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Political & Economic Overview

Companies Law
Sector Analyses Intellectual Property
Legal Overview

Investment Issues

Currency & Banking


Political & Economic Overview

The Israeli economy is characterized by modern industry, technological and scientific know-how, intensive activity in foreign trade and a well-developed financial market. The latter part of 2003, however, saw devestating industrial action in protest at huge cutbacks in government spending, affecting public sector employees and pension funds. 2004 may see the first minor growth in GDP but this follows three years of effective contraction of the economy and a deep recession.


Since Israel has few natural resources apart from a highly skilled labor force, priority is given to investment in research and development activities in an effort to promote the technological and qualitative edge of Israeli products in international markets. In addition, Israel boasts a sophisticated service sector, which gives full support to industry through banking, accounting, legal and technological services.


Commercial Outlook

The Israeli economy boomed from the beginning of the 1990s until the end of 2000. The period coincided with a huge wave of skilled immigration from the former Soviet Union, an end of the Arab boycott and progress in peace talks with Arab states and the Palestinians. During this period, the IMF ranked Israel as a fully industrialized country. The present Intifada that began in September 2000, however, transformed optimism into pessimism and the Israeli economy, is now trying to pull itself out of a deep recession.
Population: 6.5 million (2003)
Religions: 79% Jewish, 15% Muslim, 3% Christian, 1% Druze and other
Government: Parliamentary Democracy
Languages: Hebrew, Arabic, English and Russian very widely spoken
Work Week:

Public Sector:

Sunday-Thursday 8:30-12:30

Sunday, Tuesday and Thursday 16:00-18:00

Monetary Unit: New Israeli Shekel (NIS)
Exchange Rate: NIS 4.5: US$ 1

Although the peace talks with the Palestinians have collapsed, peace agreements signed with states in the former Soviet Union, China and India during the 1990s opened up new export markets for Israel and now constitute some of her most important trading partners. The recession has also forced Israel to undertake major economic restructuring including cutting the size of its state budget, particularly its defense budget. This process is far from complete, however, and Israel is facing major industrial action in protest at other cuts in the state budget. Israel has one of the worst strike rates of any industrialized country.


Labor Force

Israel has more scientists and technicians per capita than any other country in the world. About 30 percent of the population has at least thirteen years of education, and about 20 percent of the population holds academic degrees. Almost one quarter of the work force is involved in scientific, academic or technical professions. Another quarter is employed in industry. Israel publishes more scientific articles per capita than any other country in the world.


Israel's labor force is not cheap, although average wages are lower than those prevailing in Europe or in the United States. Israel, however, has an especially professional labor force. Productivity in the high-tech fields increased from US$ 45,000 in sales per worker in 1985 to about US$ 90,000 presently.



Services make up the largest portion of the business sector product (about 40 percent), industry accounts for another 30 percent, transport and communications make up 13 percent, construction 9 percent and water and electricity 4 percent. Agriculture contributes the rest.



Sectoral Analyses



In view of the country's highly skilled labor force and lack of most basic raw materials, industry has concentrated on high added value manufacturing by developing products based on Israel's own scientific creativity and technological innovation. During the past few decades, Israel has made international strides in the fields of medical electronics, agrotechnology, telecommunications, fine chemicals, computer hardware and software, and diamond cutting and polishing. The highest growth rates are in the high-tech sectors, which are not capital intensive and require sophisticated production techniques as well as considerable investment in research and development. Traditional industrial branches include food processing, textiles and fashion, furniture, fertilizers, pesticides, pharmaceuticals, chemicals, and rubber, plastic and metal products.
Transportation and Communications.

In the early years of the State, residential building accounted for 84 percent of total construction output. Subsequently, it fluctuated between 70 to 75 percent until 1991 when it spiked to 86 percent to meet the needs of renewed waves of immigration.

While initially almost all construction stemmed from government initiative and investment, the share of private investment rose gradually, from 33 percent in 1958 to 83 percent in 1989. This share temporarily declined recently as a result of the new immigrants' enormous demand for public housing, which was, to a large extent, government sponsored or subsidized.



Today, Israel meets most of its food needs through domestic production supplemented by imports, mainly of grain, oilseeds, meat, coffee, cocoa and sugar, which are financed by agricultural exports. Israel's farm production consists largely of dairy and poultry products as well as a large variety of flowers, fruit and vegetables. During the winter months, long-stemmed roses, spray carnations, melons, tomatoes, cucumbers, peppers, strawberries, kiwis and avocados are especially successful exports.

Israel's agricultural success is a result of the close interaction between farmers and researchers who have cooperated in developing and applying sophisticated methods in all agricultural branches, as well as technological advancement, new irrigation techniques and innovative agromechanical equipment.


Arms Industry


Israel is one of the top five arms exporters in the world and has signed recent deals worth up to billions of dollars with Turkey, India and China. There are several different arms companies that work in cooperation with the ministry of defense and operate through Sibat that produces an annual defense sales direcetory.



The violence that began in 2000 almost ground the tourism industry to a halt, causing many job losses. Some 70,000 employees were directly employed in the tourism industry and the industry stands at some 30% of its value in 2000. In 1995, some 2.2 million people visited the country, attracted by its geographical diversity, archaeological and religious sites, almost unlimited sunshine and modern resort facilities. Most tourists to Israel come from Europe and the Americas.

External Trade

Due to its small size, Israel is dependent on foreign trade. The modest size of the domestic market limits the potential of economic growth and, accordingly, the possibility of realizing the full potential of production is limited. For this reason, exports play a leading role in the process of sustainable economic growth.

A large part of the increase in the Israeli economy between the years 1992 and 1994 may be attributed to the rapid growth of Israeli exports, due mainly to the addition of new markets in Asia (China and India) and Eastern Europe. In 1994, the real growth of exports was approximately 11 percent, the same as in 1993.

Israel imports 40 percent of its oil from Egypt, valued at approximately US$ 500 million per year. Another 50 percent originates in the Persian Gulf. Total oil imports amount to 9 to 11 million tons per year.



Legal Overview


Israel inherited much of its legal system from the two powers that ruled the country prior to its independence: the Ottoman Empire and the British Mandate. Since its foundation on May 14, 1948, however, Israel has adopted new that replaced most of the laws borrowed from those powers. Today, Israel can boast its own modern and independent legal system.

Israel has no written constitution, but several Basic Laws, which enjoy judicial supremacy have been enacted, and, together with Israel's Declaration of Independence, they form the basis for Israeli constitutional law.



The judiciary enjoys independence from the executive and legislative branches of government. Judges are nominated by the Judicial Appointments Committee and are confirmed by the President.

The court system consists of three tiers: Magistrates Courts, which are located in most sizable communities throughout the country; five District Courts, located in Jerusalem, Tel-Aviv, Beer Sheva, Haifa and Nazareth; and the Supreme Court, which sits in Jerusalem. In addition to the aforementioned courts, there are several specialized courts, including the traffic courts, juvenile courts, labor tribunals, family courts and the religious courts. The latter mostly deal with personal status issues (i.e., marriage and divorce). If, however, both litigants consent, any civil claim may be brought before the religious courts.


Magistrates Court

The Magistrates Courts have jurisdiction over both criminal and civil cases. This jurisdiction is restricted, however, with certain statutory exceptions, to criminal cases for which the maximum punishment is a fine or imprisonment for less than seven years, and to civil claims which do not relate to real property (except for issues of possession or use) or that do not exceed the amount of approximately US$ 285,000. Cross-claims in civil cases, which arise from the same circumstances as a claim that is being tried before the Magistrates Courts, may be heard in the Magistrates Courts regardless of value.

Any judgment of the Magistrates Courts may be appealed before the District Courts. Interim decisions of the Magistrates Courts on civil matters, however, may only be appealed to the District Courts subject to a leave by the Magistrates Court or by a District Court judge.


District Court

The District Court has residual jurisdiction, hence it may hear any civil or criminal case which is not in the jurisdiction of the Magistrates Courts or in the exclusive jurisdiction of another tribunal. The District Court also serves as a court of appeal on judgments of the Magistrates Courts.

Similar to the Magistrates Courts, matters brought before the District Courts are ordinarily heard by one judge. Criminal cases in which the penalty is death or imprisonment of ten years or more and civil appeals from lower instances and other tribunals, however, are heard by a tribunal, except for interim decisions and orders or temporary injunctions.

Judgments of the District Court as a court of first instance may be appealed to the Supreme Court. Other decisions of the District Courts in civil cases, and judgments of the District Courts in appeals, may be appealed to the Supreme Court by leave of the District Court or of the Supreme Court.


Supreme Court

The Supreme Court sits in two capacities. First, it sits as the highest court of appeal in both civil and criminal cases; Second, it sits as the High Court of Justice deciding on matters concerning administrative law and conflicts with the government, as well as petitions for equitable writs such as habeas corpus, mandamus and certiorari.

The Supreme Court ordinarily sits as a panel of three judges, however, in certain circumstances the President of the Supreme Court may decide that a greater odd number of judges is necessary and may increase the number to as many as thirteen judges. In other situations, a single residing judge may grant motions for temporary injunctions and other interim relief or hear appeals on judgments of the District Court that were decided by a single judge.



Investment Issues


Companies Law

A foreign person or enterprise can operate in Israel through several types of business entities. Of primary importance are corporations and partnerships.
Apart from special, unique circumstances, no limitation is placed on the nationality of the shareholders or officers of an Israeli corporation. In fact, all the shareholders, officers and directors may be foreign residents or citizens.



Corporations are governed by the Companies Ordinance (New Version) 1983, which was modeled on British legislation and are the most common form of business entity in Israel. They may be private or public, limited by shares or guarantees, unlimited or foreign.

The procedure for incorporation includes the filing of a memorandum of association and articles, in accordance with the provisions of the Companies Ordinance, with the Registrar of Companies. Those documents may be filed in English.

It should be noted that a new Companies Law has been proposed and is now being debated in the Knesset, the Israeli parliament. If enacted, as is anticipated by many legal scholars, it will bring Israeli legislation even more closely in line with modern, western corporations law, especially prevailing American law.


Private Companies

Israeli private companies are either limited by shares or by guarantee and may have between two to fifty shareholders. They may not offer their shares or debentures to the public, and any transfer of their shares is subject to a board approval. In addition, a private company is not obliged to publish a prospectus in order to issue securities, nor is it required to submit audited financial statements to the Registrar of Companies.


Public Companies

Israeli public companies must have a minimum of seven shareholders. Unlike private companies, they may offer shares and debentures to the public on the stock exchange by issuing a prospectus approved by the Securities Authority or through private placements if the offer is to thirty-five investors or less. They must file financial statements with the Companies Registrar, and, if their shares are listed on the stock exchange, they must also abide by the rules of the exchange and the laws relating to securities and the regulations promulgated by the Securities Authority. In addition, a public company must hold a general meeting of its shareholders at least once a year, at which its management report and audited financial statements must be presented. In those meetings, the shareholders can, inter alia, approve dividends, elect directors and appoint auditors. A company whose securities are traded publicly must include two independent non-executive directors on the board who serve as representatives of the public.


Companies Limited by Shares

Among corporations, this is the most common corporate form. The Companies Ordinance provides the general protections afforded to shareholders in limited liability companies throughout western countries, including the shareholders' limited liability towards the liabilities of the company, which is regarded as a separate legal entity. This protection is not absolute, and may be withdrawn by the courts, by "lifting the corporate veil". This may occur in circumstances where shareholders abuse the corporate form in order to commit criminal acts or to wrongfully depreciate the corporate's assets.


Foreign Companies

A foreign company may operate in Israel through a branch or through a subsidiary formed under Israeli law.
A foreign company wishing to set up a branch in Israel must register as a foreign company with the Registrar of Companies. According to the requirements of the Israeli Companies Ordinance, a list of its directors and a power of attorney authorizing an individual residing in Israel to receive legal process served on the company must be filed with the Registrar of Companies.


Directors' Duties and Liabilities

Recent legislation has confirmed the case-law basduty of care and fiduciary duty owed by company directors to their company and imposed greater responsibility upon directors. Directors must act competently, in good faith and in the interest of the company. They must not put themselves in a position that may create a conflict of interest between themselves and the company othat may place them in competition with the company. Furthermore, company directors may not take advantage of any business opportunity arising as a result of their position in the company and must disclose any personal interest they may have in a transaction to which the company is a party. Provided full disclosure is made, a company director may enter into a transaction with the company. Transactions with interested parties requires board approval, approval of the audit committee, and transactions not in the ordinary course of business require shareholder approval. The interested party may not participate in the board meeting review, the transaction and at least one third of the non-interested shareholders participating in the shareholder meeting must vote for the resolution approving the transaction.


Securities Regulations

The issuance of securities to the public is governed by the Securities Law of 1968 and the rules and regulations of the Tel-Aviv Stock Exchange and of the Ministry of Finance. The main subjects covered by the Securities Law include, inter alia, the establishment, composition and powers of the Securities Authority; the rules relating to prospectuses and the permit for their publication; the manner and form in which the subscription to securities issued by prospectus is taken place; the possible liability for a misleading prospectus; rules concerning insider trading and class actions.

The basic requirement of the Securities Law of 1968 is that securities will be offered to the public only under a prospectus, whose publication was authorized by the Securities Authority. The prospectus is then scrutinized by the Securities Authority and is made public within a few days. The prospectus requirement reflects the principle of disclosure as a primary instrument for investor protection, and the liability of the signatories to the prospectus for misrepresentation or inaccuracy is strictly enforced.



Partnerships are governed by the Partnerships Ordinance (New Version) of 1975. A partnership may not have less than two nor more than twenty members. The relationship between the partners is usually determined in accordance to the partnership agreement. In the absence of such an agreement, partners are entitled to their share of profits in proportion to their share in the partnership's capital. Unless stated otherwise in the partnership agreement, a partner may withdraw at any time from the partnership. Withdrawal of a partner will liquidate the partnership unless otherwise provided in the partnership agreement.
Partnerships must register with the Registrar of Partnerships, although the Partnerships Ordinance states that failure to register shall not be taken into account in considering whether or not the partnership exists. A limited partnership may not commence business until it has been registered.


Limited Partnerships

A limited partnership must have at least one general partner and one limited partner. The general partner, as in a general partnership, has unlimited liability for the obligations of the partnership. The liability of a limited partner is limited to the sum invested in the partnership. The limited partner may not participate in the management of the partnership and does not have the power to bind the partnership. In addition, a limited partner may not, while the limited partnership is in existence, draw on or receive back, either directly or indirectly, any part of his investment in the partnership. Violation of this principle may make him liable for the obligations of the limited partnership up to the amount so withdrawn.


General Partnerships

In a general partnership, all partners jointly and severally share unlimited liability for the partnership's obligations; such liability may extend to the partners' personal assets. Each partner is permitted to participate in the management of the business and is held to be an agent of the partnership.
Foreign Partnership

A foreign partnership may conduct business in Israel, but it may not establish a place of business in Israel unless it has first registered with the Registrar of Partnerships and received a permit from the Ministry of Justice.

Joint Ventures

Joint ventures are an effective method for conducting business between entities from different countries. A joint venture can be formed by a contract or be structured as a partnership or a company.


Commercial Agency

Agency arrangements may also be of interest to foreign investors. It should be noted that there is no specific legislation dealing with commercial agents and distributors in Israel (except with respect to limitation of commission payable for supplying goods or services to the government). Therefore, there are no statutory requirements regarding the form and content of an agency agreement. In addition, there is no limitation on the nationality or domicile of such agent.

This form of organization is found mainly in agriculture, transportation and in certain types of marketing operations associated with agricultural products. The liability of a member in a cooperative society is generally limited to the amount of shares owned by the member or to an amount specified in the society's articles.
Not-for-Profit Organization

A special law enables not-for-profit activities to be conducted through an organization. This is a simplified form of an incorporated body and is generally used by charitable organizations.


Anti-Trust Law

Israel's anti-trust law is governed by the Trade Restrictions Law of 1988 and is enforced by the Trade Restrictions Authority headed by a Commissioner. The Law and the Authority deal primarily with three issues: restrictive contractual arrangements, mergers and prohibition of monopolies. According to the Law, a contractual arrangement would be considered restrictive if at least one party to an agreement restricts itself in a manner that may reduce or prohibit competition in the business between the parties to the agreement or between one of the parties and a third party. An arrangement is deemed restrictive if the restriction concerns the price offered or paid, the profit which may be derived, the division of the market according to the location of the business or the people or type of people engaged with, or the quantity, type or quality of the assets or services rendered.

The Authority also certifies ventures involving the merging of companies. A merger is defined as including the purchase of the majority of the assets of one company by another company, or the purchase of shares of one company by another company that provides the purchasing company with more than 25% of the issued share capital or the voting power or with the power to appoint more than 25% of the directors or to participate in more than 25% of the purchased company's profits. The Law applies only if the joint annual turnover of the merging companies exceeds US$ 14.5 million or if the merger would either create a monopoly or lead to the vesting of a significant purchasing power in a particular industry in the hands of a single entity. The Authority has the power to prohibit such a merger and also to separate already merged companies if, as a result of their merger, competition was restricted.

Monopolies are also prohibited by the Law. A monopoly is defined as the concentration of more than half of the total supply of assets or purchase of assets, or more than half of the total services rendered or purchased, in the hands of one individual. The Authority's role is to define business entities as a monopoly and to restrict them from abusing their position.

The Authority's involvement in Israel's business environment has increased significantly in the past two years, and the Law is enforced rigorously as its violation would consa criminal offense.


Investment Incentives

Israel offers a variety of well developed investment incentive programs including the Approved Enterprise Scheme under the Encouragement of Capital Investments Law, free trade zones and research and development grants from governmental and quasi-governmental sources.


Encouragement of Capital Investment Law

The government's primary statutory measure for encouraging both domestic and foreign capital investments is embodied in the Encouragement of Capital Investment Law of 1959. Under this law the government grants substantial benefits in a variety of forms to "approved enterprises." The status of an "approved enterprise" may be granted to companies incorporated in Israel and to partnerships registered in Israel. Such enterprises generally engage in industry, shipping, export or tourism.

Applications for approval of enterprises are filed with the Investment Center of the Ministry of Industry and Trade and must be approved before any investment is made. The Investment Center may approve or reject proposals in full or in part. One of the conditions to receiving such a grant is that 30% of the total investment in the project must have been financed by the owners' investment in paid up share capital.

Approved enterprises may be entitled to receive grants, which vary in amount according to the geographic location of the enterprise in Israel and the nature of the enterprise. In the case of industrial enterprises, the grants may reach up to 24% of the total investment in fixed assets of the project.

Approved enterprises may also receive tax benefits, including reduced rates of corporate tax, the ability to use accelerated depreciation on fixed assets and a reduced withholding rate on dividends distributed to shareholders. For example, reduced corporate tax rates may be between 10% and 25%, depending on the proportion of foreign investment made in the project, in contrast to 36% which is the usual corporate tax rate.

An approved enterprise may alternatively choose to waive its right to receive government grants and to receive, instead, tax exemptions, which may, if approved, include a full tax exemption of up to ten years. Furthermore, an approved industrial or tourist related enterprise may elect to apply for state guaranties of loans instead of grants. Dividends distributed by an approved enterprise will be subject to the equivalent of branch profits tax of between 10% to 25% depending upon the percentage of foreign shareholding of the enterprise, in addition to withholding tax of 15%.


Research and Development

Research and development grants and assistance programs are available through the Ministry of Industry and Trade. To attain such grants or assistance, which can provide as much as 66% of research and development costs, a proposal must be submitted by the entity conducting the research and development activity to the office of the Chief Scientist in the Ministry of Industry and Trade. If a research and development project results in a salable product, the funding will generally be repaid as royalties at 3% of the product's sales revenues. The product developed as a result of such a grant must be produced in Israel, except if otherwise approved by the Research Committee of the Office of the Chief Scientist.

Similarly, up to 50% of industrial research and development costs of joint ventures between Israeli and US companies may be underwritten by the Binational Industrial Research and Development Foundation (BIRD), and funds for agricultural projects are available from the Binational Agricultural Research and Development Foundation (BARD), both of which are sponsored by the Israeli and United States governments.

Furthermore, the Canada-Israel Industrial Research and Development Foundation (CIIRDF) was established by the governments of Canada and Israel to promote collaborative research and development between companies in those two countries. CIIRDF will contribute up to 50% of the research and developments costs of joint feasibility studies, pilot projects or full scale projects.

Israel has, in addition, entered into binational financing agreements with France, the Netherlands, Spain and the United Kingdom and is negotiating such agreements with Belgium and Portugal.

The United States, Israel and Jordan have recently initiated the TRIDE program, now in its pilot stages. Each TRIDE project would be a joint venture involving private companies from all three countries, which will draw on complimentary strength in research and development, manufacturing, and marketing to develop new products and technologies for domestic and international markets. The three governments will support up to 50% of the direct costs needed to bring new product to market.

Israel is a member of the European Community's Fourth RTD Framework Program. The program funds research and technological developments and has a total budget of more than US$ 10 billion.

The Chief Scientist is also responsible for the Incubator Technology Centers which offer infrastructure support at reduced or no cost and finance 85% of the approved budget for technology based startup businesses. The Incubator Centers have been very successful in starting out several new technologies that have gone on to become highly successful businesses.


Free Trade Zones

In an attempt to maximize the advantages of investing in Israel, the government enacted legislation to allow the development of the free trade area in Eilat, which provides for a twenty year income tax reprieve and a 15% flat tax on distributed profits of an investing company. It affords full exemption from import and export duties and taxes, allows full repatriation of profits with the foreign investor corporation and lifts otherwise applicable currency controls.


Qualifying Industrial Zone

Within the context of the United States - Israel Free Trade Area Implementation Act of 1995, the governments of Israel and Jordan have agreed to the creation of the Irbid Qualifying Industrial Zone (QIZ) to be located in the Irbid duty-free zone in Jordan in conjunction with the Israeli side of the border-crossing at the Sheikh Hussein - Nahar Hayarden Bridge. Pending American approval of the project, this zone would provide duty-free treatment to products jointly produced by Israelis and Jordanians that meet the requirements of US legislation. The Israeli parliament's reconfirmation and American approval of this project are expected in 1998 (see Chapter on Jordan).


Trade Agreements

Israel has had free trade agreements with the European Union (EU) since 1975, the United States since 1985 and with the European Free Trade Association (EFTA) since 1992. Thosagreements allow Israeli enterprises and Israeli-based enterprises to access freely foreign markets, which cover more than two-thirds of Israel's external trade.

Since the signing of the Declaration of Principles with the Palestinian Liberation Organization in 1993, Israel has signed a free trade agreemenwith the Palestinian Authority and began negotiations with a number of other Middle Eastern and other countries. So far, Israel has concluded agreements with Jordan, Turkey, India, CIS, Russia, South Korea, Poland and Hungary. Israel has had a most favored nation trade agreement with Egypt since 1981. Indonesia, Bangladesh and Pakistan have all indicated an interest in establishing closer economic ties with Israel. Morocco, which has established diplomatic relations with Israel, has increased its importation of Israeli made agricultural related products such as agro-chemicals and irrigation equipment.

Israel has signed the General Agreement on Tariffs and Trade (GATT) with the World Trade Organization and has been granted preferences under the General System of Preferences (GSP) by Australia, Austria, Canada, Finland, Japan, New Zealand, Norway, Sweden Switzerland and the United States.


Customs valuations are primarily based on tariff classification. Duties are generally imposed on the basis of cost insurance and freight (CIF) but if the CIF value and market values differ materially, the latter may be used. Under the 1975 EU-Israel Free Trade Agreement, industrial products not produced in Israel may be imported into Israel free of any customs charge. Such products usually include raw materials and semiprocessed goods.

In the case of raw materials imported for the purpose of producing products intended for export, it is usually possible to defer payment of import duties, provided that guaranties are made that such duties will be paid if the products are not exported within a given period of time.



Currency and Banking

Foreign currency control is administered by the Bank of Israel and affects transactions carried out by Israeli residents and non-residents. In recent years the laws governing foreign currency control have undergone several reforms to remove maof the restrictions imposed on Israeli residents investing abroad and on investments by non-residents in Israel.

While the basic rule is that foreign currency transactions are prohibited unless authorization is obtained, many types of foreign currency transactions are allowed by virtue of the General Permit promulgated pursuant to the Currency Control Law of 1978.

The General Permit authorizes Israeli and foreign residents to conduct certain transactions through an authorized dealer (usually an Israeli bank). The transactions authorized in the permit include most transactions conducted in the ordinary course of business activity. There are also several Class Permits which allow foreign currency transactions by persons or entities that meet certain class characteristics.

A Special Permit may be required for any transaction outside the scope of the transactions covered by the General Permit or Class Permits. In granting such a Special Permit, the Controller of Foreign Exchange will generally examine the permit applicant's request to ascertain the benefits to be gained by the Israeli economy from allowing such a transaction.


Israeli Residents

Israeli residents are permitted to hold foreign currency accounts in Israeli banks using shekels to purchase the foreign currency. Individual, as well as corporate Israeli residents, may also borrow money from foreign sources and repay such loans in foreign currency provided that details of such loan is submitted to the Bank of Israel (usually through an authorized dealer).

Individuals are permitted to invest in Israeli and foreign securities traded abroad on authorized foreign stock exchanges.

Israeli active companies, companies that have annual revenues of at least US$ 450,000, are permitted to invest in the equity of, grant loans to foreign companies or acquire real estate abroad. Furthermore, Israeli companies are permitted to purchase securities on foreign stock exchanges.


Non-Israeli Residents

A foreign resident may repatriate profit from investments in Israel and transfer all proceeds resulting from the sale of such investment subject to the certification by the tax authorities that the relevant Israeli taxes have been paid. A foreign resident may invest in shares of Israeli companies and may grant loans to Israeli companies or individuals.


Israel has a highly developed and modern banking system. There are commercial banks, mortgage banks, financial institutions, merchant banks, representative offices of foreign banks and an investment finance bank. A full range of commercial services and support is provided by those banks, many of which maintain branches and offices in the major international financial centers. Approximately 75% of the total assets of the commercial banks is held by three major banking groups (Bank Hapoalim, Bank Leumi and Israel Discount Bank).

In 1983, the Israeli banking industry went through what became known as the "bank share crisis." As a result, the Israeli government intervened and became a major non-voting shareholder of the leading banks. The government has sold controlling interests in several banks and is continuing the privatization process with respect to the remaining shares held by the government in more banks as well as with respect to the other banks.

The Bank of Israel is the official central bank. Among its numerous responsibilities, the Bank of Israel is also responsible for the issuance of currency, monetary policy, and regulations.



Intellectual Property



Israel, a member of the Paris Convention for the Protection of Industrial Property, protects patents under the Patent Law of 1967 for a period of twenty years from the date of filing the application. Any novel invention, whether a process or a product that involves an inventive step and is used in industrial or agricultural applications may be patented.

In order to register a patent, the Israeli Patent Law also requires the patent to be new and novel worldwide. Any publications or exploitation of a patentable invention anywhere in the world, prior to the date of registration in Israel will prevent the patent from being registered.

A patent application must be filed with the Patent Office and include the specifications of the patent. The Patent Office conducts an examination, which may take up to three years from the date of filing the applications, to determine whether the patent conforms to the Patent Law and regulations. At the end of the examination, if the application is approved, a notice of acceptance is published in the Patent Journal. From the date of publication and for a period of three consecutive months thereafter, any person may oppose the registration of the patent. If no objection is filed or if such objection is dismissed, the patent may be granted and registered.



Under the Trademark Ordinance of 1972, registered trademarks are protected for periods of fourteen years each, renewable indefinitely upon the payment of renewal fees.

The Trademark Ordinance provides that a trademark shall not be registerable unless it distinguishes between the goods of the owner of the trademark and the goods of others. An application for the registration of a trademark must be filed with the Registrar of Trademarks and must include a description of the trademark and goods.

The Trademark Office conducts an examination of trademarks, which lasts, generally, for a period of about two years. After such examination, if a trademark conforms to the requirements of the Trademark Ordinance, a notice of acceptance is published. Within three months of this publication, any person may object to the registration on the grounds of ineligibility. Unless such an objection is filed, or if such an objection is filed but is dismissed, the trademark will be granted and registered.



Under the Copyright Law of 1911, protection is given to rights of the creators of works which are original and are either literary, artistic, dramatic or musical works. Such protection is automatic and no formal application is required in order to obtain such right. The Copyright Law extends the protection for the lifetime of the creator or author; an additional fifty years of protection are granted for musical and artistic work, and seventy years for literary and dramatic work. Computer programs are within the framework of this Law.


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