| COUNTRY PERSPECTIVES
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PALESTINIAN AUTHORITY |
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How to invest in Palestinian Territories? |
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The Palestinian Authority has created a framework of economic legislation to encourage and support foreign and local investment in Palestine. The 1998 Law on Encouragement of Investment provides incentives for capital investment in all sectors of the Palestinian economy by both local and foreign corporations registered to do business in Palestine. |
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How to invest in Palestinian Territories? |
To begin with, here are some elements of the Palestinian strategic offer:
- Free Trade Agreements with the US, EU, EFTA, Canada, Russia, Jordan, Saudi Arabia, Syria and Egypt;
- Special Trade Agreement with Arab League Nations;
- Equally favourable incentives for international and local investors;
- No restrictions on profit and capital repatriation;
- Free movement of currencies;
- Free Industrial Zones;
- Regionally competitive investment promotion and Free Zones laws;
- Business support firms, consultancy firms, secondary businesses, IT universities, etc;
- A skilled workforce, often conversant in English.
- The Palestinian Authority hopes that increasing capital investment growth will generate jobs and help develop an export-oriented manufacturing base. Law n°10 governs investment in industrial parks and free trade zones. A foreign investor can own a company without the obligation of having a local partner. Currency can be freely transferred and profits freely repatriated.
Jordanian legislation dating back to 1964 governs the setting up of new businesses in the West Bank, except for those in non self-governing areas of the West Bank, which operate under the Israeli military ordinance of 1970. Corporate legislation dating back to 1929, adopted during the British mandate, constitutes the legal framework for setting up businesses in Gaza.
Customs legislation in the West Bank and Gaza is derived from Jordanian or Israeli laws and Israeli military ordinances. The 1994 economic protocol of Paris governs economic and trade relations between the Palestinian Authority and Israel. Most customs procedures and Palestinian tariff measures are based on Israeli standards and are pretty much controlled by Israel.
However, on the basis of the economic Protocol of Paris, certain products are regulated by the Palestinian Authority, which can reduce or increase customs duty rates. Other products are governed by the Palestinian Authority but are subject to quantitative restrictions or Israeli standards. There are multiple incentives:
- PIPA offers exemption from customs duty for a given period. This also applies to spare parts, fixed assets for developing or enlarging an already existing company, and price increases due to higher costs because of price hikes in the exporting country or increases in shipping or processing costs. Investment initiatives approved by PIPA benefit from exemptions and tax cuts according to volume. The corporate tax rate is 20 percent and VAT is at 17 percent.
- For investment between US$ 100,000 and US$ 1 million: tax exemption for five years and taxation at a 10 percent rate for the following eight years.
- Investment between US$ 1 and US$ 5 million: tax exemption for five years and taxation at a 10 percent rate for the following 12 years.
- Investment of more than US$ 5 million: tax exemption for five years and taxation at a rate of 10 percent for the following 16 years.
- Projects recommended by PIPA and approved by the Council of Ministers are exempt from tax for five years and taxable at a 10 percent rate for the following 20 years.
- Exemptions or special incentives are granted to investment in hospitals, hotels or enterprises engaged in export activities.
Investment in training in the ICT sector can be deducted from the tax base.
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