What Every Foreign Tech Company Should Know About Israeli Accounting

Israel has a thriving technology scene, which generates the largest growth sector of its economy and encourages an annual proliferation of startups. The Israeli tech ecosystem attracts many foreign companies to acquire local Israel startups as subsidiaries, forming multi-national groups with cross border activities. These structures bring with it considerations on local Israeli accounting and compliance, which can often be overwhelming. 

It is helpful to understand Israeli accounting in order to avoid penalties and operational delays, and to also access incentives. Partnering with a local Israeli accounting firm like SZ Shvarts Zedkia allows international technology companies to operate in Israel with ease, and access local expertise. 

Why Accounting Matters Before You Go Live in Israel

It is critical to set up a compliant financial system from day one. This can include everything on a base level like Israeli Bookkeeping, Payroll, and Business Incorporation to more periodic needs like Audit.  

At accounting firms like SZ Shvarts Zedkia, we also provide Fiscal Representative services in case a foreign company does not have management on the ground or an authorized signatory in Israel to handle tax filings, VAT representation, and correspondence. 

Early accounting setup is essential for investor confidence and business scalability. This means accuracy, compliance, and accountability from the start.

Accounting Challenges for Foreign Tech Firms in Israel

In our experience at SZ Shvarts Zedkia, there are some frequent obstacles we observe for foreign technology companies entering Israel, and we support our clients in every way to navigate their ease of entry.

• Local tax authority expectations and filing timelines - There is strong oversight by the Israeli Tax Authority, so that ongoing accounting in Israel must provide frequent filings, detailed documentation, and proactive handling of audits.
  

• Understanding VAT, Corporate Income Tax, and Withholding Tax - VAT (referred to as “Ma’am”) plays a central role in Israeli accounting, with frequent filings and invoice requirements. Errors must be prevented along the way to avoid penalties.
  

• Integration of Bituach Leumi (National Insurance) into payroll - In Israel the payroll accounting is highly linked to labor law, pension, severance, and social benefits. This makes payroll a core accounting feature that demands thoughtful planning, and not simply an HR process.
  

• Understanding startup-specific benefits or R&D tax credits - The Israeli government offers incentives for technology companies, and at SZ Shvarts Zedkia we support Israeli subsidiaries of foreign companies to access every benefit possible to support its growth.
  

• Managing multiple currencies and foreign transactions - For this it is critical to have close financial oversight. 
  

• Lack of local expertise leading to missed deductions or reporting errors - It’s important to understand local Israeli accounting laws and best practices to maximize gains and minimize exposure.
  

• Keeping up with dynamic Israeli tax reforms and reporting updates - In a changing world of laws and regulations, having a trusted accounting firm will keep all activities compliant.
  

• Dual reporting requirements – While a foreign parent company might have its own fiscal year timeline and reporting standards, the local Israeli standards will need to be integrated into these systems.
  

Learn more about hiring an Outsourced CFO in Israel to provide expert financial oversight, without having to hire a full time employee.

Choose the Right Accounting Partner in Israel to Support Growth and Investor Confidence

Outsourcing to a local accounting firm in Israel ensures compliance and efficiency. Some factors to consider include: selecting a firm experienced with foreign tech companies, a knowledge of both Israeli-GAAP and IFRS standards, bilingual communication, and efficient payroll platforms.

Having a long-term financial strategy is important, beyond just basic bookkeeping at financial reporting. Partnering with a firm like SZ Shvarts Zedkia ensures ongoing financial planning to optimize the operations of any foreign business, and set up the foundation for further funding, success, and growth.

Accurate and transparent financial reporting attracts venture capital and cross-border investors. Solid bookkeeping enables smooth due diligence for funding or M&A. It builds trust with Israeli authorities and business partners. And it aligns financial processes with international audit standards.

Take the Next Step Toward Smarter Financial Management

Accounting is not just compliance, it’s also the backbone of sustainable growth for any foreign company entering Israel. Partnering with professional Israeli accounting experts helps foreign tech firms operate smoothly, stay compliant, and scale faster. Our team at SZ Shvarts Zedkia helps foreign tech businesses set up compliant, efficient, and investor-ready financial systems.

Need expert guidance before launching in Israel? Contact our team to learn more.