The state of Israel has always been of interest to Russians regardless of their confessional identity or nationality. The history of Israel is closely bound in with the culture and religion of many Russian citizens and citizens of other countries of the former Soviet Union. After diplomatic relations were reestablished between the USSR and Israel in 1991, millions of Russians visited the Promised Land.
Nevertheless, the business image of Israel in the eyes of Russian businessmen has not always been the best. Israel is still perceived as a very expensive country, a jurisdiction with very high taxes and a complicated bureaucratic system, which are very difficult to understand without considerable expenses. However, in the last year the situation has started to change. Today, the State of Israel is one of the few OECD countries that has not joined sanctions against the Russian Federation. Israeli business, unlike its American and European counterparts, is not subject to any restrictions and is generally open to cooperation with Russian companies.
One new opportunity for Russian citizens and companies to do business is to open a subsidiary and current account in Israel. In accordance with Israeli tax law, an Israeli company whose founder is a non-resident of the State of Israel and which does not conduct commercial activities on Israel’s territory is exempt from tax. An important factor is that the company must be registered in the development area (Ezor Pituach), which allows the most benefits to be received. Of course, obtaining this tax status requires serious legal and accounting work, but businessmen in many countries are successfully taking advantage of this profitable opportunity.
The key factor is that an individual who receives money from the company should also not have Israeli tax residency status. In other words, both the founders and the employees of the Israeli company must be a non-Israeli tax residents in order to take full advantage of the tax exemption. Otherwise, the company must be registered as a taxpayer and tax-free status will be lost.
Now the question arises: why does Israel need the above, given that in doing so it attracts companies involved in “offshore” activities? The answer is abundantly clear.
By means of such a very radical tax exemption, the state of Israel attracts international business to the country. A company that is registered in Israel pays for accounting and legal services, and also possibly invests in the purchase of real estate and other assets. All this brings extremely lucrative revenues to the country’s budget.
The Managing Partner of Nordic Star Law Offices Andrei Gusev together with Senior Counsel in the firm and Head of its Tel Aviv office Dan Fayutkin advise Clients on how to open and run a business in Israel.