Starting a small business in Israel? Learn from my mistakes!

Did you come to Israel – or are you planning to come to Israel – hoping hoping to start a small business?  Good for you!  I really mean it.  Israel is the Startup Nation.  It’s a land of opportunity.  It’s the place where you can make many of your dreams come true in amazing ways you never even dreamed of back where you came from.

As long as you’re careful.

For all the opportunities here in Israel, it’s also… (shh) a very bureaucratic place.  And you have to stay on top of the bureaucracy because, unlike in certain larger and more anonymous countries I could name, where you can owe the tax people money for years with absolutely zero consequences, neglecting some of the bureaucracy here in Israel can have serious repercussions.

How do I know?

Um, let’s just say… I’ve learned this the hard way.   Not the extremely hard way, which probably involves jail time.  But the kind of hard way, which involves having your bank accounts frozen and threatening letters from various government agencies.

Setting yourself up as a small business here is actually super-easy.  There are three basic steps, and I’ve found that Rifka Lebowitz’s guide is terrific in terms of explaining these in detail:

1. Register your business for Ma’am (Value Added Tax = VAT):  There are two kinds of businesses, which mostly depends on how much income they bring in, and for both types, you need to open a “tik” (file) – tax-exempt (osek patur) and tax-paying (osek murshe) with the VAT office.
2. Register for income tax:  True, they’re both taxes.  But the VAT people don’t talk to the income tax people and vice versa.  So you have to tell the income tax people you’re a business now.  And then they will hound you forever after (see Tip #1) until you close your business tik, which is very easy to do if you’re no longer running your business.
3. Register with Bituach Leumi:  This is a socialized country You no longer have an employer paying your national insurance, and most importantly, your health insurance to your kupat cholim (HMO, healthcare provider network) – so this is your responsibility now as an independent business person.

In general, skipping one of these steps is a recipe for disaster – so don’t do it.

Here are three mistakes I made along the way through this simple process that I hope you can learn from instead of having to untangle on the other side.  Any tips here are NOT a substitute for a good accountant.  If you think your needs are at all complex, please consult a real tax advisor (not just a blog, for heaven’s sake!) before you take any steps you may regret.

Mistake #1 – Tax ≠ Tax

Sounds like a no-brainer, right?  Except I was lulled into complacency because when you come here, everybody says

What should you buy where? Smarter online shopping in Israel

It’s back to school time here in Israel.  And we all know what that means:  online shopping!

I can’t be the only one, right?

In Israel, just like around the world, the hottest shopping site these days is Aliexpress.  There, you can buy directly from China, mostly with free shipping, cutting out the middleman and saving a bundle.

That's the theory, at least. 

In practice, it's not so simple.  The quality is usually low, and it's better in theory to buy Israeli (or local, wherever you happen to be).   Sometimes, though, when buying Chinese is the only option anyway, things do work out much better, price-wise.

But there are many downsides to Aliexpress, including:

• Long shipping time
• Dubious quality merchandise
• No recognizable brand names
• No brands, price comparisons or reviews (sometimes there are reviews, but rarely)
• Merchants don't speak English

The biggest down, however, is that for higher-value items (I think it's over $50), you could get hit with a big tax bill.  The same thing was true in Canada - there, anything worth over about $20 could get opened and dinged for import taxes.  And there are added fees you have to pay as well if you're billed for taxes.  Sometimes, it's just not worth it.

That's why it's nice to know that there are online-shopping alternatives that let you buy "locally" here in Israel.  The goods may still be made elsewhere, but you're dealing with local suppliers who know how to get stuff to your door quickly, and can often save you that big tax bill.

The best place to start is on ZAP - zap.co.il.  There, you can search (in Hebrew, so use Google Translate if you're not strong at it) for whatever you want, and hopefully, you'll get a whole bunch of good results.

Still alien? Passing the one year mark.

I did an experiment this morning.

I woke up, stretched etc as usual.  And then thought to myself, “I’m waking up… in Israel.”

Nothing.

“Here we are… in our apartment… in Israel.”

Nope.  No response.

I guess I was trying to shock myself back into feeling the newness of it… except it really isn’t new anymore.

Last Wednesday was our “aliyahversary.”

If aliyah was a baby, we’d have been blowing out candles, feeding it cake.

It might be taking its first steps by now.