Workforce Payments Guide Israel

Last updated: Dec 18, 2023

Currency
Israeli Shekels (NIS)
Payroll Frequency
Monthly
Capital
Jerusalem
Fiscal Year
1 January- 31 December
Employer Taxes
21.78%
Employee Costs
21.01%
Central Bank
The Bank of Israel
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3rd Party Payments

National Insurance: The payment is due by the 15th of the following month.
Provident Fund: The payment is due by the 15th of the following month.
Income Tax: The payment is due by the 19th of the following month.”

Payments Coverage

Papaya Global fully support payments in Israel.

Funding currencies may be AED,AUD,CAD, CHF, kr DKK, EUR, GBP, HKD, NZD, kr SEK, SGD, USD. The payout currency is ILS and payment is done up to 1 day.

Papaya Global supports payments to contractors in Israel. The payout currency may vary based on the receiver bank account setup when receiving foreign currencies. it is advised for contractors to reach out to their bank to confirm how foreign currencies are handled

Payroll Frequency

Monthly

IBAN

IBAN Example Israel

IL679929813489169661758

IBAN in print IL 67 9929 8134 8916 9661 758
Country Code IL
Digit Code 67
Bank Code 992
Bank Account Number 3489169661758

IL679929813489169661758

KYC

In Israel the Know Your Customer (KYC) process for companies is an important part of doing business. The process is designed to ensure transparency and regulatory compliance, reduce fraud, money laundering, terrorist financing, and other illegal activities.

Steps involved in the KYC process:

  • Verify the company’s credentials: Submit the company’s registration certificate, PAN card, and proof of legal name and telephone number.
  • Understand the business operations: Obtain basic information about the company’s operations, including the names of the directors, business addresses, and company numbers.
  • Evaluate the business-related information: Confirm and evaluate the business-related information of clients or potential business partners. This includes understanding the ownership structure, legal status, financial situation, and any potential risks.
  • Perform due diligence: Conduct background checks, bankruptcy checks, litigation search (criminal & civil), media & reputation checks, and site visits and verification.
  • Assess Financial Stability: Look over financial statements, credit reports, and other pertinent documents to evaluate the financial standing of business partners”

Banking Regulations

The banking laws that impact cross-border workforce payments are part of the broader regulatory framework governing the banking and financial sector. Here are some key points:

Open Banking and Payment Services Regulation: The Israeli Ministry of Finance has proposed certain government resolutions to promote competition in the Israeli financial system, particularly in the payments market. This includes regulating financial information services and the provision of payment services, including payment initiation services.

Banking (Licensing) Law: Any banking corporation interested in operating in Israel requires a license from the governor of the Bank of Israel. The examination of whether to grant a license takes into account various factors, including the plan of action of the applicant, the suitability of the applicant’s controlling shareholders, directors, and managers for their position, the contribution of granting the license to competition in the capital market, the economic policy of the government, and public policy.

Promotion of Electronic Payments: The Bank of Israel has made several regulatory interventions to boost electronic payments and reduce dependence on cash, such as introducing a cap on cash transactions3. Israeli regulators are looking to open up competition by allowing new types of banking, such as mobile-only banks.”

Bank Account Opening

To open a commercial bank account in Israel, you must provide the following documents:

  • Incorporation documents: They include original and updated documents of incorporation of the company such as the memorandum of association, certificate of incorporation, articles of association, by-laws, and other essential documents.
  • Identification of authorized signatory documents or a proxy under power of an attorney that the bank must identify before activating your account.
  • Good standing of the company or incumbency certificate, which must have been issued within six months.
  • Identification of B.O. documents: This includes identification or your passport and any other B.O. document that is certified by apostil.
  • Other documents required in specific cases. The time it takes to open a company bank account in Israel can vary. It could take you less than 30 minutes to submit your application online if you have all your documents handy. The verification process could take a day or two and you’ll typically receive your debit card in the mail seven to 10 business days later”

International Banks

Several major foreign banks operate in Israel including:

BNP Paribas Israel
Citibank N.A
HSBC Bank plc
State Bank of India
Barclays Bank plc”

Local Major Banks

Local major banks include:

Bank Leumi
Bank Hapoalim
Bank Discount
Bank Mizrachi

Payment Tools

In 2022, 74% of online purchase transactions in Israel were paid for by credit card. As of January 2023, 79.1% of the people aged 15 and older in Israel owned a credit card.

In Israel, there are different types of credit cards issued by global and local companies, and most eCommerce websites accept them as payment methods.

In addition to CC, there are local payments apps such as Bitpay as well as Apple Pay etc.

Cryptocurrency

Cryptocurrency exchanges in Israel must adhere to licensing requirements, including obtaining a permit from the Israeli Capital Market, Insurance, and Savings Authority. Acquiring a license involves demonstrating compliance with Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations, maintaining risk management policies, and implementing robust cybersecurity measures.

Taxation: The Israel Tax Authority has proposed that the use of virtual currencies should be considered as a “means of virtual payment” and subject to taxation. For the purpose of income tax and value-added tax requirements, virtual currency is viewed as “an asset” and is taxed in accordance with relevant transaction classifications under the Income Tax Ordinance (New Version), 1961, and the Value Added Tax Law, 5736-1975.

Bank of Israel: The Bank of Israel does not recognize virtual currencies such as Bitcoin as actual currency. However, there is a central bank digital currency project for a digital shekel.”

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