HSBC Treasury Management Profiles 2018 -

Current section, Introduction

Introduction

Israel has a thriving technology sector, and is a hub for many multinational companies producing high-tech products. Exports of goods and services account for 30 per cent of GDP with precious metals and stones (27 per cent of exports) and electrical equipment (15 per cent of exports), the country’s biggest exports. Israel is also a major importer of goods, particularly from the USA (13 per cent off imports), which is also its largest export market (32 per cent of overall exports). According to figures released by the Israeli Ministry of Economy and the Israel Export Institute, exports of merchandise and services exceeded USD100 billion in 2017; year-on-year exports rose 5 per cent, despite the effect a strong shekel is having on the economy (the ILS strengthened 11 per cent against the USD in 2017). The country’s strengthening economy is being supported by strong household spending (7.8 per cent Q3) and falling unemployment (4.3 per cent in November 2017). GDP is expected to grow by 3.0 per cent in 2017 (down from the 4 per cent expansion on 2016) and by 3.3 per cent in 2018. Israel recorded a budget deficit of 1.97 per cent of GDP in 2017, below a target of 2.9 per cent. The lower than expected budget deficit was helped by the high level of employment in the country and higher than expected tax income. In January 2018, the Ministry of Finance set its 2019 budget at USD139 billion, a USD5.8 billion increase on the approved 2018 budget, with a budget deficit target of 2.9 per cent. In September 2017, the government approved a five-year USD32.4 billion infrastructure plan aimed at increasing productivity and the growth potential of the economy.

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Legal and regulatory

  • Foreign exchange and domestic currency (ILS) accounts can be held by residents both domestically and abroad. Resident domestic currency accounts are freely convertible
  • Non-resident bank accounts are permitted in both foreign and domestic (ILS) currency. Non-resident domestic currency accounts can also be held abroad. Non-resident domestic currency accounts are freely convertible
  • All transactions between residents and non-residents must be reported to the central bank
  • Israel does not apply exchange controls

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Taxation

  • Resident companies are subject to tax on their worldwide income
  • Non-resident companies are taxed on Israeli-sourced income only
  • The corporate income tax rate is 23 per cent

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Payment instruments and systems

  • Electronic credit transfers are used for both high-value corporate and low-value retail payment transactions, although cheques remain a common cashless payment instrument for both retail and commercial payments. Payment cards are the most popular method of payment in Israel; debit card regulations introduced in 2016 increased the issuance and use of debit cards. Mobile payments are increasingly popular
  • Israel operates three national payment systems: Zahav, an RTGS system; Masav, for low-value electronic debits and credits; and the BCH, for paper-based payments

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Cash management

  • Notional pooling and cash concentration are permitted between resident and non-resident companies. Cross-border sweeping is possible, but may be subject to income tax deductions
  • Cash collection and account receivables services are available

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Electronic banking

  • Electronic banking is commonplace in Israel. There is no bank-independent electronic banking standard
  • Internet and mobile banking services are provided by all of the country’s banks for both corporate and retail purposes

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Sources:

  • Central Bureau of Statistics
  • World Bank
  • Israel Export and International Cooperation Institute.

The materials contained on this page were assembled in April 2017 (unless otherwise dated).

 

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