Israel Doing Business
Elevated risks of instability in Israel's neighbours, including Jordan, Lebanon, Syria, and the West Bank and Gaza, have raised political risks, and investors' risk appetite may be tempered by the potential for a spillover of instability into the country's borders. We highlight rising tension with Iran as a particular concern.
The probability of a successful peace negotiation between Israel and the Palestinian territories has declined markedly, as the Palestinian Authority has sought reconciliation with Hamas and a unilateral path to statehood through the UN. The economy's growth momentum is set to slow in the quarters ahead. Headwinds from the slowing global economy, as well as higher energy prices - which will weigh on private consumption - will drag on headline growth throughout the year. We forecast real GDP growth of 3.2% in 2012, down from an estimated 4.8% in 2011.
Major Forecast Changes We expect Israel's fiscal deficit to increase in 2012. Recently announced spending measures are a further signal that the government's fiscal consolidation plans have taken a back seat, while a precarious macroeconomic outlook will shrink tax revenues and push the shortfall further into the red. We have revised up our 2012 budget deficit forecast from 2.8% of GDP to 3.8%, compared with 3.1% in 2011.
Key Risk To Outlook House prices in Israel have risen rapidly in recent years, raising concerns that a bubble has formed in the property market. However, an increase in supply, coupled with macroprudential measures on the part of the government designed to bring down prices, have seen the market cooling rapidly in the past few months. A sharp drop in prices could lead to a decline in residential construction, weighing on fixed investment throughout the year.
A sharper-than-expected downturn in the global economy - which could be sparked by a credit event in Europe or a 'hard landing' in the Chinese economy - would hit Israel's economy badly. Exports have already been hit by stagnant demand in Europe and elsewhere, and a further slowdown in external demand would see the outlook for exports deteriorating even further.
Business tips
Israel is made up of a large variety of ethnic groups and religions (large Jewish majority with significant Muslim/Christian minorities), and as such, is a multi-cultural society with a wide range of behaviours.
The official languages of the country are Hebrew and Arabic, however most Israelis do speak English. Israeli business culture could be characterised as Mediterranean and sophisticated. The majority of local business people are quite knowledgeable in regard to international business trends, technologies, practices, etc.
Israeli business people tend to be less formal than their European counterparts. In most cases, the dress code is quite informal meaning that ties are usually the exception rather than the norm. Most of the time, there is no clear distinction between social and business interactions.
Israelis are usually quite direct and 'to the point'. The negotiation style of local business men could be considered by some as blunt and direct. Israeli negotiators will usually tell you directly where you stand. On the other hand, the local business culture tends to be quite flexible and creative. Israeli business people will generally be friendly and warm towards their foreign counterparts that come to visit the country.
People usually refer to each other by their first name without the use of formal titles.
Business cards are usually exchanged at the start of meetings, and visitors should have plenty of cards available. Kosher is the Hebrew term meaning fit for consumption or what is ritually correct. Based on Old Testament passages, the kosher regime dictates a variety of dietary laws that are observed by some Jews. In any case, there are different levels of kosher observance and a lot of non-religious Jews in Israel do not observe the kosher tradition.
Restaurants in Israel may be kosher or non-kosher, depending on the clientele. It is estimated that about 60 % of Israelis will respect kosher laws to some degree. When interacting with religious Jews, sensitivity regarding kosher food should be displayed (eg. non-kosher food gifts for religious Jews would not be proper).
Please as well note:
Bribery of foreign public officials is a crime.
Tariffs and non-tariff barriers
Tariff
Import tariffs are based on the Harmonised System.
Israel uses the Customs Valuation principles of the World Trade Organization code. In most cases, the basis for valuation is the CIF price.
In addition to its GATT multilateral trade commitments, Israel as well has free trade agreements with the European Union, EFTA nations, USA, Canada, Hungary, Poland, Slovenia and Turkey. It as well has a preferential trade agreement with Turkey.
Within the framework of services provided by the Department of Customs and VAT, foreigners may contact the Classification Section directly to receive data concerning the classification of goods, inclunding data on taxes and other charges for imported goods. This data is given without charge but is limited to three items per request. Requests should include description of goods and country of origin.
Israeli Department of Customs and VAT
32 Agron Street
PO Box 320
91002 Jerusalem, Israel
Tel: +972 (0)2 670 3253
Fax: +972 (0)2 625 8602
Non-tariff barriers
Import restrictions
General import licenses are required for a specified inventory of goods. In most cases, licences are issued by the Ministry of Industry and Trade and are normally valid for months. Application to import goods must be submitted on an import license application form, together with the order offer and copy of a pro-forma invoice or price quotation of the supplier or manufacturer.
An import licence is required for the following reasons:
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Restrictions on imports from certain nations, which ban or restrict imports from Israel
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Protection of local production
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Consumer protection and maintenance of public security and health
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Division of import quotas with preferred tariffs
Importers must be Israeli citizens or a registered Israeli company.
Kosher certificates are required in order to import food to Israel whenever the importer wishes to market food products with the markings Kosher on them. The body responsible for issuing Kosher certificates is the Chief Rabbinate.
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Product certification, labelling and packaging
Labelling
Israel has very strict labelling requirements. Imports must be labelled with the country of origin, the producer’s name and address, the importer’s name and address, and the contents, weight, and volume of the goods. In 1998, Israel amended its packaging and labeling requirements to allow non-metric packaging as long as data on pricing in standard metric units is provided.
Labelling must be in Hebrew, although other languages can be used if the fonts are no larger than the Hebrew.
Other significant data:
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Outer containers should bear consignee's mark and port mark and should as well be numbered (to accord with packing inventory) unless their contents can be otherwise readily identified.
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A lot of products are subject to specific labelling. Examples are some consumer goods, paper products, handbags, musical recordings, fertilisers, insecticides, chemicals, pharmaceuticals, some food products, seeds and alcoholic beverages.
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Food products sold in Israel must be packaged according to standard uniform weights and volumes, usually metric. Nutritional labelling is compulsory on amount packaged foods. Data on these standards is available from:
Department of Weights and Measures
Ministry of Industry and Trade
30 Agron Street
Jerusalem 94190
Tel: +972 2 622 0601
Fax: +972 2 560 5994
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Special packaging regulations apply to imported fruit and plants (including parts of plants, seeds, vegetables, potatoes).
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No marks may be applied (eg. such as the words patented, registered, registered design and trademark registered used alone), which suggest that patent, design or trademark has been registered in Israel, if such is not the case.
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Imports carrying marks which are or purport to be Israeli trademarks must show actual country of origin.
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Special care should be taken to mark and label outside and inside containers of dangerous articles such as poisons, insecticides, drugs, inflammable goods, ammunition, explosives, reptiles, insects, bacteria and radioactive materials.
Further data on food labelling and packaging may be obtained from:
Israel Ministry of Health, Food Control Administration
12-14 Ha'arba'a Street
Tel Aviv 61070
Tel: +972 3 563 4782
Fax: +972 3 562 5769
Special certificates
This certificate is issued to the importer by the competent authority, as the case may be (Ministry of Health, Agriculture, Transportation, Industry and Commerce, Communications) approving the import of goods as indicated in the certificate and under the terms specified.
Frozen meat requires sanitary certificates:
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A certificate indicating ante- and post-mortem inspection and observance of packing standards is required.
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A further certificate that the meat has been properly frozen or chilled up until the time of shipment is needed.
Hides and animal parts require veterinary certification of their condition, disinfection and/or freedom from disease and infection.
Amount cattle require the usual veterinary certification of examination (within 24 hours of shipment). The certificates for stud cattle require an endorsement regarding tests for tuberculosis and bovine contagious abortion. If transshipped en route, a further veterinary certificate is required showing that the animals have not been in contact with any other stock at the port of embarkation.
Bees must be certified (within 60 days of shipment) free from infections and contagious diseases.
Whisky requires a certificate of age stating that is has been stored in wood for not less than three years.
Mineralised methylated spirits require a supplier's certificate stating the materials and proportions used in denaturing the spirits.
In general, plants are imported to Israel according to the Israeli Plant Protection Law (1956) Plant Import Regulations (1970). According to the regulations, an import permit (IP) from the importing country, and a phytosanitary certificate (PC) from the exporting country, is required for any plant/plant product (unprocessed) import.
An IP is issued to specific genera or species of plants, therefore the application form should be detailed. If a plant is not listed in the Plant Protection and Inspection Services databank ( a division of the Ministry of Agriculture and Rural Development), a pest risk analysis (PRA) should be performed in order to approve the application and determine the requirements. Specific requirements are given within the IP and should be fulfilled with the PC.
For further data and to obtain the application form please contact:
Head, Import Division
Plant Protection and Inspection Services
Ministry of Agriculture and Rural Development
National of Israel
PO Box 78 Bet-Dagan
50250 Israel
Tel: +972 3 968 1500
Fax: +972 3 968 1507
Methods of quoting and payment
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Documentary requirements
Fax signatures are not permitted.
Pro-forma invoice
copies are required.
Commercial invoice
No prescribed form. The importer should indicate the number of copies required, but the Israeli Customs require three copies. It must as well be endorsed by a responsible member of the exporting firm.
The invoice must indicate:
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country of origin (if this is not indicated, a 10 % deposit is levied - refundable only upon lodgement of the corrected invoice)
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place and date of preparing invoice
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names and addresses of seller and buyer
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quantity
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description
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marks and numbers of packages
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a full description of the goods
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unit and total gross
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legal and net weights
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agreed price
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terms of supply
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shipping and payment, including any rebates
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the harmonised tariff number should be indicated as it facilitates clearance
Certificates of origin
Required for fruits, plants, seeds and vegetables.
Bill of lading
To Order bills acceptable copies are usually required and must indicate:
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Consignee's name and address
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Gross weight in metric and imperial measurements
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Import licence number, when applicable
Public health requirements
Amount plants are inspected at port of entry. Flowers, fruit and bark-covered tree trunks require a permit from the Director of Agriculture.
Foodstuffs, beverages, medical and pharmaceutical preparations, fertilisers and insecticides containing DDT cannot be imported.
Foodstuffs must have the true nature of their contents stated on the label (in Hebrew) and as well show the name and address of the manufacturer or producer and the importer.
Food and beverages containing preservatives must show on the label the quantity (in parts per million) and nature of such preservatives.
Foodstuffs may not be packed or sold in containers intended to hold poisons or non-consumable liquids.
Pharmaceutical preparations and household pesticides require a licence from the Ministry of Health.
Medical preparations must be labelled in Hebrew with the name of product, instructions for its use and a statement of its qualities. Hebrew lettering must be at least as large as that of any other language appearing on the label.
The Ministry of Health is the certifying authority for cosmetics, pharmaceuticals, and medical devices.
Specific regulations cover packing and trading in poisons and noxious chemicals.
Washing and cleaning preparations containing hard detergents are prohibited.
Insurance
Goods sold on FOB or C&F terms (Incoterms 1990) must be insured in Israel.
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Taxation
Main import taxes into Israel:
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Customs – The customs rate is determined in the Customs Tariff. There are several methods for calculating the customs rate: according to the price of the goods, a specific duty or a combination of both methods in setting minimum or maximum tariffs. There are as well reduced customs duties or no customs duties pursuant to trade agreements with European Union nations, EFTA nations, USA, the Czech Republic, Slovakia, Turkey, Hungary, Poland, Slovenia, Canada, Mexico, Jordan, Romania and Bulgaria.
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Purchase Tax - Purchase tax is levied on locally manufactured goods and on imported goods. The tax is calculated as a certain percentage of the wholesale price. While purchase tax on locally manufactured goods is charged on the wholesale price, purchase tax on imports is collected from the importer at the port and is calculated according to the price of the goods for customs plus a certain percentage called TAMA (added percentage quota or import increment) which raises the price of the imported product to its wholesale price base.
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Safeguard Duties – These are levied on a limited number of imported goods under the Trade Surcharges Law such as edible oils and oil cakes.
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Value Added Tax (VAT) – A VAT of 15.5 % is charged on the sale of services and goods. The basis for calculating VAT on imports is the price of the goods plus amount the applicable import taxes. This tax is deducted from the VAT that the importer must transfer in respect of his sales.
(Source: The Federation of Israeli Chambers of Commerce)
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