Establishing a Fiscal Representative Office
A fiscal representative office can be established and operated by a local representative responsible for managing the company’s legal and financial affairs in Israel, including all tax-related issues. Normally, the representation office does not handle the operational or professional aspects of the company’s activity in Israel.
A fiscal representative office in Israel offers several important advantages. First, the company’s business and tax-related activities are managed in a manner similar to that of other Israeli companies. If the company decides to shut down its activities in Israel, a fiscal representative office can streamline the process so that it requires only completion, closing out and reporting of tax debts, which is far more expeditious than the process for closing a registered company.
In addition, a fiscal representative office in Israel can be the optimal solution in cases where an enterprise prefers not to establish a company in Israel for marketing and public relation reasons, such as to avoid damaging the parent company’s relationship with countries which are not on good terms with Israel.
Last but not least, in most cases, when working 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 company establishes a fiscal representative office, withdrawing distributed profits obtained from Israeli activities is not considered a dividend. This must be examined in accordance with the double taxation treaties between Germany and Israel.
Nevertheless, a fiscal representative office in Israel entails personal liability for all parent company tax debts in Israel, and as a result, it is customary to provide guarantees and deposits in the representative’s office’s trust accounts for the duration of the business activity in Israel. Also, there is full legal business liability for company activities in Israel.
Before making a decision regarding establishing a business entity in Israel, we strongly recommend that you consult with local experts in order to understand the advantages, disadvantages and consequences of all the existing options. If a decision is made to define business activity as a “fixed presence” in Israel, a fiscal representative office needs to be opened prior to commencing activity. The process of opening and establishing such an office can take from a few days to over one month, depending on a number of factors.
As a result, we recommend making the necessary arrangements as far in advance as possible. Feel free to contact our experts in order to get a professional consultation.