summary
Opening a business in Israel as a returning resident or as a foreign citizen requires the examination of various aspects. Alongside registering the business, arrangements must be made with the bank and the required reporting must be addressed.
We provide professional support that includes bookkeeping, VAT reports and an annual report. A dedicated accountant handles the accounting and financial aspects of the business.