Annex V
(September 28, 1995)
Protocol on Economic Relations
INDEX
PROTOCOL ON ECONOMIC RELATIONS
between
the Government of the State of Israel
and
the P.L.O., representing the Palestinian people
Paris, April 9, 1994
PREAMBLE
The two parties view the economic domain as one of the cornerstone
in their mutual relations with a view to enhance their interest in the
achievement of a just, lasting and comprehensive peace. Both parties
shall cooperate in this field in order to establish a sound economic
base for these relations, which will be governed in various economic
spheres by the principles of mutual respect of each other's economic
interests, reciprocity, equity and fairness.
This protocol lays the groundwork for strengthening the economic base
of the Palestinian side and for exercising its right of economic decision
making in accordance with its own development plan and priorities. The
two parties recognise each other's economic ties with other markets
and the need to create a better economic environment for their peoples
and individuals.
FRAMEWORK AND SCOPE OF THIS PROTOCOL
- This protocol establishes the contractual agreement that will govern
the economic relations between the two sides and will cover the West
Bank and the Gaza Strip during the interim period. The implementation
will be according to the stages envisaged in the Declaration of Principles
on Interim Self Government Arrangements signed in Washington D.C.
on September 13, 1993 and the Agreed Minutes thereto. It will therefore
begin in the Gaza Strip and the Jericho Area and at a later stage
will also apply to the rest of the West Bank, according to the provisions
of the Interim Agreement and to any other agreed arrangements between
the two sides.
- This Protocol, including its Appendixes, will be incorporated into
the Agreement on the Gaza Strip and the Jericho Area (in this Protocol
- the Agreement), will be an integral part thereof and interpreted
accordingly. This paragraph refers solely to the Gaza Strip and the
Jericho Area.
- This Protocol will come into force upon the signing of the Agreement.
- For the purpose of this Protocol, the term "Areas" means
the areas under the jurisdiction of the Palestinian Authority, according
to the provisions of the Agreement regarding territorial jurisdiction.
The Palestinian Jurisdiction in the subsequent agreements could cover
areas, spheres or functions according to the Interim Agreement. Therefore,
for the purpose of this Protocol, whenever applied, the term "Areas"
shall be interpreted to mean functions and spheres also, as the case
may be, with the necessary adjustments.
THE JOINT ECONOMIC COMMITTEE
- Both parties will establish a Palestinian-Israeli Joint Economic
Committee (hereinafter - the JEC) to follow up the implementation
of this Protocol and to decide on problems related to it that may
arise from time to time. Each side may request the review of any issue
related to this Agreement by the JEC.
- The JEC will serve as the continuing committee for economic cooperation
envisaged in Annex III of the Declaration of Principles.
- The JEC will consist of an equal number of members from each side
and may establish sub-committees specified in this Protocol.
A sub-committee may include experts as necessary.
- The JEC and its sub-committees shall reach their decisions by agreement
and shall determine their rules of procedure and operation, including
the frequency and place or places of their meetings.
IMPORT TAXES AND IMPORT POLICY
- The import and customs policies of both sides will be according
to the principles and arrangements detailed in this Article.
-
- The Palestinian Authority will have all powers and responsibilities
in the sphere of import and customs policy and procedures with
regard to the following:
- Goods on List Al, attached hereto as Appendix I locally-produced
in Jordan and in Egypt particularly and in the other Arab
countries, which the Palestinians will be able to import in
quantities agreed upon by the two sides up to the Palestinian
market needs as estimated according to para 3 below.
- Goods on List A2, attached hereto as Appendix II, from the
Arab, Islamic and other countries, which the Palestinians
will be able to import in quantities agreed upon by the two
sides up to the Palestinian market needs as estimated according
to para 3 below.
- The import policy of the Palestinian Authority for Lists Al
and A2 will include independently determining and changing from
time to time the rates of customs, purchase tax, levies, excises
and other charges, the regulation of licensing requirements and
procedures and of standard requirements. The valuation for custom
purposes will be based upon the GATT 1994 agreement as of the
date it will be introduced in Israel, and until then - on the
Brussels Definition of Valuation (BDV) system. The classification
of goods will be based on the principles of "the Harmonized
Commodity Description and Coding System". Concerning imports
referred to in Article VII of this Protocol (Agriculture), the
provisions of that Article will apply.
- For the purposes of para 2(a) above, the Palestinian market needs
for 1994 will be estimated by a sub-committee of experts. These estimates
will be based on the best available data regarding past consumption,
production, investment and external trade of the Areas. The sub-committee
will submit its estimate within three months from the signing of the
Agreement. These estimates will be reviewed and updated every six
months by the sub-committee, on the basis of the best data available
regarding the latest period for which relevant data are available,
taking into consideration all relevant economic and social indicators.
Pending an agreement on the Palestinian market needs, the previous
period's estimates adjusted for population growth and rise in per-capita
GNP in the previous period, will serve as provisional estimate.
- The Palestinian Authority will have all powers and responsibilities
to independently determine and change from time to time the rates
of customs, purchase taxes; levies, excises and other charges on the
goods on List B, attached hereto as Appendix III, of basic food items
and other goods for the Palestinian economic development program,
imported by the Palestinians to the Areas.
-
- With respect to all goods not specified in Lists Al, A2 and
B, and with respect to quantities exceeding those determined in
accordance with paras 2(a) & 3 above (hereinafter - the Quantities),
the Israeli rates of customs, purchase tax, levies, excises and
other charges, prevailing at the date of signing of the Agreement
, as changed from time to time, shall serve as the minimum basis
for the Palestinian Authority. The Palestinian Authority may decide
on any upward changes in the rates on these goods and exceeding
quantities when imported by the Palestinians to the Areas.
- With respect to all goods not specified in Lists A1 and A2,
and with respect to quantities exceeding the Quantities, Israel
and the Palestinian Authority will employ for all imports the
same system of importation, as stipulated in para 10 below, including
inter alia standards, licensing, country of origin, valuation
for customs purposes etc.
- Each side will notify the other side immediately of changes made
in rates and in other matters of import policy, regulations and procedures,
determined by it within its respective powers and responsibilities
as detailed in this Article. With regard to changes which do not require
immediate application upon decision, there will be a process of advance
notifications and mutual consultations which will take into consideration
all aspects and economic implications.
- The Palestinian Authority will levy VAT at one rate on both locally
produced goods and services and on imports by the Palestinians (whether
covered by the three Lists mentioned above or not), and may fix it
at the level of 15% to 16%.
- Goods imported from Jordan, Egypt and other Arab countries according
to para 2(a)(1) above (List Al) will comply with rules of origin agreed
upon by a joint sub-committee within three months of the date of the
signing of the Agreement. Pending an agreement, goods will be considered
to have been "locally produced" in any of those countries
if they conform with all the following:
-
- They have been wholly grown, produced, or manufactured in
that country, or have been substantially transformed there
into new or different goods, having a new name, character,
or use, distinct from the goods or materials from which they
were so transformed;
- They have been imported directly from the said country;
- The value or the costs of the materials produced in that
country, plus the direct processing costs in it, do not fall
short of 30 percent of the export value of the goods. This
rate may be reviewed by the joint committee mentioned in para
16 a year after the signing of the Agreement.
- The goods are accompanied by an internationally recognized
certificate of origin;
- No goods will be deemed as substantially new or different
goods, and no material will be eligible for inclusion as domestic
content, by virtue of having merely undergone simple combining
or packaging, or dilution with water or other substances,
which do not materially alter the characteristics of the said
goods.
- Each side will issue import licences to its own importers, subject
to the principles of this Article and will be responsible for the
implementation of the licensing requirements and procedures prevailing
at the time of the issuance of the licenses. Mutual arrangements will
be made for the exchange of information relevant to licensing matters.
- Except for the goods on Lists Al and A2 and their Quantities - in
which the Palestinian Authority has all powers and responsibilities,
both sides will maintain the same import policy (except for rates
of import taxes and other charges for goods in List B) and regulations
including classification, valuation and other customs procedures,
which are based on the principles governing international codes, and
the same policies of import licensing and of standards for imported
goods, all as applied by Israel with respect to its importation. Israel
may from time to time introduce changes in any of the above, provided
that changes in standard requirements will not constitute a non-tariff-barrier
and will be based on considerations of health, safety and the protection
of the environment in conformity with Article 2.2. of the Agreement
on Technical Barriers to trade of the Final Act of the Uruguay Round
of Trade Negotiations. Israel will give the Palestinian Authority
prior notice of any such changes, and the provisions of para 6 above
will apply.
-
- The Palestinian Authority will determine its own rates of customs
and purchase tax on motor vehicles imported as such, to be registered
with the Palestinian Authority. The vehicle standards will be
those applied at the date of the signing of the Agreement as changed
according to para 10 above. However, the Palestinian Authority
may request, through the sub-committee on transportation, that
in special cases different standards will apply. Used motor vehicles
will be imported only if they are passenger cars or dual-purpose
passenger cars of a model of no more than three years prior to
the importation year. The sub-committee on transportation will
determine the procedures for testing and confirming that such
used cars comply with the standards' requirements for that model
year. The issue of importing commercial vehicles of a model prior
to the importation year will be discussed in the joint sub-committee
mentioned in para 16 below.
- Each side may determine the terms and conditions for the transfer
of motor vehicles registered in the other side to the ownership
or use of a resident of its own side, including the payment of
the difference of import taxes, if any, and the vehicle having
been tested and found compatible with the standards required at
that time by its own registration administration, and may prohibit
transfer of vehicles.
-
- Jordanian standards, as specified in the attached Appendix I,
will be acceptable in importing petroleum products into the Areas,
once they meet the average of the standards existing in the European
Union countries, or the USA standards, which parameters have been
set at the values prescribed for the geographical conditions of
Israel, the Gaza Strip and the West Bank. Cases of petroleum products
which do not meet these specifications will be referred to a joint
experts' committee for a suitable solution. The committee may
mutually decide to accept different standards for the importation
of gasoline which meet the Jordanian standards even though, in
some of their parameters, they do not meet the European Community
or USA standards. The committee will give its decision within
six months. Pending the committee's decision, and for not longer
than six months of the signing of the Agreement, the Palestinian
Authority may import to the Areas, gasoline for the Palestinian
market in the Areas, according to the needs of this market, provided
that:
- this gasoline is marked in a distinctive colour to differentiate
it from the gasoline marketed in Israel; and
- the Palestinian Authority will take all the necessary steps
to ensure that this gasoline is not marketed in Israel.
- The difference in the final price of gasoline to consumers in
Israel and to consumers in the Areas, will not exceed 15% of the
official final consumer price in Israel. The Palestinian Authority
has the right to determine the prices of petroleum products, other
than gasoline, for consumption in the Areas.
- If Egyptian gasoline standards will comply with the conditions
of sub-para (a) above, the importation of Egyptian gasoline will
also be allowed.
- In addition to the points of exit and entry designated according
to the Article regarding Passages in Annex I of the Agreement for
the purpose of export and import of goods, the Palestinian side has
the right to use all points of exit and entry in Israel designated
for that purpose. The import and export of the Palestinians through
the points of exit and entry in Israel will be given equal trade and
economic treatment.
- In the entry points of the Jordan River and the Gaza Strip:
- Freight shipment
The Palestinian Authority will have full responsibility and powers
in the Palestinian customs points (freight-area) for the implementation
of the agreed upon customs and importation policy as specified
in this protocol, including the inspection and the collection
of taxes and other charges, when due.
Israeli customs officials will be present and will receive from
the Palestinian customs officials a copy of the necessary relevant
documents related to the specific shipment and will be entitled
to ask for inspection in their presence of both goods and tax
collection.
The Palestinian customs officials will be responsible for the
handling of the customs procedure including the inspection and
collection of due taxes.
In case of disagreement on the clearance of any shipment according
to this Article, the shipment will be delayed for inspection for
a maximum period of 48 hours during which a joint sub-committee
will resolve the issue on the basis of the relevant provisions
of this Article. The shipment will be released only upon the sub-committee's
decision.
- Passengers customs lane
Each side will administer its own passengers customs procedures,
including inspection and tax collection. The inspection and
collection of taxes due in the Palestinian customs lane will
be conducted by customs officials of the Palestinian Authority.
Israeli customs officials will be invisibly present in the Palestinian
customs lane and entitled to request inspection of goods and
collection of taxes when due. In the case of suspicion, the
inspection will be carried out by the Palestinian official in
a separate room in the presence of the Israeli customs official.
- The clearance of revenues from all import taxes and levies, between
Israel and the Palestinian Authority, will be based on the principle
of the place of final destination. In addition, these tax revenues
will be allocated to the Palestinian Authority even if the importation
was carried out by Israeli importers when the final destination explicitly
stated in the import documentation is a corporation registered by
the Palestinian Authority and conducting business activity in the
Areas. This revenue clearance will be effected within six working
days from the day of collection of the said taxes and levies.
- The Joint Economic Committee or a sub-committee established by it
for the purposes of this Article will deal inter alia with the following:
- Palestinian proposals for addition of items to Lists Al, A2
and B. Proposals for changes in rates and in import procedures,
classification, standards and licensing requirements for all other
imports;
- Estimate the Palestinian market needs, as mentioned in para
3 above;
- Receive notifications of changes and conduct consultations,
as mentioned in para 6 above;
- Agree upon the rules of origin as mentioned in para 8 above,
and review their implementation;
- Coordinate the exchange of information relevant to licensing
matters as mentioned in para 9 above;
- Discuss and review any other matters concerning the implementation
of this Article and resolve problems arising therefrom.
- The Palestinian Authority will have the right to exempt the Palestinian
returnees who will be granted permanent residency in the Areas from
import taxes on personal belongings including house appliances and
passenger cars as long as they are for personal use.
- The Palestinian Authority will develop its system for temporary
entry of needed machines and vehicles used for the Palestinian Authority
and the Palestinian economic development plan.
Concerning other machines and equipment, not included in Lists Al,
A2 and B, the temporary entry will be part of the import policy as
agreed in para 10 above, until the joint sub-committee mentioned in
para 16 decides upon a new system proposed by the Palestinian Authority.
The temporary entry will be coordinated through the joint sub-committee.
- Donations in kind to the Palestinian Authority will be exempted
from customs and other import taxes if destined and used for defined
development projects or non-commercial humanitarian purposes. The
Palestinian Authority will be responsible exclusively for planning
and management of the donors' assistance to the Palestinian people.
The Joint Economic Committee will discuss issues pertaining to the
relations between the provisions in this Article and the implementation
of the principles in the above paragraph.
MONETARY AND FINANCIAL ISSUES
- The Palestinian Authority will establish a Monetary Authority (PMA)
in the Areas. The PMA will have the powers and responsibilities for
the regulation and implementation of the monetary policies within
the functions described in this Article.
- The PMA will act as the Palestinian Authority's official economic
and financial advisor.
- The PMA will act as the Palestinian Authority's and the public sector
entities' sole financial agent, locally and internationally.
- The foreign currency reserves (including gold) of the Palestinian
Authority and all Palestinian public sector entities will be deposited
solely with the PMA and managed by it.
- The PMA will act as the lender of last resort for the banking system
in the Areas.
- The PMA will authorize foreign exchange dealers in the Areas and
will exercise control (regulation and supervision) over foreign exchange
transactions within the Areas and with the rest of the world.
-
- The PMA will have a banking supervision department that will
be responsible for the proper functioning, stability, solvency
and liquidity of the banks operating in the Areas.
- The banking supervision department will predicate its supervision
on the international principles and standards reflected in international
conventions and especially on the principles of the "Basle
Committee".
- The supervision department will be charged with the general
supervision of every such bank, including:
- The regulation of all kinds of banking activities, including
their foreign activities;
- The licensing of banks formed locally and of branches, subsidiaries,
joint ventures and representative offices of foreign banks
and the approval of controlling shareholders;
- The supervision and inspection of banks.
The PMA will relicense each of the five branches of the Israeli banks
operating at present in the Gaza Strip and the West Bank, as soon as
its location or the authorities regarding it come under the jurisdiction
of the Palestinian Authority. These branches will be required to comply
with the general rules and regulations of the PMA concerning foreign
banks, based on the "Basle Concordat". Para I0 d, e, and f
below will apply to these branches.
- Any other Israeli bank wishing to open a branch or a subsidiary
in the Areas will apply for a license to the PMA and will be treated
equally to other foreign banks, provided that the same will apply
to the Palestinian banks wishing to open a branch or a subsidiary
in Israel.
- Granting of a license by both authorities will be subject to the
following arrangements based on the "Basle Concordat" valid
on the date of signing of the Agreement and to the host authority's
prevailing general rules and regulations concerning opening of branches
and subsidiaries of foreign banks.
In this para 10 "host authority" and "home authority"
apply only to the Bank of Israel (BOI) and the PMA.
- A bank wishing to open a branch or establish a subsidiary will apply
to the host authority, having first obtained the approval of its home
authority. The host authority will notify the home authority of the
terms of the license, and will give its final approval unless the
home authority objects.
- The home authority will be responsible for the consolidated and
comprehensive supervision of banks, inclusive of branches and subsidiaries
in the area under the jurisdiction of the host authority. However,
the distribution of supervision responsibilities between the home
and the host authorities concerning subsidiaries will be according
to the "Basle Concordat".
- The host authority will regularly examine the activities of branches
and subsidiaries in the area under its jurisdiction. The home authority
will have the right to conduct on site examinations in the branches
and subsidiaries in the host area. However, the supervision responsibilities
of the home authority concerning subsidiaries will be according to
the "Basle Concordat".
Accordingly, each authority will transfer to the other authority copies
of its examination reports and any information relevant to the solvency,
stability and soundness of the banks, their branches and subsidiaries.
- The BOI and the PMA will establish a mechanism for cooperation and
for the exchange of information on issues of mutual interest.
- The New Israeli Sheqel (NIS) will be one of the circulating currencies
in the Areas and will legally serve there as means of payment for
all purposes including official transactions. Any circulating currency,
including the NIS, will be accepted by the Palestinian Authority and
by all its institutions, local authorities and banks, when offered
as a means of payment for any transaction.
- Both sides will continue to discuss, through the JEC, the possibility
of introducing mutually agreed Palestinian currency or temporary alternative
currency arrangements for the Palestinian Authority.
- The liquidity requirements on all deposits in banks operating in
the Areas will be determined and announced by the PMA.
- Banks in the Areas will accept NIS deposits. The liquidity requirements
on the various kinds of NIS deposits (or deposit linked to the NIS)
in banks operating in the Areas will not be less than 4% to 8%, according
to the type of deposits. Changes of over 1% in the liquidity requirements
on NIS deposits (or deposits linked to the NIS) in Israel will call
for corresponding changes in the above mentioned rates.
- The supervision and inspection of the implementation of all liquidity
requirements will be carried out by the PMA.
- The reserves and the liquid assets required according to this paragraph
will be deposited at the PMA according to rules and regulations determined
by it. Penalties for non compliance with the liquidity requirements
will be determined by the PMA.
The PMA will regulate and administer a discount window system and the
supply of temporary finance for banks operating in the Areas.
- The PMA will establish or license a clearing house in order to clear
money orders between the banks operating in the Areas, and with other
clearing houses.
- The clearing of money orders and transactions between banks operating
in the Areas and banks operating in Israel will be done between the
Israeli and the Palestinian clearing houses on same working day basis,
according to agreed arrangements.
Both sides will allow correspondential relations between each others'
banks.
The PMA will have the right to convert at the BOI excess NIS received
from banks operating in the Areas into foreign currency, in which the
BOI trades in the domestic inter-bank market, up to the amounts determined
per period, according to the arrangements detailed in para 16 below.
- The excess amount of NIS, due to balance of payments flows, that
the PMA will have the right to convert into foreign currency, will
be equal to:
- Estimates of all Israeli "imports" of goods and services
from the Areas, valued at market prices (inclusive of taxes),
which were paid for in NIS, less:
- the taxes collected by the Palestinian Authority on all
Israeli "imports" from the Areas and rebated to
Israel in NIS, and
- the taxes collected by Israel on all Israeli "imports"
from the Areas and included in their market value, and not
rebated to the Palestinian Authority,
minus
- Estimates of all Israeli "exports" of goods and services
to the Areas, valued at market prices (inclusive of taxes), which
were paid for in NIS, less
- the taxes collected by Israel on such "exports"
and rebated to the Palestinian Authority, and
- the taxes collected by the Palestinian Authority on such
"exports" and included in their market value, and
not rebated to Israel;
plus
- The accumulated net amounts of foreign currency converted previously
into NIS by the PMA, as recorded in the BOI Dealing Room.
- The said flows and amounts will be calculated as of the date of
the signing of the Agreement.
Notes to para 16:
- The estimates of the said "exports and imports" of goods
and services will include inter alia labor services, NIS expenditure
of tourists and Israelis in the Areas and NIS expenditure of Palestinians
of the Areas in Israel.
- Taxes and pension contributions on "imports" of labor
services, paid to "importing" side and rebated to the "exporting"
one, will not be included in the estimates of the sums to be converted,
as the "exports'" earnings of labor services are recorded
in the statistics inclusive of them, although they do not accrue to
the individuals supplying them.
The PMA and the BOI will meet annually to discuss and determine the
annual amount of convertible NIS during the following calendar year
and will meet semi-annually to adjust the said amount. The amounts determined
annually and adjusted semi-annually will be based on data and estimates
regarding the past and on forecasts for the wi following period, according
to the formula mentioned in para 16. The first meeting will be as soon
as possible within three months after the date of the signing of the
Agreement.
- The exchange of foreign currency for NIS and vice-versa by the PMA
will be carried out through the BOI Dealing Room, at the market exchange
rates.
- The BOI will not be obliged to convert in any single month more
than 1/5 of the semi-annual amount, as mentioned in para 17.
- There will be no ceiling on the annual foreign currency conversions
by the PMA into NIS. However, in order to avoid undesirable fluctuations
in the foreign exchange market, monthly ceilings of such conversions
will be agreed upon in the annual and semi-annual meetings referred
to in para 17.
- Banks in the Areas will convert NIS into other circulating currencies
and vice-versa.
- The Palestinian Authority will have the authorities, powers and
responsibilities regarding the regulation and supervision of capital
activities in the Areas, including the licensing of capital market
institutions, finance companies and investment funds.
DIRECT TAXATION
- Israel and the Palestinian Authority will each determine and regulate
independently its own tax policy in matters of direct taxation, including
income tax on individuals and corporations, property taxes, municipal
taxes and fees.
- Each tax administration will have the right to levy the direct taxes
generated by economic activities within its area.
- Each tax administration may impose additional taxes on residents
within its area on (individuals and corporations) who conduct economic
activities in the other side's area.
- Israel will transfer to the Palestinian Authority a sum equal to:
- 75% of the income taxes collected from Palestinians from the
Gaza Strip and the Jericho Area employed in Israel.
- The full amount of income taxes collected from Palestinians
from the Gaza Strip and Jericho Area employed in the settlements.
- The two sides will agree on a set of procedures that will address
all issues concerning double taxation.
INDIRECT TAXES ON LOCAL PRODUCTION
- The Israel and the Palestinian tax administrations will levy and
collect VAT and purchase taxes on local production, as well as any
other indirect taxes, in their respective areas.
- The purchase tax rates within the jurisdiction of each tax administration
will be identical as regards locally produced and imported goods.
- The present Israeli VAT rate is 17%. The Palestinian VAT rate will
be 15% to 16%.
- The Palestinian Authority will decide on the maximum annual turnover
for businesses under its jurisdiction to be exempt from VAT, within
an upper limit of 12,000 US $.
- The VAT on purchases by businesses registered for VAT purposes will
accrue to the tax administration with which the respective business
is registered.
Businesses will register for VAT purposes with the tax administration
of the side of their residence, or on the side of their ongoing operation.
There will be clearance of VAT revenues between the Israeli and Palestinian
VAT administrations on the following conditions:
- The VAT clearance will apply to VAT on transactions between
businesses registered with the VAT administration of the side
in which they reside.
- The following procedures will apply to clearance of VAT revenues
accruing from transactions by businesses registered for VAT purposes:
- To be acceptable for clearance purposes, special invoices,
clearly marked for this purpose, will be used for transactions
between businesses registered with the different sides.
- The invoices will be worded either in both Hebrew and Arabic
or in English and will be filled out in any of these three
languages, provided that the figures are written in "Arabic"
(not Hindi) numerals.
- For the purpose of tax rebates, such invoices will be valid
for six months from their date of issue.
- Representatives of the two sides will meet once a month,
on the 20th day of the month, to present each other with a
list of invoices submitted to them for tax rebate, for VAT
clearance. This list will include the following details regarding
each invoice:
- The number of the registered business issuing it;
- The name of the registered business issuing it;
- The number of the invoice;
- The date of issue;
- The amount of the invoice;
- The name of the recipient of the invoice.
- The clearance claims will be settled within 6 days from
the meeting, through a payment by the side with the net balance
of claims against it, to the other side.
- Each side will provide the other side, upon demand, with
invoices for verification purposes. Each tax administration
will be responsible for providing invoices for verification
purposes for 6 months after receiving them.
- Each side will take the necessary measure to verify the
authenticity of the invoices presented to it for clearance
by the other side.
- Claims for VAT clearance which will not be found valid will
be deducted from the next clearance payment.
- Once an inter-connected computer system for tax rebates
to businesses and for VAT clearance between the two sides
is operational, it will replace the clearance procedures specified
in sub-paras (4) - (8).
- The two tax administrations will exchange lists of the businesses
registered with them and will provide each other with the
necessary documentation, if required, for the verification
of transactions.
- The two sides will establish a sub-committee which will
deal with the implementation arrangements regarding the clearance
of VAT revenues set above.
- VAT paid by not-for-profit Palestinian organizations and institutions,
registered by the Palestinian Authority, on transactions in Israel,
will accrue to the Palestinian tax administration. The clearance system
set out in para 5 will apply to these organizations and institutions.
LABOR
- Both sides will attempt to maintain the normality of movement of
labor between them, subject to each side's right to determine from
time to time the extent and conditions of the labor movement into
its area. If the normal movement is suspended temporarily by either
side, it will give the other side immediate notification, and the
other side may request that the matter be discussed in the Joint Economic
Committee.
The placement and employment of workers from one side in the area
of the other side will be through the employment service of the other
side and in accordance with the other sides' legislation. The Palestinian
side has the right to regulate the employment of Palestinian labor
in Israel through the Palestinian employment service, and the Israeli
Employment Service will cooperate and coordinate in this regard.
-
- Palestinians employed in Israel will be insured in the Israeli
social insurance system according to the National Insurance Law
for employment injuries that occur in Israel, bankruptcy of employers
and maternity leave allowance.
- The National Insurance fees deducted from the wages for maternity
insurance will be reduced according to the reduced scope of maternity
insurance, and the equalization deductions transferred to the
Palestinian Authority, if levied, will be increased accordingly.
- Implementation procedures relating thereto will be agreed upon
between the Israeli National Insurance Institute and the Palestinian
Authority or the appropriate Palestinian social insurance institution.
-
- Israel will transfer to the Palestinian Authority, on a monthly
basis, the equalization deductions as defined by Israeli legislation,
if imposed and to the extent levied by Israel. The sums so transferred
will be used for social benefits and health services, decided
upon by the Palestinian Authority, for Palestinians employed in
Israel and for their families.
The equalization deductions to be so transferred will be those
collected after the date of the signing of the Agreement from
wages of Palestinians employed in Israel and from their employers.
These sums will not include
- Payments for health services in places of employment.
- 2/3 of the actual administrative costs in handling the matters
related to the Palestinians employed in Israel by the Payments
Section of the Israeli Employment Service.
- Israel will transfer, on a monthly basis, to a relevant pension
insurance institution to be established by the Palestinian Authority,
pension insurance deductions collected after the establishment of
the above institution and the completion of the documents mentioned
in para 6.
These deductions will be collected from wages of Palestinians employed
in Israel and their employers, according to the relevant rates set
out in the applicable Israeli collective agreements. 2/3 of the actual
administrative costs in handling these deductions by the Israeli Employment
Service will be deducted from the sums transferred. The sums so transferred
will be used for providing pension insurance for these workers. Israel
will continue to be liable for pension rights of the Palestinian employees
in Israel, to the extent accumulated by Israel before the entry into
force of this para 4.
- Upon the receipt of the deductions, the Palestinian Authority and
its relevant social institutions will assume full responsibility in
accordance with the Palestinian legislation and arrangements, for
pension rights and other social benefits of Palestinians employed
in Israel, that accrue from the transferred deductions related to
these rights and benefits. Consequently, Israel and its relevant social
institutions and the Israeli employers will be released from, and
will not be held liable for any obligations and responsibilities concerning
personal claims, rights and benefits arising from these transferred
deductions, or from the provisions of paras 2-4 above.
- Prior to the said transfers, the Palestinian Authority or its relevant
institutions, as the case may be, will provide Israel with the documents
required to give legal effect to their aforesaid obligations, including
mutually agreed implementation procedures of the principles agreed
upon in paras 3-5 above.
- The above arrangements concerning equalization deductions and/or
pension deductions may be reviewed and changed by Israel if an authorized
court in Israel will determine that the deductions or any part thereof
must be paid to individuals, or used for individual social benefits
or insurance in Israel, or that it is otherwise unlawful. In such
a case the liability of the Palestinian side will not exceed the actual
transferred deductions related to the case.
- Israel will respect any agreement reached between the Palestinian
Authority, or an organization or trade-union representing the Palestinians
employed in Israel, and a representative organization of employees
or employers in Israel, concerning contributions to such organization
according to any collective agreement.
-
- The Palestinian Authority may integrate the existing health
insurance scheme for Palestinians employed in Israel and their
families in its health insurance services. As long as this scheme
continues, whether integrated or separately, Israel will deduct
from their wages the health insurance fees ("health stamp")
and will transfer them to the Palestinian Authority for this purpose.
- The Palestinian Authority may integrate the existing health
insurance scheme for Palestinians who were employed in Israel
and are receiving pension payments through the Israeli Employment
Service, in its health insurance services. As long as this scheme
continues, whether integrated or separately, Israel will deduct
the necessary sum of health insurance fees ("health stamp")
from the equalization payments and will transfer them to the Palestinian
Authority for this purpose.
- The JEC will meet upon the request of either side and review the
implementation of this Article and other issues concerning labor,
social insurance and social rights.
- Other deductions not mentioned above, if any, will be jointly reviewed
by the JEC. Any agreement between the two sides concerning these deductions
will be in addition to the above provisions.
- Palestinians employed in Israel will have the right to bring disputes
arising out of employee - employer relationships and other issues
before the Israeli Labor Courts, within these courts' jurisdiction.
- This Article governs the future labor relations between the two
sides and will not impair any labor rights prior to the date of signing
of the Agreement.
AGRICULTURE
- There will be free movement of agricultural produce, free of customs
and import taxes, between the two sides, subject to the following
exceptions and arrangements.
- The official veterinary and plant protection services of each side
will be responsible, within the limits of their respective jurisdiction,
for controlling animal health, animal products and biological products,
and plants and parts thereof, as well as their importation and exportation.
- The relations between the official veterinary and plant protection
services of both sides will be based on mutuality in accordance with
the following principles, which will be applied in all the areas under
their respective jurisdiction:
- Israel and the Palestinian Authority will do their utmost to
preserve and improve the veterinary standards.
- Israel and the Palestinian Authority will take all measures
to reach equivalent and compatible standards regarding animal
disease control, including mass vaccination of animals and avians,
quarantines, "stamping out" measures and residue control
standards.
- Mutual arrangements will be made to prevent the introduction
and spread of plant pests and diseases, for their eradication
and concerning residue control standards in plant products.
- The official veterinary and plant protection services of Israel
and the Palestinian Authority will coordinate and regularly exchange
information regarding animal diseases, as well as plant pests
and diseases, and will establish a mechanism for immediate notification
of the outbreak of such diseases.
- Trade between the two sides in animals, animal products and biological
products will be in keeping with the principles and definitions set
out in the current edition of the OIE National Animal Health Code
as updated from time to time (hereinafter - I.A.H.C.).
- Transit of livestock, animal products and biological products from
one side through the area under the jurisdiction of the other side,
should be conducted in a manner aimed at the prevention of diseases
spreading to or from the consignment during its movement. For such
a transit to be permitted, it is a prerequisite that the veterinary
conditions agreed upon by both sides will be met in regard to importation
of animals, their products and biological products from external markets.
Therefore the parties agree to the following arrangements.
- The official veterinary services of each side have the authority
to issue veterinary import permits for import of animals, animal products
and biological products to the areas under its jurisdiction. In order
to prevent the introduction of animal diseases from third parties,
the following procedures will be adopted:
- The import permits will strictly follow the professional veterinary
conditions for similar imports to Israel as prevailing at the
time of their issuance. The permits will specify the country of
origin and the required conditions to be included in the official
veterinary certificates which should be issued by the veterinary
authorities in the countries of origin and which should accompany
each consignment.
Each side may propose a change in these conditions. The change
will come into force 10 days after notice to the other side, unless
the other side requested that the matter be brought before the
Veterinary Sub-Committee specified in para 14 (hereinafter - VSC).
If it is more stringent than the prevailing conditions - it will
come into force 20 days after the request, unless both sides decide
otherwise through the VSC, and if more lenient - it will come
into force only if agreed upon by both sides through the VSC.
However, if the change is urgent and needed for the protection
of animal and public health, it will come into force immediately
after notice by the other side and will remain in force unless
and until both sides agree otherwise through the VSC.
- The official veterinary certificates will include the provisions
regarding OIE Lists A & B Diseases as specified in the I.A.H.C.
When the I.A.H.C. allows alternative requirements regarding the
same disease, the most stringent one will be adopted unless otherwise
agreed upon by the VSC.
- When infectious diseases which are not included in Lists A &
B of the I.A.H.C. exist or are suspected, on scientific grounds,
to exist in the exporting country, the necessary veterinary import
conditions that will be required and included in the official
veterinary certificates, will be discussed in the VSC, and in
the case of different professional opinions, the most stringent
ones will be adopted.
- The import of live vaccines will be permitted only if so decided
by the VSC.
- Both sides will exchange, through the VSC, information pertaining
to import licensing, including the evaluation of the disease situation
and zoosanitary capability of exporting countries, which will
be based upon official information as well as upon other available
data.
- Consignments which do not conform with the above mentioned requirements
will not be permitted to enter the areas under the jurisdiction
of either side.
- Transportation of livestock and poultry and of animal products and
biological products between areas under the jurisdiction of one side
through areas under the jurisdiction of the other side, will be subject
to the following technical rules:
- The transportation will be by vehicles which will be sealed
with a seal of the official veterinary services of the place of
origin and marked with a visible sign "Animal Transportation"
or "Products of Animal Origin" in Arabic and Hebrew,
in coloured and clearly visible letters on white background;
- Each consignment will be accompanied by a veterinary certificate
issued by the official veterinary services of the place of origin,
certifying that the animals or their products were examined and
are free of infectious diseases and originate from a place which
is not under quarantine or under animal movement restrictions.
- Transportation of livestock and poultry, animal products and biological
products destined for Israel from the Areas and vice versa will be
subject to veterinary permits issued by the official veterinary services
of the recipient side, in keeping with the OIE standards used in international
traffic in this field. Each such consignment will be transported by
a suitable and marked vehicle, accompanied by a veterinary certificate
in the form agreed upon between the official veterinary services of
both sides. Such certificates will be issued only if permits of the
recipient side are presented.
- In order to prevent the introduction of plant pests and diseases
to the region, the following procedures will be adopted:
- The transportation between the Areas and Israel, of plants and
parts thereof (including fruits and vegetables), the control of
pesticide residues in them and the transportation of plant propagation
material and of animal feed, may be inspected without delay or
damage by the plant protection services of the recipient side.
- The transportation between the Areas through Israel of plants
and parts thereof (including fruits and vegetables) as well as
of pesticides, may be required to pass a phytosanitary inspection
without delay or damage.
- The official Palestinian plant protection services have the
authority to issue permits for the import of plants and parts
thereof as well as of pesticides from external markets. The permits
will be based on the prevailing standards and requirements.
The permits will specify the required conditions to be included
in the official Phytosanitary Certificates (hence P.C.) based
upon the standards and the requirements of the International Plant
Protection Convention (I.P.P.C.)and those of the European and
Mediterranean Plant Protection Organization (E.P.P.O.) which should
accompany each consignment. The P.C.'s will be issued by the plant
protection services in the countries of origin. Dubious or controversial
cases will be brought before the sub-committee on plant protection.
- The agricultural produce of both sides will have free and unrestricted
access to each others' markets, with the temporary exception of sales
from one side to the other side of the following items only: poultry,
eggs, potatoes, cucumbers, tomatoes and melons. The temporary restrictions
on these items will be gradually removed on an increasing scale until
they are finally eliminated by 1998, as listed below:
| Year |
Poultry |
Eggs |
Potatoes |
Cucumbers |
Tomatoes |
Melons |
|
(In tons) |
(In millions) |
(In tons) |
(In tons) |
(In tons) |
(In tons) |
Note: The above figures refer to the combined quantities marketed
from the West Bank and Gaza Strip to Israel and vice-versa. The
Palestinian Authority will notify Israel the apportioning of these
quantities between these areas concerning the quantities pertaining
to the Palestinian produce.
- The Palestinians will have the right to export their agricultural
produce to external markets without restrictions, on the basis of
certificates of origin issued by the Palestinian Authority.
- Without prejudice to obligations arising out of existing international
agreements, the two sides will refrain from importing agricultural
products from third parties which may adversely affect the interests
of each other's farmers.
- Each side will take the necessary measures in the area under its
jurisdiction to prevent damage which may be caused by its agriculture
to the environment of the other side.
- The two sides will establish sub-committees of their respective
official veterinary and plant protection services, which will update
the information and review issues, policies and procedures in these
fields. Any changes in the provisions of this Article will be agreed
upon by both sides.
- The two sides will establish a sub-committee of experts in the dairy
sector in order to exchange information, discuss and coordinate their
production in this sector so as to protect the interests of both sides.
In principle, each side will produce according to its domestic consumption.
INDUSTRY
- There will be free movement of industrial goods free of any restrictions
including customs and import taxes between the two sides, subject
to each side's legislation.
-
- The Palestinian side has the right to employ various methods
in encouraging and promoting the development of the Palestinian
industry by way of providing grants, loans, research and development
assistance and direct-tax benefits. The Palestinian side has also
the right to employ other methods of encouraging industry resorted
to in Israel.
- Both sides will exchange information about the methods employed
by them in the encouragement of their respective industries.
- Indirect tax rebates or benefits and other subsidies to sales
shall not be allowed in trade between the two sides.
- Each side will do its best to avoid damage to the industry of the
other side and will take into consideration the concerns of the other
side in its industrial policy.
- Both sides will cooperate in the prevention of deceptive practices,
trade in goods which may endanger health, safety and the environment
and in goods of expired validity.
- Each side will take the necessary measures in the area under its
jurisdiction to prevent damage which may be caused by its industry
to the environment of the other side.
- The Palestinians will have the right to export their industrial
produce to external markets without restrictions, on the basis of
certificates of origin issued by the Palestinian Authority.
- The JEC will meet and review issues pertaining to this Article.
TOURISM
- The Palestinian Authority will establish a Palestinian Tourism Authority
which will exercise, inter alia, the following powers in the Areas.
- Regulating, licensing, classifying and supervising tourist services,
sites and industries.
- Promoting foreign and domestic tourism and developing the Palestinian
tourist resources and sites.
- Supervising the marketing, promotion and information activities
related to foreign and domestic tourism.
- Each side shall, under its respective jurisdiction, protect, guard
and ensure the maintenance and good upkeep of historical, archaeological,
cultural and religious sites and all other tourist sites, to fit their
status as well as their purpose as a destination for visitors.
- Each side will determine reasonable visiting hours and days for
all tourist sites in order to facilitate visits at a wide variety
of days and hours, taking into consideration religious and national
holidays. Each side shall publicize such opening times. Meaningful
changes in the opening times will take into consideration tourist
programs already committed to.
- Tourist buses or any other form of tourist transport authorized
by either side, and operated by companies registered and licensed
by it, will be allowed to enter and proceed on their tour within the
area under the jurisdiction of the other side, provided that such
buses or other vehicles conform with the EEC technical specifications
[I. currently adopted.] All such vehicles will be clearly marked as
tourist vehicles.
- Each side will protect the environment and the ecology around the
tourist sites under its jurisdiction. In view of the importance of
beaches and maritime activities for tourism, each side will do its
best efforts to ensure that development and construction on the Mediterranean
coast, and especially at ports (such as Ashqelon or Gaza), will be
planned and carried out in a manner that will not adversely affect
the ecology, environment or the functions of the coastline and beaches
of the other side.
- Tourism companies and agencies licensed by either side shall enjoy
equal access to tourism - related facilities and amenities in border
points of exit and entry according to the regulations of the authority
operating them.
-
- Each side will license, according to its own rules and regulations,
travel agents, tour companies, tour guides and other tourism businesses
(hereinafter - tourism entities) within its jurisdiction.
- Tourism entities authorized by either side, will be allowed
to conduct tours that include the area under the jurisdiction
of the other side, provided that their authorization as well as
their operation will be in accordance with rules, professional
requirements and standards agreed upon by both sides in the sub-committee
mentioned in para 9.
Pending that agreement, existing tourism entities in the Areas
which are currently allowed to conduct tours that include Israel,
will be allowed to continue to do so, and Israeli authorized tourism
entities will continue to be allowed to conduct tours that include
the Areas.
In addition, any tourism entity of one side that the tourism authorities
of the other side will certify as fulfilling all its rules, professional
requirements and standards, will be allowed to conduct tours that
include that other side.
- Each side will make its own arrangement for compensation of tourists
for bodily injury and property damages caused by political violence
in the areas under its respective jurisdiction.
- The JEC or a tourism sub-committee established by it shall meet
upon the request of either side in order to discuss the implementation
of the provisions of this Article and resolve problems that may arise.
The sub-committee will also discuss and consider tourist issues of
benefit to both sides, and will promote educational programs for tourism
entities of both sides in order to further their professional standards
and their ethics. Complaints of one side against the behaviour of
tourism entities of the other side will be channelled through the
committee.
Note: It is agreed that the final wording in the last sentence
in para 4 will be adopted according to the final wording in the
relevant provisions of the Agreement.
INSURANCE ISSUES
- The authorities, powers and responsibilities in the insurance sphere
in the Areas, including inter alia the licensing of insurers, insurance
agents and the supervision of their activities, will be transferred
to the Palestinian Authority.
-
- The Palestinian Authority will maintain a compulsory absolute
liability system for road accident victims with a ceiling on the
amount of compensation based upon the following principles:
- Absolute liability for death or bodily injury to road accident
victims, it being immaterial whether or not there was fault
on the part of the driver and whether or not there was fault
or contributory fault on the part of others, each driver being
responsible for persons travelling in his vehicle and for
pedestrians hit by his vehicle.
- Compulsory insurance for all motor vehicles, covering death
or bodily injury to all road accident victims, including drivers.
- No cause of action in tort for death or bodily injury resulting
from road accidents.
- The maintenance of a statutory fund (hereinafter - the Fund)
for compensation of road accident victims who are unable to
claim compensation from an insurer for the following reasons:
- the driver liable for compensation is unknown;
- the driver is not insured or his insurance does not
cover the liability involved; or
- the insurer is unable to meet his liabilities.
- Terms in this Article will have the same meaning as in the
legislation prevailing at the date of signing of the Agreement
concerning compulsory motor vehicle insurance and compensation
of road accident victims.
- Any change by either side in the rules and regulations regarding
the implementation of the above mentioned principles will
require prior notice to the other side. A change which might
substantially affect the other side will require prior notice
of at least three months.
-
- Upon the signing of the Agreement the Palestinian Authority
will establish a Fund for the Areas (hereinafter - the Palestinian
Fund) for the purposes detailed in para 2(a)(4) above and for
the purposes detailed below. The Palestinian Fund will assume
the responsibilities of the statutory Road Accident Victims Compensation
Fund in the West Bank and the Gaza Strip (hereinafter - the Existing
Fund) regarding the Areas, according to the prevailing law at
that time. Accordingly, the Existing Fund will cease to be responsible
for any liability regarding accidents occurring in the Areas from
the date of signing of the Agreement.
- The Existing Fund will transfer to the Palestinian Fund, after
the assumption of the above mentioned responsibilities by it,
the premiums paid to the Existing Fund by the insurers for vehicles
registered in the Areas, pro-rata to the unexpired period of each
insurance policy.
-
- Compulsory motor vehicle insurance policies issued by insurers
licensed by either side will be valid in the territories of both
sides. Accordingly, a vehicle registered in one side covered by
such a policy will not be required to have an additional insurance
coverage for travel in the areas under the other side's jurisdiction.
These insurance policies will cover all the liabilities according
to the legislation of the place of the accident.
- In order to cover part of the liabilities which may incur due
to road accidents in Israel by uninsured vehicles registered in
the Palestinian Authority, the Palestinian Fund will transfer
to the Israeli Fund, on a monthly basis, for each insured vehicle,
an amount equal to 30% of the amount paid to the Israeli Fund
by an insurer registered in Israel, for the sat-ne type of vehicle,
for the same period of insurance (which will not be less than
90 days).
- In cases where a victim of a road accident wishes to claim compensation
from an insurer registered by the other side or from the Fund of the
other side or in cases where a driver or an owner of a car is sued
by a victim, by an insurer or by the Fund of the other side, he may
nominate the Fund of his side as his proxy for this purpose. The Fund
so nominated may address any relevant party from the other side directly
or through the other sides' Fund.
- In the case of a road accident in which neither the registration
number of the vehicle nor the identity of the driver are known, the
Fund of the side which has jurisdiction over the place of the accident
will compensate the victim, according to its own legislation.
- The Fund of each side will be responsible towards the victims of
the other side for any liability of the insurers of its side regarding
the compulsory insurance and will guarantee their liabilities.
- Each side will guarantee its Fund's liabilities according to this
Article.
- The two sides will negotiate within three months from the date of
the signing of the Agreement a cut-off agreement between the Existing
Fund and the Palestinian Fund concerning accidents which occurred
in the Areas prior to the date of the signing of the Agreement, whether
claims have been reported or not. The cut-off agreement will not include
compensation for Israeli victims involved in accidents which occurred
in the Areas prior to the date of the signing of the Agreement.
-
- The two sides will establish immediately upon the signing of
the Agreement, a sub-committee of experts (hereinafter - the Sub-Committee)
which will deal with issues regarding the implementation of this
Article, including:
- Procedures concerning the handling of claims of victims
of the one side from insurers or from the Fund of the other
side;
- Procedures concerning the transfer of the amounts between
the Funds of both sides as mentioned in para 4(b) above;
- The details of the cut-off agreement between the Existing
Fund and the Palestinian Fund, as set out in para 9 above;
- Any other relevant issue raised by either side.
- The Sub-Committee will act as a continuous committee for issues
regarding this Article.
- The two sides will exchange, through the Sub-Committee, the
relevant information regarding the implementation of this Article,
including police reports, medical information, relevant statistics,
premiums, etc. The two sides will provide each other with any
other assistance required in this regard.
- Each side may require the re-examination of the arrangements set
out in this Article a year after the date of the signing of the Agreement.
- Insurers from both sides may apply for a license to the relevant
authorities of the other side, according to the rules and regulations
regarding foreign insurers in the latter side. The two sides agree
not to discriminate against such applicants.
Done in Paris, this twenty ninth day of April,
1994
For the Government of Israel
Finance Minister Avraham Shohat
For the PLO
Abu Ala (Ahmed Korei)
- The clearance of revenues from all import taxes and levies and from
excise on fuel products between Israel and the Council, according
to this Agreement, will come into full force on the date of completion
of the first phase of the redeployment of the Israeli military forces
prior to the elections, i.e., 22 days before the day of elections
(hereinafter "the said date"). However, in view of the special
needs of the Palestinian Authority and in order to assist it in covering
current expenses, Israel has agreed to transfer to the Palestinian
Authority:
- One month after the signing of this Agreement - 50% of the revenues
collected during this month from import taxes on goods, the final
destination of which is the West Bank, and from excise on petroleum
purchased by the Palestinian side for the West Bank.
- Two months after the signing of this Agreement - 50% of the
revenues collected during the previous month from import taxes
and petroleum excise as aforesaid.
- On the said date - 100% of the revenues collected during the
period since the previous payment according to subparagraph b.
above, from import taxes and petroleum excise as aforesaid.
- In addition, on the said date Israel will transfer to the Palestinian
Authority 15 million NIS as an advance payment in respect of the remaining
surplus of the Civil Administration,s budget as mentioned in paragraph
2 of Article 39 (Treasury) of Annex III.
- Israel will transfer immediately 12 million NIS to cover the recurrent
costs of the eight spheres transferred to the Palestinian Authority
starting from September 1, 1995.
- For the purposes of the implementation of the Protocol on Economic
Relations, Israel will deduct 3% from each transfer to the Palestinian
side of import taxes and other indirect taxes, in order to cover Israel,s
administrative costs in collecting these taxes and in handling matters
related to them.
- The two sides will continue discussion through the Joint Economic
Committee on the procedures for the set-off of financial obligations
between the two sides, including legal entities under their control
or management.
-
- Cigarettes, alcohol, iron and cement will be added to list A2
attached to the Protocol on Economic Relations in accordance with
subparagraphs 2.a.(2) and 2.b of Article III of the Protocol,
in quantities according to the Palestinian market needs, taking
into account the quantities of these goods included in list A1.
However, with regard to these goods, the Israeli rates of customs,
purchase tax, levies, excises and other charges, prevailing
at the date of signing of the Agreement, as changed from time
to time, shall serve as the minimum basis for the Council.
- The quantities of electrical equipment in lists A1 and A2 will
be revised and increased by the JEC to cover all the needs of
the Palestinian market.
- Articles V (Direct Taxation) and VI (Indirect Taxes on Local Production)
of the Protocol on Economic Relations shall be replaced by the Articles
attached as Appendices 1 and 2 to this Supplement.
(Replacing Article V of the Protocol on Economic Relations)
ARTICLE V
Direct Taxation
- Israel and the Palestinian side will each determine and regulate
independently its own tax policy in matters of direct taxation, including
income tax on individuals and corporations, property taxes, municipal
taxes and fees.
- Each tax administration will have the right to levy the direct taxes
generated by economic activities within the area under its tax responsibility.
- Each tax administration may impose additional taxes on its residents
(individuals and corporations) who conduct economic activities in
areas under the tax responsibility of the other side.
- Israel will transfer to the Palestinian side a sum equal to:
- 75% of the income taxes collected from Palestinians from the
West Bank and the Gaza Strip employed in Israel.
- The full amount of the income taxes collected from Palestinians
from the West Bank and the Gaza Strip employed in the Settlements.
- When a Palestinian remits payment to an Israeli the following rules
regarding deduction at source shall apply:
- No tax shall be deducted at source on income from the sales
of goods from the areas under Israeli tax responsibility, which
are not supplied by means of a permanent establishment in the
areas under Palestinian tax responsibility. Where income from
the sales of goods is attributable to a permanent establishment
in the areas under Palestinian tax responsibility, tax may be
deducted at source, but only on such income as is attributable
to such permanent establishment.
- No tax shall be deducted at source on income derived by an Israeli
from transportation activities, if the point of departure or the
point of final destination is in the areas under Israeli tax responsibility.
- When an Israeli remits payment to a Palestinian which is income
accruing in or deriving in the West Bank and the Gaza Strip, the following
rules regarding deduction at source shall apply:
- No tax shall be deducted at source on income from the sales
of goods from the areas under Palestinian tax responsibility which
are not supplied by means of a permanent establishment in the
areas under Israeli tax responsibility. Where income from the
sales of goods is attributable to a permanent establishment in
the areas under Israeli tax responsibility, tax may be deducted
at source, but only on such income as is attributable to such
permanent establishment.
- No tax shall be deducted at source on income derived by a Palestinian
from transportation activities, if the point of departure or the
point of final destination is in the areas under Palestinian tax
responsibility.
- Non-deduction at source in accordance with the provisions of paragraphs
5 and 6 above, shall be carried out through the use of certificates
in the form set out in Schedule 1. Such certificates shall be issued
on special paper in order to assure that the certificates are authentic.
The certificates will be worded in both Hebrew and Arabic and will
be filled out in the language of the other side or in English, and
the figures will be written in "Arabic" (not Hindi) numerals.
-
- In any case, where the appropriate certificate referred to in
paragraph 7 has not been presented to the payer prior to the payment
of income referred to in paragraphs 5 and 6 above, tax will be
deducted at source by the payer according to the applicable law.
- With regard to income not referred to in paragraphs 5 and 6
above, tax may be imposed by the tax administration responsible
for the areas in which the income was accrued or derived.
- Each side will grant its residents a tax relief for income tax paid
by them on income accrued in or derived in the areas under the tax
responsibility of the other side.
- Both sides agree that a special subcommittee will be established
to finalize the arrangements and procedures regarding taxation issues
(including issues concerning double taxation).
(Replacing Article VI of the Protocol on Economic Relations)
ARTICLE VI
Indirect Taxes on Local Production
- The Israel and the Palestinian tax administrations will levy and
collect VAT and purchase taxes on local production, as well as any
other indirect taxes, in their respective areas.
- The purchase tax rates within the jurisdiction of each tax administration
will be identical as regards locally produced and imported goods.
- While the prevailing concepts and principles of VAT will continue
to be applied by both sides in a compatible way, the Palestinian VAT
rate shall not be lower than 2% below the Israeli VAT rate (the present
Israeli VAT rate is 17%).
- The Palestinian side will decide on the maximum annual turnover
for businesses under its jurisdiction to be exempt from VAT, within
an upper limit of 12,000 US $.
-
- Ongoing permanent businesses will register for VAT purposes
with the VAT administration of the side exercising responsibility
in the place in which they are situated.
- When subparagraph a. does not apply, dealers will register for
VAT purposes with the VAT administration of the side of their
residence, notwithstanding the place of their activity. A corporation
will register for VAT purposes according to the residency of the
individual holding the majority of its shares which grant rights
to distribution of profits.
- Special cases of dealers having ongoing operations in the other
side without having a permanent place of business there, will
be dealt with by the joint committee established according to
paragraph 11 below, upon a request of either side.
- Each side will provide the other side, upon request, information
concerning sales of specific dealers from one side to specific
dealers from the other side. Israel will provide the Palestinian
tax administration assistance in collecting information concerning
the activities in Israel of Palestinian dealers registered for
VAT purposes with the Palestinian VAT administration having ongoing
operations in Israel, and will enable Palestinian inspectors to
follow their activities in Israel, as necessary for tax enforcement
purposes and allowed by law.
- The VAT on purchases by dealers registered for VAT purposes will
accrue to the VAT administration with which the dealer is registered.
- The principles set out in paragraphs 1-6 of this Article shall also
apply to wage- and-profit tax on financial institutions.
- There will be clearance of VAT revenues between the Israeli side
and the Palestinian side according to the following conditions:
- The VAT clearance will apply to VAT on transactions between
dealers registered with different VAT administrations.
- The following procedures will apply to cleaance of VAT revenues
accruing from transactions by dealers registered for VAT purposes:
- For transactions between dealers registered with the different
VAT administrations special invoices, clearly marked for this
purpose, must be used, and they will be accepted for clearance
purposes.
- These invoices will be worded in both Hebrew and Arabic
and will be filled out in any of these two languages or in
English, provided that the figures are written in "Arabic"
(not Hindi) numerals and that the amounts filled out in the
invoice are stated also in NIS. The amount of VAT will be
specified both numerically and in words.
- For the purposes of tax rebates, such invoices will be valid
for six months from their date of issue.
- Representatives of the two sides will meet once a month,
on the twenty-fifth day of the month, to present each other
with a list of invoices submitted to them for tax rebate,
for VAT clearance. This list will include the following details
regarding each invoice:
- the number of the registered dealer issuing it;
- the name of the registered dealer issuing it;
- the number of the invoice;
- the date of issue;
- the amount of the invoice - with a separate reference
to the amount of VAT; and
- the name and the registration number of the recipient
of the invoice.
- The clearance claims will be settled within six days from
the meeting, through a payment by the side with the net balance
of claims against it, to the other side.
- Each side will provide the other side, upon request, with
invoices for verification purposes. Each tax administration
will be responsible for providing invoices for verification
purposes for two years after receiving them.
- Each side will take the necessary measures to verify the
authenticity of the invoices presented to it for clearance
by the other side.
- Claims for VAT clearance which will not be found valid will
be deducted from the next clearance payment.
- Once an interconnected computer system for tax rebates to
dealers and for VAT clearance between the two sides is operational,
it will replace the clearance procedures specified in subparagraph
(4) above.
- The two tax administrations will exchange lists of the dealers
registered with them and will provide each other with the
necessary documentation, if requested, for the verification
of transactions.
- The joint subcommittee established under paragraph 11 will
deal with the implementation of the provisions of this paragraph.
- VAT paid on transactions made with dealers registered with the Israeli
side by not-for-profit Palestinian organizations and institutions,
or by financial institutions, which are registered with the Palestinian
side, or by the Palestinian local authorities, or by the Palestinian
side itself, will be remitted to the Palestinian side in accordance
with the clearance system set out in paragraph 8 above.
- VAT paid on transactions made with dealers registered with the Palestinian
side by not-for-profit Israeli organizations and institutions, or
by financial institutions, which are registered with the Israeli side,
or by the Israeli local authorities, or by the Israeli side itself,
will be remitted to the Israeli side in accordance with the clearance
system set out in paragraph 8 above.
- The two sides will establish a joint committee composed of representatives
of both VAT administrations. This committee will deal with all issues
requiring coordination and cooperation with regard to this Article.
Pursuant to Article V (Direct Taxation):
| Serial No.__________ |
|
Certificate of Non-Deduction of Income Tax at
Source
by the Palestinian Tax Administration |
|
| To:_______________________________ |
| (name of payer) |
|
| 1. We hereby certify that: |
|
|
_______________________________ |
|
(name of recipient) |
|
|
__________________________________ |
|
I.D. Number and/or dealer number |
|
|
____________________________ |
_______________________ |
|
home address |
business address |
|
|
is entitled to receive the full
amount of NIS _______________ for the sale of goods/ transportation
activities without deduction of tax at source. |
|
| 2. This certification shall apply
only to income accruing in or deriving in the West Bank or Gaza
Strip, and shall be valid from _________ (date) until __________
(date) and/or for invoice(s) No. _____. |
|
| 3. This certification is valid
only on presentation of the original certificate. |
|
| This certificate was issued by |
Date of issue |
| ___________________________ |
_____________________ |
| Serial No.__________ |
|
Certificate of Non-Deduction of Income Tax at
Source
by the Israeli Tax Administration |
|
| To:_______________________________ |
| (name of payer) |
|
| 1. We hereby certify that: |
|
|
_______________________________ |
|
(name of recipient) |
|
|
__________________________________ |
|
I.D. Number and/or dealer number |
|
|
____________________________ |
_______________________ |
|
home address |
business address |
|
|
is entitled to receive the full
amount of NIS _______________ for the sale of goods/ transportation
activities without deduction of tax at source. |
|
| 2. This certification shall apply
only to income accruing in or deriving in Israel, the Settlements
and military locations, and shall be valid from _________ (date)
until __________ (date) and/or for invoice(s) No. _____. |
|
| 3. This certification is valid
only on presentation of the original certificate. |
|
| This certificate was issued by |
Date of issue |
| ___________________________ |
_____________________ |
Interim Agreement between Israel and the Palestinians
|