Israel: Investing

FDI in Figures

Israel has a liberal investment system and most activities are open to both private national and foreign investors. According to UNCTAD's World Investment Report 2024, Israel's inward investment flows decreased to USD 16.4 billion in 2023, compared to USD 23 billion one year earlier. At the end of the same period, the total stock of inward FDI stood at USD 244.4 billion. According to the Chief Economist’s Office, in 2023, foreign investment in Israeli hi-tech dropped 24%, excluding a major Intel investment, with 1,563 deals, down 62% from 2,502 in 2022. Key investments included Thales SA’s 3.6 billion USD Imperva merger and Adani Group’s 1.2 billion USD Haifa Port acquisition. Semiconductor investments led at 48%, followed by IT at 31% and life sciences at 6%. U.S. investors contributed 24 billion USD, 73% of total foreign investments, with France at 3.7 billion USD. In the first half of 2024, investments totalled 11.8 billion USD across 910 deals. The first quarter saw 4.4 billion USD, and the second quarter reached 7.4 billion USD. In October 2024, the hi-tech sector alone attracted over 1 billion USD. Most of the FDI to Israel is directed towards manufacturing (especially for electronics equipment, like computers), information and communication, professional, scientific and technical activities, and financial and insurance activities. In terms of countries, the United States and the Netherlands are the main partners (U.S. firms account for nearly two-thirds of the more than 300 research and development centres established by multinational companies in the country). Furthermore, Chinese investment in Israel has grown rapidly in recent years, particularly in software, IT services and consumer electronics.

Israel has a number of assets appealing to foreign investors, including a high-skilled and multilingual workforce and a strong R&D sector (it has the world's highest R&D intensity, almost twice the OECD average – data World Bank), advanced procedures and industrial technologies, governmental incentives and grants to foreign investors, a lean bureaucracy and a diversified economy. The hi-tech sector, especially start-ups, has attracted a great deal of foreign investment. However, the country's geopolitical environment is particularly unstable because of tensions with the Palestinian territories and support for American policy by Israel (albeit improvements have been achieved in diplomatic and commercial relations with Arab countries such as the UAE, Morocco, and – to a lesser extent - Saudi Arabia). The instability worsened following the escalation of the conflict with Hamas. The Israeli government aims to remove trade barriers and encourage capital, including foreign investment. However, persistent trade barriers and monopolies have significantly contributed to the high cost of living and limited competition in key sectors. The government still maintains some protective trade policies, especially for agricultural products. In 2019, Israel set up a centralized investment screening mechanism for certain foreign investments, updating regulations in 2022 to lower the foreign ownership threshold for committee review. Investments in regulated industries (e.g., banking, insurance) need approval from relevant regulators and may require a government license. The Ministry of Defense also reviews foreign investments in the defence sector informally, with other regulations typically applied on a national treatment basis. Overall, Israel ranks 15th among the 133 economies on the Global Innovation Index 2024, 30th among the 180 on the 2024 Corruption Perception Index, and 26th out of 184 countries on the latest Index of Economic Freedom.

What to consider if you invest in Israel

Protection of Foreign Investment

Procedures Relative to Foreign Investment

Freedom of Establishment

There are no restrictions on foreign investments except for sectors considered vital for national security, such as the defence and telecommunications sectors.

Acquisition of Holdings

Rules regarding mergers and acquisitions or takeovers are the same as for Israelis.

Obligation to Declare

Foreign investors are not under any obligation to receive prior authorisation from the Government, except for regulated industries (such as banking) or to register, except if the company wants to benefit from certain advantages. Investments in certain sectors may require a government license.

Competent Organisation For the Declaration

Invest in Israel
The Authority for Investments and Development of the Industry and Economy

Requests For Specific Authorisations

In October 2019, the Israeli government established a centralized investment screening mechanism for certain inbound foreign investments. Such mechanism applies to investments in regulated industries (like banking and insurance), which have to obtain approval by the relevant regulator.

Office Real Estate and Land Ownership

Possible Temporary Solutions

Consult Instant Offices, CoWorker, Regus.

The Possibility of Buying Land and Industrial and Commercial Buildings

Purchase of buildings and land is open to foreign investors. However, registering or obtaining land rights is a cumbersome process (Israel ranks 75th in “Registering Property” according to the World Bank’s 2020 Doing Business Report).

Risk of Expropriation

There are very little risk of expropriation, as the Israeli judicial system recognizes and enforces secured interests in property. In case of expropriation, the company will benefit from complete and non-arbitrary compensations, with interest from the day of expropriation until final payment.

Investment Aid

Forms of Aid

Assistance is going to depend on the location of the investment and the nature of the project, amount of investment and the degree of foreign participation. This will be for financial assistance, financial incentives, grants, depreciation on diminishing values or loan guarantees, reduced tax rates, tax exemptions, and other tax-related benefits.
For detailed information, consult the dedicated page on the website of Invest in Israel.

Privileged Domains

Incentives are available for research and development, employment generation, jobs for emigrants and training. For further details, refer to the dedicated page on Invest in Israel's portal.

Privileged Geographical Zones

For a detailed description of sector-specific incentives, consult the dedicated page on Invest in Israel's website.

Free-trade zones

Grants are accorded at up to 20% of the amount of investment in fixed assets, production equipment or facilities. For investments in the Negev area in south Israel, an addition of up to 10% may be applied.
Furthermore, Israel has bilateral Qualifying Industrial Zone (QIZ) agreements with Egypt and Jordan.

Public aid and funding organisations

The Investment Authority is entrusted with capital grants, while the Tax Authority manages the tax benefits.

Investment Opportunities

The Key Sectors of the National Economy

Value added sectors: high-tech, aeronautics, electronics, telecommunications, information, biotechnologies, etc. 
Security: biometry, surveillance and protection. Resources: treatment of raw water and desalination of water.
Furthermore, Israel is ranked 1st for medical device patents and 2nd for medical device solutions per capita.

High Potential Sectors

Chemical industry, agro-technologies, semi-conductor industry, communication, environment, biotechnologies, security, natural gas.

Privatization Programmes

The Government Companies Authority (GCA) is the administrative agency for state-owned companies in charge of supervision, privatization, and implementation of structural changes. After several years of stalled progress, the provatization program has been revived since 2020. Among the sectors concerned are defence (Israel Aerospace Industries), transport (Portof Haifa) and postal service (Israel Post).

Tenders, Projects and Public Procurement

Ministry of Economy and Industry , Mandatory Tenders Regulations
Tenders Info , Tenders in Israel
DgMarket , Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors

Electricity.
In the case of designated monopolies, defined as entities that supply more than 50% of the market, the government controls prices. For further information consult the website of the Israel Competition Authority.

Finding Assistance For Further Information

Investment Aid Agency

Ministry of Economy and Industry
Israel's Investment Promotion Centre

Other Useful Resources

Doing Business with Israel - Ministry of Foreign Affairs

Doing Business Guides

Doing Business in Israel (Thomson Reuters)
Doing Business in Israel - World Bank
Doing Business in Israel - UHY

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