Tax
A 15 per cent corporate rate, VAT tied to Israel's by treaty, and clearance revenue dependence
Corporate income tax is 15 per cent, with a reduced rate for some sectors. VAT is set within a band tied to the Israeli rate under the 1994 Paris Protocol, and most revenue is collected by Israel and transferred.
Key rules
- Jurisdiction — Palestinian Authority jurisdiction, with revenue collection largely performed by Israel.
Governing law
- Income Tax Law, Decree-Law No. 8 of 2011, as amended
- Paris Protocol on Economic Relations 1994, Article III
- Value Added Tax provisions under the Paris Protocol arrangements
In practice
The Paris Protocol constrains fiscal autonomy in an unusual way: the Palestinian VAT rate must stay within two percentage points of Israel's, and import duties and VAT on goods entering through Israeli ports are collected by Israel and remitted as clearance revenue, which is the largest single component of Palestinian public revenue. Periodic Israeli withholding of clearance transfers has produced repeated fiscal crises, a dependency with no analogue in ordinary tax systems. Domestic corporate tax at 15 per cent, with 20 per cent on telecommunications and some monopolies, is administered by the Ministry of Finance.