Since the early days of Israeli tech, the relocation of executives and employees has been key to the success of any company. In fact, I believe that close to 100% of all startup companies deal with relocation at some point during their growth process. There are 2 main reasons for this: First of all, founders and employees need to move to wherever their target market is as their company grows. But beyond that, having employees that have spent time in both the Israeli and U.S. offices is a critical to the successful collaboration between the sites.
Personally, I went through that experience exactly 10 years ago (June 2006). I remember the complexity of the process, and also the many questions that remained ambiguous (and are still somewhat of an enigma even today), like “Where should I live? How do I get a credit card? Should I sell my house in Israel?” and many others.
A few weeks ago we hosted an event at our Viola Group offices around this very topic. When selecting the speakers, we tried to think about the many aspects of the relocation process and decided to touch (this time) on financial issues, tax issues, visa issues, and also the cultural and emotional implications. Our four speakers included Daniel Drenger, VP Marketing at Ocean Relocation, Dina Pasca-Raz, Partner and Head of International Tax at KPMG Israel, Caryn Tamari, trainer and consultant at Barry Katz Ltd and Jennifer Schear, Founding Partner at Schear Immigration Law Firm.
The large turnout reflected the keen interest in this topic so we hope that the event will become an annual one, where we can continue to share best practices and have an open discussion around all-things relocation.
Our four speakers have been kind enough to contribute overviews of their presentations from the event, and we’re delighted to share then with you below. Feel free to get in touch with them directly if you have more questions on any of these relocation aspects or leave a question/comment at the bottom of this post.
Relocating your employees’ quality of life
By Daniel Drenger, VP Marketing at Ocean Group
Entrepreneurs are renowned for being fearless, so some of them may not be concerned about the challenges of relocation. Relocating for work can be quite stressful, however, because it is literally a life-changing event. For you as an employer, it’s important to help make the transition as seamless as possible, because your employees are, after all, your most valuable asset. Fortunately, you can support your employees by investing in a thoughtful relocation process.
To do this, we recommend using a simple model of Core/Flex Policy to create your own relocation program. “Core” covers the ‘must have’ services and benefits that you should offer your relocating employee based on factors such as their seniority, short-term assignment versus long-term assignment, etc. “Flex” covers the additional services that you can offer on a flexible basis based on the employee’s unique needs.
Here are some examples of potential services and benefits that can be offered to employees moving to the US:
Core:
Tax consultation and preparationImmigration assistance
Final move (flights to the U.S.)
Relocation cash allowance
Destination services, such as area orientation, finding a home and also a school (if relevant), and other settling-in services.
Shipping of household Goods
Flex (Add-ons):
Dependent Visa
Temporary living
Language instruction
Cross-cultural training
A trip to locate a home prior to the transfer
Career assistance for the spouse
Furniture rental
Assistance filing U.S tax returns
Keep in mind that:
1. Relocation should strive to maintain your employees’ quality of life wherever they go.
2. Relocation is not just about the host country, it’s a “circular process”: There’s a chance that your employees may move from Tel Aviv to NYC and then back to Tel Aviv or maybe even to a new destination, so every decision along the way can potentially have a long-lasting effect. Relocation shouldn’t be thought of as a “one off” process that requires taking care of just one set of specific logistical tasks. Always consider the bigger picture as well (i.e. the future).
3. Relocation is a holistic process. Instead of looking at it as a set of standalone tasks, adopt a holistic, integrated approach instead, where all of the tasks are interrelated: Tax, immigration, the logistics, finding a home, renting your house, etc.
4. Relocation programs tend to evolve organically as your company grows, so your ultimate aim should be to be consistent, compliant, and to use what you learn along the way to avoid any unnecessary complications for future employee relocations.
Relocation: A cross-cultural adventure
By Caryn Tamari, trainer and consultant at Barry Katz Ltd
Benjamin Franklin once said “By failing to prepare, you are preparing to fail”, and that’s certainly true of relocation as well. Relocation is an exciting opportunity. Wherever you go, things are undoubtedly going to be different. But if you prepare properly for your relocation adventure and learn how to navigate the cultural differences successfully, there’s no reason why you shouldn’t feel in control and arrive more confident and aware of what to expect and how to behave.
As well-traveled Israelis with a relatively high level of English and exposure to other cultures, many of us assume that we already know ‘naturally’ how to behave in a variety of scenarios, but this is a misconception that can often get us into all kinds of awkward, embarrassing situations and unnecessary trouble.
As Milton Bennett, creator of the Developmental Model of Intercultural Sensitivity says: “Intercultural sensitivity is not natural”, meaning that we can certainly make cultural faux-pas without even realizing it.
Cultural orientation training allows us to be more aware and better equipped to navigate gaps in cross-culture communication.
Here are some tips to keep in mind:
Don’t say things in English the way you’d say them if you were speaking in Hebrew. When we speak English we say things in the same ‘style’ or ‘manner’ we’d use if we were saying them in Hebrew, which can often come across as abrasive and rude to non-Hebrew speakers. Instead of “Everyone knows” try “here’s what I’m wondering”. Or instead of saying “That’s wrong!” try “Have you thought of it this way?” Etc.
Listen for certain nuances in English that may be distorting the true (or “full”) meaning of what is being said. Sometimes we can miss messages in certain cultures that don’t really say what they mean. Americans are taught from a relatively young age to avoid using negative language so they shy away from “NO”. Remember to pay attention to the subtext. Listen beyond what is being said.
Brush up on local business etiquette, which can be vastly different from Israeli customs. Israeli entrepreneurs, VCs, and hi-tech people in general may be used to calling (or taking phone calls) outside of traditional business hours, but this isn’t necessarily appropriate in other cultures, so try to avoid it and apologize when necessary.
Just because someone is polite in a business situation, doesn’t mean they’re your new BFF. Sometimes we can misinterpret someone who is being friendly, as someone who is our friend, but that’s not the case in certain business cultures. Don’t mistake politeness as an opening to be informal, because informality can also be perceived as unprofessional.
Relocation Tax Considerations
By Dina Pasca-Raz, Partner – Head of International Tax at KPMG Israel
The decision of Israeli high-tech companies to expand their operations to the U.S. market would normally involve relocation of key employees from Israel abroad. From the individual’s standpoint, relocation may be a significant springboard to one’s career. However, on top of the passing thoughts as to the new culture, or exciting career opportunities, careful attention needs to be given to the tax considerations of such a move.
Israeli tax law provides that an individual is an Israeli tax resident if his “Center of Life” is in Israel. This test takes into account the all-inclusive economic, personal and social circumstances of the individual.
The “Center of Life” test often gives rise to practical questions such as “should I sell my house”, “can I still reserve my rights with the Israeli Social Security”, “must I close my Israeli bank accounts”, or “must I sell my (brand new) car. All these questions, and many more, ideally should be addressed prior to the relocation.
Also, it is assumed that an individual is an Israeli tax resident if he was present in Israel for a period of 183 or more in a tax year, or 30 days or more in a tax year and a total of 425 or more in that tax year and in the two tax years before the tax year (the assumption does not work in the other direction).
Specific consideration should also be made to issues such as Israeli Exit Tax, time of relocation and, of course, to the key issue of the individual’s stock based compensation (Israeli Section 102 vs. U.S. Section 409A).
In particular, Israeli founders should contemplate receiving tailor-made advice, which will ensure they took care of specific matters such as U.S. estate tax, potential double taxation upon exit, legal opinions if needed and more. In addition, companies that send their employees abroad need to make sure that they do not expose themselves to a U.S. Permanent Establishment and should advise their employees abroad about what they can, and cannot do on behalf of the Israeli parent company.
In a nutshell, Israelis relocating abroad should not be terrified about the tax aspects that may apply to them, but at the same time, they need to realize that they are better off dealing with this matter sooner (in advance) rather than later (which might be too late).
U.S. Work Visa options for hi-tech personnel
By Jennifer Schear, Founding Partner at Schear Immigration Law Firm
When it comes to U.S. work visas for Israeli hi-tech professionals, the options are limited. As such, Israeli companies that are considering establishing a presence in the U.S. need to make the most of the available options. Employees are also advised to make sure that they comply with the terms and conditions of the B-1/2 tourist visa when traveling to the U.S. for business prior to issuance of a work visa. In some cases, however, a long term work visa may not be required, and a “part-time” work visa or a visa which allows for short term assignments on behalf of the Israeli employer may be sufficient.
While there are various categories of U.S. work visas, the most widely utilized classes for Israeli professionals are:
The L-1 visa for Intra-company transfers
The E-1 visa for Treaty Traders and
The H-1B visa for Specialty Occupations.
Unfortunately, the E-2 investor visa is still not available to Israeli nationals, but we are keeping our fingers crossed for developments in this regard.
Here is some high-level info* about the various U.S. visas:
Who needs a U.S. work visa?
Individuals entering the U.S. to engage in productive work activities require work authorization
Source of payment and duration of stay irrelevant
Business trip – permissible activities include meetings, conferences
Frequent business travelers may encounter issues upon entry to U.S.
Negative impact on future visa applications
Full relocation to U.S. is not necessary (part-time employment allowed)
B-1 in Lieu of H-1B
Temporary assignment behalf of foreign (non-U.S.) entity – up to 6 months
Employee must remain on foreign payroll for duration of assignment
Job duties must require individual with academic degree
Employee must hold relevant academic degree
Not appropriate for full relocation
No derivative status for family members
L-1 Intracompany Transfers:
Companies can transfer managers and executives (L-1A), or specialized knowledge employees (L-1B) to a US parent, subsidiary or affiliate entity
Employee must have been employed for at least 12 continuous months at Israeli entity
Sponsored by U.S. entity
L-1 is appropriate for both established companies and “new offices”
New offices must have corporate infrastructure in place before applying
New offices must prove they are “doing business” in U.S. after one year
Increased scrutiny of eligibility criteria, especially in Silicon Valley jurisdiction
Allows for spousal work authorization
H-1B Specialty Occupation:
The H-1B visa is often referred to as the “hi-tech” visa
Appropriate for individuals holding an academic degree (or equivalent experience) which is relevant to the position being offered in the US. Ex: A software programmer would likely require a BSc. in Computer Science or related field
Sponsored by U.S. entity
Subject to annual numerical limitations (cap)
Difficult for early stage startups – wage requirements
Portability provision allows employee to transfer to another employer
Does not allow for spousal work authorization
E-1 Treaty Trader:
The E-1 category is based on a treaty of trade, commerce and friendship between Israel and the U.S.
Companies that hold E-1 status can transfer managers, executives and employees with “essential skills” to U.S.
Sponsored by either a U.S. or Israeli entity
Company must be at least 50% owned by Israeli nationals
Company’s total international trade must be at least 50% between Israel & U.S.
Definitions for nationality and trade are very specific
Not appropriate for most early stage new start ups
Allows for spousal work authorization
*Please note that these details can change from time to time, so for the most up-to-date info you can also visit the U.S. Embassy website.
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