Israel

Legal Framework

Israel's 'Startup Nation' ecosystem drives one of the world's most advanced AI research and development environments, supported by the Israel Innovation Authority and a dense network of venture capital, military technology transfer, and academic institutions. There is no standalone AI-specific law; instead, AI governance relies on existing intellectual property, privacy, and consumer protection frameworks. The government published a national AI policy framework emphasizing ethics-by-design and a risk-based approach, preferring self-regulation and sector-specific guidance over prescriptive legislation.

Key Laws & Regulations

• ◆Protection of Privacy Law 5741-1981 (amended)
• ◆Israel Innovation Authority Law
• ◆Regulation of Security in Information Systems Law (proposed)
• ◆Companies Law 5759-1999
• ◆Electronic Signature Law 5761-2001
• ◆National AI Ethics Framework (non-binding guidelines)

Business Formation

Company registration through the Israel Companies Registrar is straightforward and fully digital. Common structures include private limited companies (Ltd.) and partnerships. The Innovation Authority provides grants covering 20-50% of approved R&D expenditures. Foreign companies can establish branches or subsidiaries without restrictions on foreign ownership.

Tax Implications

Corporate tax rate is 23%. Preferred Enterprise incentives reduce effective rates to 7.5-16% for qualifying tech companies. Capital gains tax is 25-30%. R&D grants from the Innovation Authority are non-dilutive. Israel has extensive double tax treaty network. Angel investor tax benefits available for qualifying investments in R&D companies. IP-related income benefits under the Innovation Box regime.