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Doing Business in Palestine

Palestine lies on the south western side of Asia in the southern part of the Mediterranean Sea‘s East Coast. Thus, it lies in the heart of the so called ancient world, namely, the crossing point between Asia, Africa and Europe. This makes it a land bridge linking Asia and Europe with Africa and the Mediterranean Sea with the Red Sea and the Atlantic Ocean with the Indian Ocean. 

Why invest in Palestine?

Skilled labor, governmental policies that strongly encourage trade and investment, a strong partnership between the private and public sectors and various investment incentives, guarantees and insurance from local and international institutions for investors are all factors that make Palestine a most attractive place for new investments, especially if combined with the tremendous export opportunities presented through the extensive network of trade and economic agreements that give goods of Palestinian origin a highly competitive edge in a wide-ranging number of lucrative markets. The Palestinian economy is market-based economy, in which the private sector plays the leading role, with a supportive government that believes in partnership. Both the private and public sectors have agreed on an export - oriented and outward looking strategy utilizing the broad number of economic agreements and the implementation of international best practices and standards towards building the economy. The Palestinian private sector has proven to be resilient over the years, with the ability to surmount all the limitations and restrictions that were created through a somewhat challenging political environment. Today’s According to current administrative divisions, Palestine is divided into two geographic regions: The West Bank and The Gaza Strip: The West Bank is divided into 11 Governorates see table right (Jenin, Tubas, Tulkarm, Nablus, Qalqiliya, Salfit, Ramallah & Al-Bireh, Jericho & AlAghwar, Jerusalem, Bethlehem, and Hebron). The Gaza Strip is divided into 5 Governorates (North Gaza, Gaza City, Deir Al-Balah, Khan Yunis and Rafah). 

What type of Business Structure should we use? 

There are advantages and disadvantages to all of them, and there is no one correct answer, it’s all dependent on your specific business circumstances and needs. A brief overview of the main structures is below:


Establishment (a branch of your overseas business) 

  • Not a separate legal entity but an extension of the overseas parent company
  • No limited liability or ring-fencing of the Palestine operations
  • If have a permanent establishment in Palestine then profits from this PE are liable to Palestinian Corporation tax
  • You have the option to set expiration time for this branch.

The company is subject to the income and sales tax law.

  • It can do work inside Palestine
  • Must file parent company accounts, prepared under Palestinian Company Law, at Companies controller  


Regular Public Company (Solidarity company): 

  • Number of founders between 2 to 20.
  • The law does not specify its capital.
  • All partners within a company are jointly liable for covering the debts of the company and for all of their contracts and obligations.
  • It is permitted for every partner to participate in managing the company, without having the right to receive any benefits and rewards as compensation, unless all partners agree otherwise.

Regular Limited Liability Company: 

  • Number of founders between 2 to 20.
  • The law does not specify its capital.
  • It consists of two kinds of partners; one or more general partners who are jointly and severely liable for the company’s debts and its contracts and obligations and one or more partners whose liability for the company’s debts is limited to their contribution to the company’s capital.
  • Partners with limited liability may not participate in the management of the company. 

Shareholding Companies Public Shareholding Limited Liability Company:

  • Minimum number of founders should be 7.
  • The capital of the company should not be less than JD 30,000 which shall consist of tradable shares that are offered to the public.
  • The responsibility of the shareholders is limited to the contribution of each person in the Company’s capital.
  • A board of directors of 5 to 11 members elected for 4 years shall manage the Company


Private Limited Liability Corporation:

  • Number of founders between 2-50 people.
  • The company’s capital must not be less that JD 2,000, which shall be divided into shares that are not offered to the public.
  • The responsibility of shareholders is limited to the contribution of each in the company’s capital.
  • If the number of shareholders is less than 20 shareholders, the partners shall agree on how to administer the company, as is the case with a regular company. However, if the number of shareholders exceeds 20 people, a Board of Directors of 2-5 members shall manage it, elected in the same manner as the Board of Directors is elected in Public Shareholding Companies. 

Foreign Companies

  • Foreign companies could be regular or shareholding companies. They will register as foreign companies or branches of foreign companies.
  • It is not permitted for any foreign Company to perform any business unless it is registered with the Companies’ Registrar. It must present the required documents to the Companies Registrar who shall then recommend the registration to the Minister. If any changes occur in the company’s documents, the company must inform the authority through the same Registration procedure. If the company is a shareholding company, it must present a report on their business within 3 months of the end of every financial year and a copy of their financial reports prepared by a certified audit firm. The company has to indicate clearly in all its documents and papers the name of the country it was established in. 

How much Corporation Tax will the business pay? 

Current Corporation Tax rates in Palestine are:


Tax rate (%)  


Taxable profit (Cur)

 limited Co


(NB: rates are for the tax year to 31\12\2016

Overview of the corporate tax regime: 

Capital Gains Tax: Businesses and companies are not assessed for capital gains tax. Tax for Service Contracts: Income generated or earned from contracts entered into for the provision of services is taxable. Dividends, Leases and Royalties: Dividends paid out of profit are taxable. Dividends paid after redistribution of capital are exempt. Royalties are not exempt. Lease payments are not exempt. Retained profits are exempt only if reinvested. Purchase Tax: Purchase taxes are payable by manufacturers or importers at the port of entry on certain consumer products specified by law. Products that are manufactured for export are exempt from the purchase tax. Purchase tax is imposed at a rate of 5% to 95% depending on set rates and the type of good. Gift and Inheritance Tax: There are no taxes paid on gifts or inheritance in Palestine. 

Do you have law to encourage doing business in Palestine?

Yes, there are Palestinian investment laws that have many options to encourage doing business in Palestine by reducing or exempting companies from income taxes for certain period of time.

What if we make cross-border transactions between group companies? 

Palestine does not have Transfer Pricing rules, but follows internationally recognized Transfer Pricing (TP) rules where cross-border trading and financial transactions between affiliated entities have to be conducted on an arm’s length basis. The price and terms should be the same as if the transactions had been between completely independent parties.    

Typical transactions between affiliated entities that are covered by TP regulations are:


  • Sale and purchase of goods
  • Provision of management services
  • Property rental charges
  • Transfer of intangible assets e.g. trademarks, patents
  • Sharing of knowledge, expertise, business contacts etc.
  • Provision of financial support e.g. inter-group loans and charging a “market” interest on loans


A business will need to prepare a Transfer Pricing Report proving the arm’s length basis of transactions. The report will include a functional and risk analysis, analysis of the adopted pricing model and benchmarking of the arm’s length basis. 

What Employment Taxes and Social Security will need to be paid?


According to the new ITL, the tax rates

(percent) for individuals from 2012 are

as follows:


Yearly gross income Tax rate (%)

1 – 75,000 shekels 5%

75,001 – 150,000 shekels 10%

Above 150,000 shekels 15%


What is Value Added Tax (VAT) and should the business be registered?


VAT is a “goods and services tax” on supplies made, the standard rate of which is [16%].


There are two types of supply

  • Taxable – must charge VAT on supplies, can reclaim input VAT
  • Exempt – cannot charge VAT nor reclaim input VAT


If goods are sold or services is provided outside of Palestine then there is no VAT chargeable on this overseas . 


To discuss your requirements please contact the International Office on +44 (0) 1245 449266 or This email address is being protected from spambots. You need JavaScript enabled to view it. us directly.


Kreston International 

Kreston International Limited is a global network of independent accounting firms. Offering reliable and convenient access to efficient and seamless advisory and assurance services through member firms located around the globe, Kreston: 

  • Is ranked the 13th largest accounting network in the world
  • Covers 104 countries
  • Has 700 offices
  • Has a resource of 21,000 professional and support staff.

Our members are accustomed to working together to deliver cohesive international solutions to ensure clients receive the highest quality of expertise available in their respective countries. Beyond assurance, quality and experience, clients will enjoy the unique synergy that stems from the trusted relationships that Kreston members have created globally and which support the consistent delivery of exceptional international service.

This information is provided for guidance only and is not a substitute for professional advice. Neither Kreston International Limited nor its member firms accept any liability for any loss arising as a result of actions taken or not taken based on the information contained in this document. 

The information in this document was prepared as at 30 November 2013.

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