2023 Investment Climate Statements: Israel

Policies Towards Foreign Direct Investment

Israel is open to foreign investment and the government actively encourages and supports the inflow of foreign capital.

The Israeli Ministry of Economy and Industry’s ‘Invest in Israel’ office serves as the government’s investment promotion agency facilitating foreign investment. ‘Invest in Israel’ offers a wide range of services including guidance on Israeli laws, regulations, taxes, incentives, and costs, and facilitation of business connections with peer companies and industry leaders for new investors. ‘Invest in Israel’ also organizes familiarization tours for potential investors and employs a team of advisors for each region of the world.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Israeli legal system protects the rights of both foreign and domestic entities to establish and own business enterprises, as well as the right to engage in remunerative activity. Private enterprises are free to establish, acquire, and dispose of interests in business enterprises. As part of ongoing privatization efforts, the Israeli government encourages foreign investment in privatizing government-owned entities.

Israel’s policies aim to equalize competition between private and public enterprises, although the existence of monopolies and oligopolies in several sectors, including communications infrastructure, food manufacturing and marketing, and some manufacturing segments, stifles competition. In the case of designated monopolies, defined as entities that supply more than 50 percent of the market, the government controls prices.

Israel established a centralized investment screening mechanism for certain inbound foreign investments in October 2019 and updated the regulations in October 2022 to lower the threshold of foreign ownership that would allow the screening committee to review an investment and requiring regulators to establish criteria under which the committee would have to review an investment. Investments in regulated industries (e.g., banking and insurance) require approval by the relevant regulator and may require a government license. The Ministry of Defense also reviews foreign investment in Israel’s defense sector through an informal process. Other regulations may apply, usually on a national treatment basis.

Other Investment Policy Reviews

The World Trade Organization (WTO) conducted its fifth and latest trade policy review of Israel  in July 2018. In the past three years, the Israeli government has not conducted any investment policy reviews through the Organization for Economic Cooperation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD). The OECD concluded an Economic Outlook Note of Israel in November 2022 which can be found here: https://www.oecd.org/economy/israel-economic-snapshot/ 

Business Facilitation

The Israeli government is open and receptive to companies wishing to register businesses in Israel. The business registration process in Israel is relatively clear and straightforward. Four procedures are required to register a standard private limited company and take 12 days to complete, on average, according to the Israeli Ministry of Finance. The foreign investor must obtain company registration documents through a recognized attorney with the Israeli Ministry of Justice and obtain a tax identification number for company taxation and for value added taxes from the Israeli Ministry of Finance. The cost to register a company averages around USD 1,000 depending on attorney and legal fees.

The Israeli Ministry of Economy and Industry’s “Invest in Israel” website provides useful information for companies interested in starting a business or investing in Israel. The website is http://www.investinisrael.gov.il/Pages/default.aspx .

Outward Investment

The Israel Export and International Cooperation Institute is an Israeli government agency operating independently, under the Ministry of Economy and Industry, that helps facilitate trade and business opportunities between Israeli and foreign companies. More information on their activities is available at https://www.export.gov.il/en .

In general, there are no restrictions on Israeli investors seeking to invest abroad. However, investing abroad may be restricted on national security grounds or in certain countries or sectors where the Israeli government deems such investment is not in the national interest.

Transparency of the Regulatory System

Israel’s governing coalition has proposed, but not yet passed, a series of judicial changes which many jurists, economists, business leaders, and politicians have said would weaken Israel’s system of checks and balances and severely limit the independence of Israel’s judiciary. Economists and business leaders have stated that these changes would lead to weaker property rights. As of April 15, 2023, the governing coalition delayed voting on the reform bills and President Isaac Herzog is presiding over negotiations between proponents and opponents of the changes aimed at finding compromises.

Israel promotes open governance and has joined the International Open Government Partnership. The government’s policy is to pursue the goals of transparency and active reporting to the public, public participation, and accountability.

Israel’s regulatory system is transparent. Ministries and regulatory agencies give notice of proposed regulations to the public on a government web site: http://www.knesset.gov.il . The texts of proposed regulations are also published (in Hebrew) on this web site. The government requests comments from the public about proposed regulations. However, the government occasionally issues new or revised regulations without prior comment periods.

Israel is a signatory to the WTO Agreement on Government Procurement (GPA), which covers most Israeli government entities and government-owned corporations. Most of the country’s open international public tenders are published in the local press. U.S. companies have won government tenders, notably in the energy and communications sectors. The perception of excessive bureaucracy and red tape discourages U.S. companies from participating in major projects.

Israel is a member of UNCTAD’s international network of transparent investment procedures. ( http://unctad.org/en/pages/home.aspx ). Foreign and national investors can find detailed information on administrative procedures applicable to investment and income generating operations including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time, and legal basis justifying the procedures.

The Israeli Securities Authority released a recommendation in April 2021 calling for all public companies to publish annual environmental, social, and governance (ESG) reports based on international standards. In May 2021, the Bank of Israel required banks to note in the annual reports the material environmental, social and governance aspects integrated into their targets, and to note concisely the main principles established by the banking corporation for promoting these issues. In December 2022, the Bank Supervisor required banks to disclose to the public their exposure to environmental risks, including climate change, and how those risks might impact their business strategy. Banks must also factor international climate agreements, such as the 2015 Paris Agreement, into their risk management models. The Israeli Capital, Insurance, and Savings Authority, which regulates financial services in the insurance and pension funds industries, also required institutional investors to publish ESG reports.

The World Bank scored Israel 3.5 out of 5 in its measurement of Global Indicators of Regulatory Governance on whether governments publish or consult with the public about proposed regulations: https://rulemaking.worldbank.org/en/data/explorecountries/israel 

International Regulatory Considerations

Israel is not a member of any major economic bloc but has adopted reforms to accept European and international standards without post-shipment inspections in Israel.

Israeli regulatory bodies in the Ministry of Economy and Industry (Standards Institute of Israel), Ministry of Health (Food Control Services), and the Ministry of Agriculture (Veterinary Services and the Plant Protection Service) often adopt standards developed by European standards organizations. Israel’s adoption of European standards rather than international may add costs for some U.S. exports to Israel.

Israel became a member of the WTO in 1995. The Ministry of Economy and Industry’s Standardization Administration regularly notifies the WTO Committee on Technical Barriers to Trade about proposed regulatory changes.

Legal System and Judicial Independence

Israel has a written and consistently applied commercial law based on the British Companies Act of 1948, as amended. The judiciary is independent, but businesses complain about the length of time required to obtain judgments. The Supreme Court is an appellate court that also functions as the High Court of Justice. Israel does not employ a jury system.

Laws and Regulations on Foreign Direct Investment

There are few restrictions on foreign investors, except in defense and other national security industries. Foreign investors are welcome to participate in Israel’s privatization program.

Israeli courts exercise authority in cases within the jurisdiction of Israel. However, if an agreement between involved parties contains an exclusively foreign jurisdiction, the Israeli courts will generally decline to exercise their authority.

Israel’s Ministry of Economy and Industry sponsors the web site “Invest in Israel” to function as a “one-stop-shop” for foreign investors at www.investinisrael.gov.il .

The Investment Promotion Center of the Ministry of Economy and Industry seeks to encourage investment in Israel. The center stresses Israel’s high marks in innovation, entrepreneurship, and Israel’s creative, skilled, and ambitious workforce. The center also promotes Israel’s strong ties to the United States and Europe.

Competition and Antitrust Laws

Israel adopted its comprehensive competition law in 1988. Israel created the Israel Competition Authority (originally called the Israel Antitrust Authority) in 1994 to enforce the competition law.

Expropriation and Compensation

There have been no known expropriations of U.S.-owned businesses in Israel. Israeli law requires adequate payment, with interest from the day of expropriation until final payment, in cases of expropriation.

Dispute Settlement

ICSID Convention and New York Convention

Israel is a member of the International Center for the Settlement of Investment Disputes (ICSID) of the World Bank and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Israel ratified the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards of 1958 in 1959.

Investor-State Dispute Settlement

The Israeli government accepts binding international arbitration of investment disputes between foreign investors and the state. Israel’s Arbitration Law of 1968 governs both domestic and international arbitration proceedings in the country. The Israeli Knesset amended the law most recently in 2008. There are no known extrajudicial actions against foreign investors.

International Commercial Arbitration and Foreign Courts

Israel formally institutionalized mediation in 1992 with the amendment of the Courts Law of 1984. The amendment granted courts the authority to refer civil disputes to mediation or arbitration with party consent. The Israeli courts tend to uphold and enforce arbitration agreements. Israel’s Arbitration Law predates the United Nations Commission on International Trade Law.

Bankruptcy Regulations

Israel has established and well-regarded bankruptcy measures in place. Israeli Bankruptcy Law has several layers, some rooted in Common Law, when Palestine was under the British mandate in 1917-1948. Bankruptcy Law in Israel is based on the 1980 Bankruptcy Ordinance, the 1985 Bankruptcy Regulations, and the 2018 Law for Insolvency and Economic Recovery.

Investment Incentives

The State of Israel encourages both local and foreign investment by offering a wide range of incentives and benefits to investors in industry, tourism, and real estate. The Law for Encouragement of Capital Investment and the Law for the Encouragement of Industrial Research and Design include grants and tax benefits for potential investors. Israel’s Ministry of Economy and Industry places a priority on investments in hi-tech companies and R&D activities. The Ministry of Economy and Industry’s Small and Medium Business Agency offers special loan programs for Arab women. Israel also offers tax benefits for new immigrants and Israeli citizens returning from residing abroad, including exemption from capital gains taxes on the sale of assets located outside of Israel.

Most investment incentives available to Israeli citizens are also available to foreign investors. Israel’s Encouragement of Capital Investments Law, 5719-1959, outlines Israel’s investment incentive programs. The Israel Investment Center (IIC) coordinates the country’s investment incentive programs.

For complete information, potential investors should contact:

Invest in Israel
Ministry of Economy and Industry
5 Bank of Israel Street,
Jerusalem 91036
Tel: +972-2-666-2607
Website: www.investinisrael.gov.il 
E-mail: investinisrael@economy.gov.il 

Israel Investment Center
Ministry of Economy and Industry
5 Bank of Israel Street,
Jerusalem 91036
http://economy.gov.il/English/About/Units/Pages/IsraelInvestmentCenter.aspx 
Tel: +972-2-666-2828
Fax: +972-2-666-2905

Foreign Trade Zones/Free Ports/Trade Facilitation

Israel has bilateral Qualifying Industrial Zone (QIZ) Agreements with Egypt and Jordan. The QIZ initiative allows Egypt and Jordan to export products to the United States duty-free, as long as these products contain inputs from Israel (8 percent in the Israel-Jordan QIZ agreement, 10.5 percent in the Israel-Egypt QIZ agreement). Products manufactured in QIZs must comply with strict rules of origin. More information is available at the Israeli Ministry of Economy and Industry’s Foreign Trade Administration website: https://www.gov.il/en/departments/Units/foreign_trade 

Israel has one free trade zone, the Red Sea port city of Eilat.

Performance and Data Localization Requirements

There are no universal performance requirements on investments, but “offset” requirements are often included in sales contracts with the government. There are no limits to private foreign ownership of Israeli firms. Israel’s visa and residency requirements are transparent. The Israeli government does not impose preferential policies on exports by foreign investors.

Real Property

Israel has a modern legal system based on British common law that provides effective means for enforcing property and contractual rights. Courts are independent. Israeli civil procedures provide that local courts may accept judgments of foreign courts. The Israeli judicial system recognizes and enforces secured interests in property. A reliable system of recording such secured interests exists. The Israeli Land Administration, which manages land in Israel on behalf of the government, registers property transactions. Registering or obtaining land rights is a cumbersome process.

Intellectual Property Rights

The Intellectual Property Law Division and the Israel Patent Office (ILPO), both within the Ministry of Justice, are the principal government authorities overseeing the legal protection and enforcement of intellectual property rights (IPR) in Israel. IPR protection in Israel has undergone many changes in recent decades as the Israeli economy has rapidly transformed into a knowledge-based economy.

Israel has not been included in the Special 301 Report or the Notorious Markets List since 2014.

In recent years, Israel revised its IPR legal framework several times to comply with newly signed international treaties. Israel took stronger, more comprehensive steps towards protecting IPR, and the government acknowledges that IPR theft costs rights holders millions of dollars per year, reducing tax revenues and slowing economic growth.

Israel’s Knesset approved Amendment No. 5 to Israel’s Copyright Law of 2007 on January 1, 2019. The amendment aims to establish measures to combat copyright infringement on the internet while preserving the balance among copyright owners, internet users, and the free flow of information and free speech.

The 2018 New Designs Law brought Israel into compliance with The Hague System for International Registration of Industrial designs.

Nevertheless, the United States remains concerned with the limitations of Israel’s copyright legislation, particularly related to digital copyright matters, and with Israel’s interpretation of its commitment to protect data derived from pharmaceutical testing conducted in anticipation of the future marketing of biological products, also known as biologics.

The United States continues to urge Israel to strengthen and improve its IPR enforcement regime. Israel lacks specialized courts, common in other countries with advanced IPR regimes. General civil or administrative courts in Israel typically adjudicate IPR cases.

IPR theft, including trade secret misappropriation, can be common and relatively sophisticated in Israel. The European Commission “closely monitors” IP enforcement in Israel. The EC cites inadequate protection of innovative pharmaceutical products and end-user software piracy as the main issues with IPR enforcement in Israel.

Israel is a member of the WTO and the World Intellectual Property Organization (WIPO). It is a signatory to the Berne Convention for the Protection of Literary and Artistic Works, the Universal Copyright Convention, the Paris Convention for the Protection of Industrial Property, and the Patent Cooperation Treaty.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Resources for Rights Holders

Aisha Salem-Howey
Intellectual Property Attaché for the Middle East & North Africa
U.S. Embassy Abu Dhabi
Tel: +965 2259 1455
E-mail: aisha.salem-howey@trade.gov 

Capital Markets and Portfolio Investment

The Israeli government is supportive of foreign portfolio investment. The Tel Aviv Stock Exchange (TASE) is Israel’s only public stock exchange.

Financial institutions in Israel allocate credit on market terms. Various credit instruments are available to the private sector and foreign investors can receive credit on the local market. Legal, regulatory, and accounting systems are transparent and conform to international norms, although the prevalence of inflation-adjusted accounting means there are differences from U.S. accounting principles.

In the case of publicly traded firms where ownership is widely dispersed, the practice of “cross-shareholding” and “stable shareholder” arrangements to prevent mergers and acquisitions is common, but not directed at preventing foreign investment. Israeli law prevents foreign investment by individuals or businesses from “enemy states,” currently limited to Iran, Syria, and Lebanon.

Money and Banking System

The Bank of Israel (BOI) is Israel’s central bank and regulates all banking activity and monetary policy. Israel has a robust banking system that offers most of the same services as the U.S. banking system. Fees for normal banking transactions are higher in Israel than in the United States and some services do not meet U.S. standards. There are 11 local commercial banks and four foreign banks operating in Israel, according to the BOI. Bank Leumi and Bank Hapoalim, the two largest banks, dominate Israel’s banking sector, collectively controlling nearly 60 percent of Israel’s credit market. The State of Israel holds 6 percent of Bank Leumi’s shares; all of Israel’s other banks are fully private.

Foreign Exchange and Remittances

Foreign Exchange

The “new Israeli shekel” is a freely convertible currency and there are no foreign currency controls. The BOI maintains the option to intervene in foreign currency trading in the event of movements in the exchange rate not in line with fundamental economic conditions or if the BOI assesses the foreign exchange market is not functioning appropriately. It has not intervened in recent years. Israeli citizens can invest in foreign markets without restriction. Foreign investors can open shekel accounts that allow them to invest freely in Israeli companies and securities. These shekel accounts are fully convertible into foreign exchange. Israel’s foreign exchange reserves totaled USD 200.5 billion at the end of March 2023.

Transfers of currency are protected by Article VII of the International Monetary Fund (IMF) Articles of Agreement: http://www.imf.org/External/Pubs/FT/AA/index.htm#art7 

Remittance Policies

Most foreign currency transactions must be carried out through an authorized dealer. An authorized dealer is a banking institution licensed to arrange foreign currency transactions for its clients. The authorized dealer must report large foreign exchange transactions to the Controller of Foreign Currency. There are no limitations or significant delays in the remittance of profits, debt service, or capital gains.

Sovereign Wealth Funds

The Israel Citizens’ Fund, a sovereign wealth fund operated by the BOI to manage the government’s windfall from natural gas sales, was established in June 2022. The fund held USD 617 million as of December 31, 2022. According to the initial investment policy, the fund will invest 60 percent of its assets in stocks, 36.5 percent in bonds and corporate debt, and 3.5 percent in cash. By law, the funds can only be invested in assets outside Israel and in foreign currency to protect against internal economic crisis and to minimize exchange rate effects of the windfall.

Privatization Program

The Government Companies Authority privatized the Port of Haifa in January 2023 through a USD 1.15 billion (NIS 4 billion) sale to a consortium led by the Adani Group. The government of Israel has ongoing plans to fully privatize the Port of Ashdod, as well as Israel Post, which currently has 20 percent of its shares publicly listed.

Additional Resources

Department of State

• Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/);
• Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/); and
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/)
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises ( https://www.state.gov/u-s-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises/)
• Xinjiang Supply Chain Business Advisory ( https://www.state.gov/xinjiang-supply-chain-business-advisory/)

Department of the Treasury

• OFAC Recent Actions ( https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions ).

Department of Labor

• Findings on the Worst Forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings );
• List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods );
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab )
• Comply Chain ( https://www.dol.gov/ilab/complychain/ ).

Climate Issues

Israel significantly strengthened greenhouse gas reduction targets in recent years but does not yet have a national climate strategy, nor has it identified specific expectations for private sector contributions to reaching these targets. There are no binding policies to implement then-Prime Minister Bennett’s 2021 announcement that Israel will achieve net-zero carbon emissions by 2050. Public procurement policies are subject to environmental regulations and often require environmental impact assessments. The government does not explicitly consider environmental and green growth considerations such as resource efficiency, pollution abatement, or climate resilience in awarding procurement contracts.

Resources to Report Corruption

Ministry of Justice
Office of the Director General
29 Salah a-Din Street Jerusalem
+972 73-392 5665
mancal@justice.gov.il 

Transparency International Israel Tel Aviv University, Faculty of Management
+972 3 640 9176
MichaelY@TI-Israel.org