The Registration of a Fiscal Representative Office in Israel

The Registration of a Fiscal Representative Office in Israel

29/01/2020

A fiscal representative office or establishment of an Israeli company?

What does it mean?

The registration and operation of a fiscal representative office; should be registered by a local representative.

The fiscal representative is responsible for the management of the company’s legal and financial affairs in Israel; including all tax-related issues.

The Advantages:

There are several major advantages to a fiscal representative office registration over the establishment of an Israeli company.  

Management and tax-related aspects compared to an Israeli company (a daughter company):

The company’s business and tax-related activities are managed in resemblance to the way Israeli companies are been managed.

When an Israeli daughter company decides to shut down its business activity, the process might be long and challenging. On the other hand, the procedure of shutting down a business activity of a fiscal representative office is an expeditious procedure, which requires only to finalize and to report tax debts. 

Marketing and PR (Public Relation) reasons:

Marketing and PR (Public relationships) might be the reason for some business entities to give up and not to establish a company in Israel from the first place.

Registration of a branch or an office in Israel, by its legal term, is under the supervision of the head office of the company abroad.

That is why, a fiscal representative office in Israel might be the ultimate solution for these kinds of business entities to conduct their business activity in Israel; without the risk of potential damage to the parent company’s relations with other countries that do not have trade relations or have no official statement about their position in relation to Israel.

Note The professional and operational aspects of the organization’s activity in Israel, usually are not handled by the representative office.

No additional Taxation on Dividends:

In most cases, when registering an office with a fiscal representative in Israel, there will be no additional tax on dividends after paying income tax on profits made in Israel.

When a business entity registers as an office with a fiscal representative, withdrawing distributed profits obtained from Israeli business activities isn’t considered a dividend. However, each situation requires a specific examination of the relevant double taxation treaties between the residence country, where the head office located and Israel.

Israel has signed treaties of double taxation with more than 55 countries.

Personal liabilities in Israel:

The fiscal representative office in Israel entails personal liability for all of the Israeli branch tax debts for the foreign company.

As a result, it is customary to provide guarantees and deposits to the trust account of the representative office for the duration of the business activity in Israel. Furthermore, there is a legal business liability cover for the company activities in Israel.

How to get started?

We recommend that you examine and understand all the relevant aspects before making a decision about the type of business entity you want to establish in Israel.

Consult with local experts, who will provide you with the needed local insights and information. Following that, you will be able to consider the advantages, disadvantages and to review all the relevant threats and opportunities to make the best decision for your business. 

If the professional recommendation will support the decision to define business activity as a “fixed presence” in Israel, then a fiscal representative office needs to be open before commencing the activity.

The process of opening and registering such an office can take a few days and up to more than a month, depending on several factors.

As a result, our advice is to make the necessary arrangements in advance, ”the sooner the better”.

Feel free to contact our experts to get a professional consultation.

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