The day that I thought would never arrive is here: Israeli PayPal account holders can now withdraw their PayPal funds to Israeli bank accounts! Oh happy day.
PayPal says that it will take 3-5 days for your funds to arrive in your Israeli bank account, and there is an 8 NIS fee if you withdraw less than 1000 NIS at a time:
To add a bank account to your PayPal account, you have to fill out the following form:
If you click on “What’s this?” next to where it says “Bank and Branch Code,” the following pop-up window will appear with the exact spelling of each bank in English for entering in the field called “Bank name,” and the exact bank code for entering in the field that says “Bank and Branch Code.”
In the “Bank and branch code” field, you need to enter the two digit code for your bank and then the three digit code for your branch number. So let’s say your bank account is at Bank Leumi in branch 368 – you would enter 10368 in that field.
Note that there is a minimum that you can withdraw, and that is 40 NIS.
I managed to add a bank account, but I haven’t yet tried withdrawing funds. But it seems to be set up to work, so hopefully we Israelis can now use PayPal as a real means for accepting credit card and online payments, without the stress we had to go through until now.