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The Registration of a Fiscal Representative Office in Israel

22/04/2020

Starting a new business activity in a new country has its challenges. One of the main points, to begin with, is to choose the legal structure which will meet the local law requirements. To start on the right foot. Consider the options on the table: a fiscal representative office or establishment of an Israeli company?

What does it mean?

The fiscal-representative office should be registered and operated by the company’s appointed local representative. The fiscal representative is responsible for the foreign company’s legal and financial affairs in Israel, including all tax-related issues.

The Advantages:

There are several key 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. In comparison, if a fiscal-representative office needs to shut down its business activity, the procedure is an expeditious procedure, which requires only to finalize and to report tax debts.

Marketing and PR (Public-Relations) reasons:

Marketing and PR (Public-relations) might be the reason for some business entities to give up and not to even consider the establishment of a company in Israel in the first place.

The registration of an Israeli branch or office in Israel, by its legal definition, is under the supervision of the head office of the company abroad and subjected to it.

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. So, there is no risk for 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 with Israel.

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 aren’t considered a dividend. However, each situation requires a specific examination of the relevant double taxation treaties between Israel and the residence country, where the head office is located.

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’s activities in Israel.

How to get started?

We recommend that you examine and understand all the relevant aspects before deciding on the type of business entity you want to establish in Israel.

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 one 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 professional consultation and insights.

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For more information about Fiscal Representation services in Israel:

FISCAL REPRESENTATION IN ISRAEL

THE ALTERNATIVES WHEN STARTING A BUSINESS IN ISRAEL