Although the current step was mainly a statement, there are countries that would be happy to support start-up companies from Israel (Photo: ShutterStock)
Last week, an announcement was made by Einat Gaz, founder and CEO of Papaya Global, that the company was withdrawing its funds from Israel, an announcement that made waves in the media.
In addition, following the economists' protest against the changes in the judicial system, Prime Minister Benjamin Netanyahu held a conference with the participation of senior businessmen, on purpose At the conference, Bank Hapoalim CEO Dov Kotler said that a movement is beginning to withdraw deposits from Israeli accounts of foreign investors, according to media sources.
It is difficult to know how threatening the numbers are, at least for the time being, but it is important to distinguish between protest measures, which, as they are called, are intended to protest and warn, and trends that may develop into a real danger to an industry that is considered the "engine" of the Israeli economy.
We will try to sort things out.
Einat Gaz, one of the founders and CEO of Papaya Global. What does her step actually mean? (Photo: Tom Holiganov)
What money comes out of Israel?
There are funds that are only excess cash, funds that are in checking accounts.
They are those that are less significant for the economy and business activity in the country, and more significant for the banks that receive commissions for managing the account and banking operations.
Spending such funds is mainly a protest measure, the main damage being the media noise created by such an action.
In contrast to these funds, there are funds located in Israel and intended for payments to suppliers, or money available for investments in Israeli companies.
Spending such funds is a significant step that directly harms the Israeli economy.
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The start-up nation may - especially if investments from international funds decrease - find itself in a situation where start-ups from Israel will open their companies abroad (Photo: ShutterStock)
How does this affect startup and technology companies in Israel?
Israel is known as the "start-up nation".
As a result, there are many entrepreneurs, start-ups and technology companies in Israel, whose initial goal is to enter the world market with the Israeli idea.
Such Israeli companies are looking in advance for the international breakthrough, and such and such decisions - if they are made by foreign investors or international funds, can reduce in advance the chances of success of an Israeli company in a market saturated with competition, where there are many companies with an excellent idea and very few investors.
Berlin, one of the places where an Israeli community developed, following grants and providing support to technological incubators, with the aim of diversifying the traditional industry in the country (Photo: ShutterStock)
What does an Israeli company that wants to enter the world market need?
The first step is of course a new technological solution, or a significant improvement to an existing solution.
The next step will be to think for which market and target audience the solution is suitable for.
Upon entering the world market, the Israeli company must decide whether to transfer all business activities abroad, or to establish a company abroad for marketing and sales purposes, and to keep the headquarters and management of the company in Israel, along with employees and programmers.
In many cases, European countries will entice Israeli companies with state grants, support and tax breaks, only if they also move the center and development abroad, with the aim of absorbing Israeli work teams who will live in their territory. Already today we can see many communities of Israelis in Berlin, Barcelona, Dublin and more .
If the Israeli company has business activity both in Israel and abroad, then the company usually generates revenue and profit in both countries, and therefore will usually have to report and pay tax in more than one country. In order not to pay double tax, it is important to conduct business activity with a country with which Israel has a treaty for the prevention of double taxation. The same treaty that will regulate the reporting and tax payment obligations between the countries.
Yaniv Angel, expert in international taxation, consulting firm Auren Israel (Photo: Adi Arad)
Target countries for investors who withdraw their money from Israel, and copy business activities from here:
Germany is seen by many companies (not only Israeli ones) as a central gateway for business activity in all of Europe.
With a stable economy and a traditional industry known for its high quality, numerous factories belonging to German families that have been operating for generations...
At the same time, the country is less known for new technological developments, therefore many companies in Germany are looking for technological solutions in Israel and around the world.
Germany today is one of the leading countries in the world among those that provide grants and support for technology incubators, and many companies in Israel see Germany as a gateway to business activity throughout Europe.
In recent years, Spain has become one of the countries with the most benefits for technology companies and startups.
With the Spanish language spoken in many parts of the world, Spain conducts extensive business activities with Latin American countries, South America and more.
That is why many Israelis see Spain as a gateway to countries on the other side of the planet.
What's more: with extensive tourism, local Spanish companies are looking for new technology in the field of food-tech and tourism.
Ireland is known as a country where many Israeli companies decided to set up their company offices and housed the company's decision makers.
This is mainly due to the fact that the average corporate tax in Ireland is relatively low compared to Europe and the rest of the developed countries in the world, a corporate tax of about 12.5% for years (in Israel, for comparison, the corporate tax is 23%, almost double - as of 2023).
Other advantages of Ireland are the English language, which makes it very easy to do business in the country, together with an advanced banking system and physical proximity to all European countries (and relatively, also to the USA). The
author, Yaniv Angel, is an expert in international taxation, who accompanies foreign companies in Israel , and Israeli companies abroad, Auren Israel, an international consulting firm.