ANNEXES TO THE AGREEMENT ON PREPARATORY TRANSFER OF POWERS AND RESPONSIBILITIES

August 29, 1994

ANNEX I

Protocol Concerning Preparatory Transfer of Powers and Responsibilities in the Sphere of Education and Culture

  1. The powers and responsibilities of the military government and its Civil Administration in the sphere of education and culture will be transferred to and will be assumed by the Palestinian Authority.
  2. The sphere of education and culture shall include all matters dealt with in the laws, regulations and military orders listed in Appendix A, as well as the responsibility over higher education, special education, cultural and educational training activities, cultural and educational institutions and programs, and private, public, non-governmental or other educational or cultural activities or institutions.

Appendix A

Laws, Regulations and Military Orders in the Sphere of Education and Culture

  1. Education Law, No. 16, 1964
  2. Regulations regarding the Structure of the Ministry of Education and Culture, No. 21, 1965
  3. Regulations regarding the Collection of Contributions in Schools, No. 22, 1965
  4. Regulations regarding the Structure of Managers' Offices in the Districts and Regions, No. 24, 1965
  5. Regulations regarding Licensing of Teaching, No. 23, 1965
  6. Regulations regarding Scientific Delegations, No. 155, 1966
  7. Regulations regarding Grants for Educational Programs and Textbooks, No. 1, 1965
  8. Regulations regarding the Appointment of Women Teachers, No. 2, 1965
  9. Regulations regarding Needy Heirs of Education and Culture Employees, No. 57, 1960
  10. Regulations regarding the Jordanian Committee for Arabization, Translation and Publishing, No. 11, 1967
  11. Regulations regarding Private Educational Institutions, No. 27, 1966
  12. Regulations regarding Adult Education and the Elimination of Illiteracy, No. 120, 1965
  13. Regulations regarding Cultural Centers, No. 28, 1966
  14. Regulations regarding the Jordanian Scientific Research Council, No. 53, 1964
  15. Regulations regarding the Nationalization of Textbooks, No. 4, 1956
  16. Regulations regarding the Education Tax, No. 1, 1956
  17. Regulations regarding the Financing of Examinations and Certificates of High Schools and Secondary Education, No. 39, 1967
  18. Order regarding the Education Law No. 16 of 1964 (Amendment No. 2) (Judea and Samaria), No. 1076, 1983
  19. Order regarding the Use of Textbooks (Judea and Samaria) (Amendment), No. 183, 1967
  20. Regulations regarding General Examination Fees in the Teachers' Colleges, 1991
  21. Directives regarding Success, Completion and Failure in Schools, No. 1, 1965
  22. Directives regarding General Matriculation Examinations, No. 2, 1965
  23. Order regarding Education Tax (Judea and Samaria), No. 501, 1972
  24. Civil Service Regulations, No. 23, 1966, including Amendments Nos. 14, 28, 61 and 92
  25. Regulations for Dispatch of Scientific Delegations, No. 115, 1966, including Amendments Nos. 16 and 43
  26. Regulations regarding Employee Pensions and Social Insurance, No. 6, 1966, including Amendments Nos. 116 and 183
  27. Financial Regulations, No. 1, 1951
  28. Requisition Regulations, No. 87, 1965
  29. Regulations regarding Employees Commuting to and from Work, No. 18, 1967, including Amendment No. 73
  30. Regulations regarding the Provision of Honors for Employees, No. 9, 1966.
  31. Regulations regarding Issuing Certificates and Diplomas, No. 15, 1966
  32. Regulations regarding Graduation Examinations, No. 17, 1966, including Amendment No. 71
  33. Regulations regarding Placement of Administrative employees, No. 1, 1966
  34. Regulations regarding the Provision of Student Services, No. 58, 1964
  35. Regulation regarding the Provision of Assistance to Students, No. 5, 1960, including Amendment No. 25
  36. Regulations regarding the Scouts Youth Movement, No. 1, 1957
  37. Regulations regarding Summer Seminars, No. 34, 1960
  38. Regulations regarding the Leasing of Properties for Government Service, No. 16, 1961, including Amendment No. 153
  39. Regulations regarding the Acquisition of Books for School and College Libraries, No. 11, 1966, including amendment No. 153
  40. Regulations regarding Health Insurance for Employees, No. 104, 1965
  41. Regulations regarding Colleges, No. 151, 1966
  42. Regulations regarding the Evaluation of Certificates, No. 110, 1966, including Amendment No. 74
  43. Law regarding Student Transfer, No. 7, 1967
  44. Regulations regarding Room and Board, No. 36, 1967

ANNEX II

Protocol Concerning Preparatory Transfer of Powers and Responsibilities in the Sphere of Health

  1. The powers and responsibilities of the military government and its Civil Administration in the sphere of health will be transferred to and will be assumed by the Palestinian Authority.
  2. The sphere of health shall include all matters dealt with in the laws, regulations and military orders listed in Appendix A, including the responsibility over all health institutions, whether private, public, non-governmental or other.
  3. In exercising its security authority, the military government will do its utmost to respect the dignity of patients and medical staff and will act with a view to prevent any damage to medical installations or equipment.
  4. The transfer of powers and responsibilities to the Palestinian Authority shall not affect the authority of Israel and of the Israeli military government in the West Bank to exercise its powers and responsibilities in criminal matters, such as the performance of autopsies, the investigation of narcotic offenses, etc.
  5. The Palestinian Authority shall inform the Civil Administration in a routine manner of births or deaths occurring within the medical institutions under its responsibility.
  6. The Palestinian Authority shall apply the present standards of vaccination of Palestinians and shall improve them according to internationally-accepted standards in the field.
  7. The Palestinian Authority shall take necessary measures to ensure that the health institutions and medical staff under its responsibility inform the Civil Administration in the West Bank of any Israeli hospitalized in a Palestinian hospital upon his or her admission.
    Arrangements for moving such hospitalized Israelis shall be agreed upon.
  8. The Palestinian Authority shall take necessary measures to ensure that the health institutions and medical personnel under its responsibility inform the Israel Police in the West Bank of any person wounded by any kind of weapon or explosive who is treated or hospitalized in a Palestinian medical institution, upon his or her admission, and of any death from unnatural causes.
  9. The Palestinian Authority shall make available for transfer the corpse of any deceased from unnatural causes, for an autopsy in the Institute of Forensic Medicine, immediately upon request by the military commander.
    Upon request of the Palestinian Authority, a Palestinian physician may be present at any autopsy performed, provided that the participation of the said representative shall not inordinately delay the performance of the autopsy.
    The Palestinian Authority shall ensure that no prior autopsy of the corpses so transferred shall be conducted.
  10. Israel and the Palestinian Authority shall exchange information regarding epidemics and contagious diseases, shall cooperate in combating them, and shall develop methods of exchange of medical files and documents.
  11. The Palestinian Authority shall enter into agreements with the Israeli medical institutions on arrangements regarding complementary medical services for Palestinians in these institutions including their hospitalization in Israeli hospitals. Israel shall assist the Palestinian Authority in reaching such agreements as necessary.
  12. The health systems of Israel and of the Palestinian Authority will maintain good working relations in all matters, including mutual assistance in providing first aid in cases of emergency, medical instruction, professional training and exchange of information.
  13. A joint committee of experts will discuss health issues that require coordination and cooperation between the Palestinian Authority and the relevant departments of the Civil Administration, including, inter alia, the environment department.
  14. A committee will be established to facilitate coordination and cooperation on health and medical issues between the Palestinian Authority and the Israeli Ministry of Health.


Appendix A

Laws, Regulations and Military Orders in the Sphere of Health

  1. Public Health Law No. 43, 1966, except for articles 7(1), 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 69, 70, 71, 72, 73, 74, 75, 76, 77 article 10(2) but not including supervision over water sources; article 15 but only when approved by the military commander
  2. Regulations regarding Supervision of Medications and their Manufacture, No. 134, 1966, only with regard to medications
  3. Regulations regarding Health Insurance, No. 146, 1966
  4. Regulations regarding Burial of Deceased, Cemeteries, Transfer of Bodies and Re-opening of Graves, 1981, except for articles 5, 7, 8(a), 9, 10, 11, 12, 13, 14, 15
  5. Regulations regarding Public Health Supervision of Radiation Equipment for Medical Treatment, 1981
  6. Pharmacologists' Bureau Law, No. 10, 1957
  7. Order regarding the Pharmacologists' Bureau Law, No. 10, 1957, (Amendment), No. 1053, 1983
  8. Internal Regulations of the Pharmacologists' Bureau, 1961, as amended 1980
  9. Order regarding Medical and Sanitation Professions (Licensing and Practice), No. 745, 1978
  10. Medical Association Law, No. 14, 1954
  11. Dental Association Law, No. 11, 1956
  12. Internal Regulations of the Dental Association, 1960
  13. Order regarding Health Services, No. 746, 1978
  14. Order regarding Notification of Casualties, No. 163, 1967
  15. Regulation regarding Health Services, 1978
  16. Notification regarding Health Services, Program of Health Services and Payment for Health Services, 1981
  17. Order regarding Dangerous Drugs, No. 558, 1973
  18. Order regarding Cosmetics, No. 1103, 1983
  19. Regulations regarding Cosmetics (Fees), 1984

ANNEX III

Protocol Concerning Preparatory Transfer of Powers and Responsibilities in the Sphere of Social Welfare

  1. The powers and responsibilities of the military government and its Civil Administration in the sphere of social welfare will be transferred to and will be assumed by the Palestinian Authority.
  2. The sphere of social welfare shall include all matters dealt with in the laws, regulations and military orders listed in Appendix A, as well as responsibility over governmental and non-governmental organizations and institutions, including charitable societies and institutions and voluntary and non-profit organizations.
  3. The Palestinian Authority will supervise registered foreign organizations of the type mentioned in paragraph 2 above, that currently operate in the West Bank and will register others only if their goals are not inconsistent with the peace process.
  4. The transfer of powers and responsibilities to the Palestinian Authority shall not affect the continued authority of the military government and its Civil Administration to exercise their powers and responsibilities for security and public order as well as for other spheres not transferred, including, inter alia, the establishment of a vice squad.
  5. The Palestinian Authority may exercise the Regulation on Welfare Insurance for Civil Servants (No. 6 of 1966) with regard to its employees.
  6. Juvenile Offenders:
  7. Israel and the Palestinian Authority will determine arrangements for the following:

    1. The serving of sentences in the West Bank passed by courts in Israel concerning juvenile offenders, residents of the West Bank.
    2. The transfer of information necessary for the preparation of briefs by probation officers in connection with juvenile offenses.
  8. Confidentiality:
  9. Arrangements will be made to protect confidentiality and individual privacy in the exchange of information between Israel and the Palestinian Authority in the sphere of social welfare.

  10. The respective social welfare systems of Israel and the Palestinian Authority will maintain a positive working relationship in all aspects, including general and professional training, and the exchange of information.

Appendix A

Laws, Regulations and Military Orders in the Sphere of Social Welfare Bureau of Social Affairs Law, No. 14, 1956

  1. Social Assistance Regulations, No. 14, 1959
  2. Regulations regarding Assistance to Youth, No. 48, 1959
  3. Amended Law regarding Assistance to Youth, No. 16, 1954
  4. Regulations regarding the Collection of Charitable Donations, No. 1, 1957
  5. Regulations regarding the Collection of Charitable Donations, No. 103, 1963
  6. Regulations regarding Assistance to University Students, No. 5, 1960, except for Articles 5 and 6
  7. Regulations regarding Assistance and Rehabilitation, No. 42, 1963
  8. Law regarding Charitable Societies and Social Welfare Institutions, No. 33, 1966
  9. Jordanian Regulations regarding Social Services Institutions, No. 128, 1965

ANNEX IV

Protocol Concerning Preparatory Transfer of Powers and Responsibilities in the Sphere of Tourism

1. The powers and responsibilities of the military government and its Civil Administration in the

sphere of tourism will be transferred to and will be assumed by the Palestinian Authority.

2. The sphere of tourism shall include all matters dealt with in the laws, regulations and military orders listed in Appendix A.
This includes the responsibility for regulating, licensing, grading, supervising and developing the tourist industry and its services within the scope of such terms in the laws, regulations and military orders listed in Appendix A, as well as maintaining and promoting foreign and domestic tourism, developing visitors' interest in tourist sites and encouraging the development of tourist services around them in coordination with the Civil Administration, or if the site is under the responsibility of another authority - in coordination with that other authority. It also includes organizing exhibitions, popular and cultural festivals and events and tourism conferences.
This sphere shall cover tourism activities conducted by private, public, non-governmental and foreign bodies.

  1. In exercising its security authorities, the military government will take into account tourism considerations with the objective of minimizing any harmful effect on the industry or any consequences that may prejudice its productivity and continued development.
  2. The military government and its Civil Administration will assist and support the Palestinian Authority in developing the tourism industry, promoting the expansion of tourist facilities such as hotels, restaurants and travel agencies, and in removing obstacles that may hinder the growth of the industry.
  3. The transfer of powers and responsibilities to the Palestinian Authority shall not affect the continued authority of the military government and its Civil Administration to exercise their powers and responsibilities for security and public order as well as for other spheres, including the sites referred to in paragraph 2 above, authority over which has not been transferred.
  4. The tourism authorities of Israel and the Palestinian Authority shall promote and encourage tourism to the region for the benefit of both sides.
    1. Travel agents, tour companies, tour guides and other tourism businesses (hereinafter "tourism entities") authorized by the Palestinian Authority will be allowed to conduct tours that include Israel, provided that their authorization as well as their operation is in accordance with rules, professional requirements and standards agreed upon in the subcommittee on tourism of the JEC.
    2. Pending that agreement, existing tourism entities in the West Bank that are currently allowed to conduct tours that include Israel, will be allowed to continue to do so.
  1. Tour buses or any other forms of tourist transport authorized by the Palestinian Authority, and operated by companies registered and licensed by it, will be allowed to enter and proceed on their tour in Israel if such buses or other vehicles conform with the standards currently in effect in the West Bank and provided that they conform with international standards that have been adopted. All such vehicles will be clearly marked as tourist vehicles.
  2. Tourism companies and agencies licensed by the Palestinian Authority shall enjoy equal access to tourism-related facilities and amenities in border points of exit and entry according to the regulations of the Israeli authorities.
  3. A joint committee will be established between Israel and the Palestinian Authority to facilitate coordination and cooperation on tourism issues, including the promotion of tourism.

 

Appendix A

Laws, Regulations and Military Orders in the Sphere of Tourism

  1. Temporary Tourism Law, No. 45, 1965, except for articles 2(4)E, 4(1), 4(5), 7(2), 7(3), 14(3)
    article 2(5) except for provisions regarding Tourism Regions
  2. Regulations regarding Equipment and Promotional Services and Constructive Activities of the Tourism Authority, No. 44, 1966
  3. Financial Regulations of the Tourism Authority, No. 45, 1966
  4. Tourism and Travel Agency Regulations, No. 46, 1966
  5. Regulations regarding Commercial Oriental Souvenir Emporiums, No. 47, 1966
  6. Regulations regarding Commercial Oriental Souvenir Emporiums, (Amendment No. 6) (Judea and Samaria), 1988
  7. Regulations regarding Tour Guides and their Supervision, No. 48, 1966
  8. Regulations regarding Guest Houses and their Supervision, No. 49, 1966
  9. Order regarding Temporary Law for Tourism, No. 45, 1965 (Judea and Samaria), No. 917, 1981
  10. Regulations regarding Tourism and Travel Agencies (Amendments 1-4) (Judea and Samaria), 1976
  11. Regulations regarding Commercial Oriental Souvenir Emporiums (Amendment No. 3) (Judea and Samaria), 1982
  12. Regulations regarding Commercial Oriental Souvenir Emporiums (Amendments 1-6), 1976, 1980, 1987, 1988
  13. Regulations regarding Tour Guides and their Supervision (Amendment No. 5) (Judea and Samaria), 1988
  14. Regulations regarding the Prohibition on Acceptance of Commissions by Tour Guides, 1976
  15. Decision regarding Escorting Tourists as a Branch of Tourism (Judea and Samaria), 1982
  16. Regulations regarding Guest Houses and their Supervision (Amendments 3 and 4), 1988, 1990
  17. Instructions regarding Guest Houses and their Supervision (Minimal Standards for Ungraded Hotels) (Judea and Samaria), 1975
  18. Instructions regarding Guest Houses and their Supervision (Principles of Hotel Grading) (Judea and Samaria), 1976
  19. Instructions regarding Guest Houses and their Supervision (Offering Drinking Water and Citrus Fruits during Meals) (Judea and Samaria), 1985
  20. Regulations regarding Tourism Offices (Judea and Samaria), 1989
  21. Regulations regarding Licensed Tourist Emporiums (Judea and Samaria), 1977

ANNEX V

Protocol Concerning Preparatory Transfer of Powers and Responsibilities in the Sphere of Direct Taxation

  1. The powers and responsibilities of the Civil Administration in the sphere of direct taxation regarding income tax on income accrued or derived in the West Bank will be transferred to and will be assumed by the Palestinian Authority.
    Powers and responsibilities regarding property tax will continue to be exercised by the Civil Administration, though the income from this tax will be transferred to the Palestinian Authority, after deducting the sums due to the municipalities.
  2. The sphere of direct taxation shall include all matters dealt with in the laws, regulations and military orders listed in Appendix A, subject to the principles set forth below.
  3. Without derogating from the principle of territoriality in taxation, i.e., the right of each tax administration to levy the income tax on income generated by economic activity in its area, and in accordance with the Declaration of Principles and with the Gaza-Jericho Agreement:
    1. The Palestinian Authority will levy and collect income tax on Palestinians in respect of income accrued or derived in the West Bank outside the settlements and the military locations.
      1. The Civil Administration will levy and collect income tax on Israelis in respect of income accrued or derived in the West Bank outside the settlements and the military locations by any business or service which accrues or derives an annual turnover in the West Bank outside the settlements and military locations exceeding $7,000 US.
      2. The tax will be levied in accordance with the Palestinian tax code in force in the West Bank.
      3. The Civil Administration will remit the tax collected to the Palestinian Authority.
      4. For the purpose of subparagraph 3(b)(1) above and paragraph 5 below, changes in the legislation regarding the definition of "accrued or derived" income shall be made in the subcommittee established under paragraph 9.
      5. In the event of disagreement regarding the implementation of this paragraph when the Palestinian Authority considers that a business or service should be taxed under this subparagraph, it may refer the matter to the above mentioned subcommittee.
    2. For the purpose of this Annex, and for the purpose of the application of Appendix B to this Annex -
      1. A corporation will be regarded as either a Palestinian or an Israeli if the majority of its shares which grant rights to distribution of profits are held by Palestinians or by Israelis, respectively.
      2. For the purpose of subparagraph a. above, shares held by foreigners will be considered as shares held by Palestinians, except with regard to corporations operating within the settlements and military locations.
    3. Income accruing to a partnership or derived by it will be attributed to its partners in accordance with their respective rights to profits and taxed in accordance with the provisions of this Annex.
    4. With regard to corporations in which Israelis and Palestinians hold shares granting equal rights to distribution of profits, corporation tax will be levied equally on each shareholder by the relevant tax authority, in accordance with the principles of this Annex.
  4. In the case of income accrued or derived by a foreigner, outside the settlements and the military locations, income tax will be levied and collected by the Palestinian Authority.
    1. When an Israeli, including the military government and its Civil Administration, remits payment to a Palestinian and the payment is income taxable by the Palestinian Authority, the Israeli will deduct tax at source in accordance with the rules of the Palestinian tax code regarding the deduction at source by Palestinian payers and transfer it to the Civil Administration.
    2. All activity relating to the assessment and collection of such deductions will be carried out by the Civil Administration or by Israel.
    3. The Civil Administration will transfer such deductions to the Palestinian Authority in a manner to be agreed upon.
    4. Procedures for implementation of the above mentioned arrangement for deduction at source will be determined by the Joint Economic Committee established under the Gaza-Jericho Agreement.
    5. Pending the determination of the above mentioned procedures:
      1. the present system of tax deduction at source from wages and salaries will continue to apply with regard to payments to Palestinian employees; and
      2. until 31 December, 1994, tax will be deducted at source at the rate of 5% from other payments to Palestinians referred to in subparagraph a. above, subject to existing certificates concerning the reduction of deduction at source which shall continue to remain in force notwithstanding their initial date of expiration.
        As of January 1, 1995, deduction at source from such payments will be effected only on the basis of the procedures to be agreed upon.
    6. When a Palestinian remits payment to an Israeli, there will be no tax deduction at source.
    7. The Palestinian Authority may transfer to the Civil Administration information regarding such payments where it considers that the income of the Israeli falls under paragraph 3(b) above, in order to assist the Civil Administration in levying tax on such income.
    8. The Civil Administration will transfer to the Palestinian Authority, on a bimonthly basis, the sums collected from Israelis as advance payments in respect of taxes to be collected by the Civil Administration under paragraph 3(b) above.
      Each tax year there will be a settling of accounts between the Civil Administration and the Palestinian Authority with regard to the final tax collected according to paragraph 3(b), taking into account the aforementioned advance payments and any necessary resultant tax refunds.
    9. Foreigners who are subject to income tax levied by the Palestinian Authority will deduct tax at source in the same manner as Palestinians.
  5. Until the Interim Agreement enters into force, Israel will transfer to the Palestinian Authority a sum equal to 75% of the income taxes collected by Israel from Palestinians employed in the settlements and military locations and in Israel.
  6. The two sides will establish a joint committee composed of representatives of both tax authorities. This committee will discuss cases where one side wishes to tax businesses or services subject to the tax authority of the other side as well as cases where it is not clear by which side tax should be levied and all cases concerning double taxation.
  7. Tax enforcement by the Palestinian Authority shall be in accordance with the principles set out in attached Appendix B.

Appendix A

Laws, Regulations and Military Orders in the Sphere of Direct Taxation

  1. Income Tax Law, No. 25, 1964, except article 74(1), and as follows (article numbers relate to Hebrew version):
    28(a)(4)-(5) - will apply to civil examinations (not to criminal investigations);
    29b, 34a(a)(2), 34a(d), 49(3), 54(3), 57, 63(c)-(d), 64, 66(4) - will be subject to the principles regarding tax enforcement;
    44(1) - will not apply to the military government, the Civil Administration and their employees;
    21, 62, 63(c), Chapter 16 - will be subject to the principles regarding the tax enforcement;
  2. Regulations regarding Depreciation for Income Tax Purposes, No. 15, 1965
  3. Regulations regarding Income Tax Deductions at Source from Salaries, No. 16, 1965
  4. Regulations regarding Income Tax (Bookkeeping), 1988 (which adopted the regulations regarding Bookkeeping, 1985)
  5. Regulations regarding Income Tax (Forms Required for Deductions at Source), 1987
  6. Regulations regarding Income Tax (Determining Payments for Services or Goods and for Contracting as an Income), 1978
  7. Regulations regarding Income Tax (Deduction at Source from Payments for Services or Goods and for Contracting), 1978
  8. Regulations regarding Income Tax (Determining Payments for Construction Work and Shipping as an Income), 1986
  9. Order regarding Encouragement of Capital Investment, No. 1342, 1991 - with regard to income tax exemptions; except for articles 26, 27 and 28
    29 and 30 - will be subject to the principles regarding tax enforcement

Appendix B

Tax Enforcement

  1. With regard to tax enforcement, the Palestinian Authority shall have the powers and responsibilities set out in this Appendix, except in relation to criminal offenses.
  2. Gathering of Information
  3. Concerning gathering of information, the Palestinian Authority shall be authorized to:

    1. demand and seize documents, information and other relevant financial records from the assessee and any relevant third party.
    2. require the appearance of any person at the taxation authorities' offices in the West Bank and require that person to provide all relevant reports and documents; and
    3. enter any permanent place of business or residence of any person being assessed.
  4. Tax Collection
  5. For the purpose of tax collection, the Palestinian Authority shall be authorized to take the following measures:

    1. attachments not relating to immovable property effected by the service of documents without requiring any physical action, such as bank accounts;
    2. attachment of monies and chattels in the debtor's permanent place of business or residence only;
    3. public auctions of the attached property or assets;
    4. requests from the local courts in the West Bank to issue restraining orders prohibiting the debtor to travel abroad; and
    5. requests from the local courts in the West Bank to issue civil imprisonment orders against tax defaulters.
  6. Appeals Proceedings
  7. The Palestinian Authority may establish a tax court in the West Bank for the purpose of hearing appeals with regard to assessments and bookkeeping. The details of this tax court shall be agreed in the CAC. Until the establishment of this tax court, such appeals shall continue to be heard by the local courts.

  8. Scope
    1. The Palestinian Authority shall not be authorized to take any enforcement measures against Israelis.
    2. The Palestinian Authority shall not have the power to exercise enforcement measures affecting, directly or indirectly, the military government or its Civil Administration. The two sides will agree upon the mode and procedures regarding enforcement measures that require the cooperation of the military government and its Civil Administration, with a view to assisting the Palestinian Authority in carrying out its enforcement measures, subject to considerations of security and public order.
    3. The use of force required for the exercise of tax enforcement measures shall be effected only by the Israeli authorities. Israel shall provide the Palestinian Authority with the necessary assistance in this regard.
    4. The enforcement measures set out in this Appendix shall be exercised by the Palestinian Authority solely for tax collection and shall not be exercised for any other purpose.
  9. Cooperation and Exchange of Information
  10. Israel and the Palestinian Authority shall cooperate, including by exchanging information, to assist each other in the exercise of their powers and responsibilities with regard to tax enforcement.

  11. Legislation Regarding Tax Enforcement
  12. Subject to the principles set out in this Appendix, the Palestinian Authority is authorized, in addition to the measures included in the legislation set out in Appendix A, to take tax enforcement measures included in the following legislation:

    1. Law regarding Collection of Public Monies, No. 6, 1952, except for articles 10, 11, 12A (appeals will be brought before the local courts), 14, 16(A) (with regard to payments owed by the Palestinian Authority)
    2. Order regarding Amendment of the Collection of Public Monies Law, No. 113, 1967
    3. Rules regarding Collection of Public Monies, 1988, except for articles 4(b)-(c), 22, 23
    4. Rules regarding Collection of Public Monies (Imprisonment of a Debtor), 1991
    5. Order regarding Taxes (Fine for Late Payment), No. 1296, 1990
    6. Order regarding Rounding Off of Sums, No. 1164, 1986
    7. Order regarding Tax Collection (Auxiliary Authorities) (Temporary Order), No. 1262, 1989 - with regard to permits and services provided by the Palestinian Authority

ANNEX VI

Protocol Concerning Preparatory Transfer of Powers and Responsibilities in the Sphere of

VAT on Local Production

  1. The powers and responsibilities of the Civil Administration in the sphere of VAT on local production in the West Bank will be transferred to and will be assumed by the Palestinian Authority.
  2. For the purpose of this Annex the term "VAT" shall refer to Value Added Tax on local production imposed on the sale of assets and the provision of services by dealers.
  3. The sphere of VAT shall include all matters dealt with in the laws, regulations and military orders listed in Appendix A, subject to the principles set forth in this Annex.
  4. In accordance with Protocol IV of the Gaza - Jericho Agreement, while the prevailing system and principles of VAT in the West Bank will continue to apply, the Palestinian VAT rate shall not be lower than 15% to 16% and the maximum annual turnover for dealers to be exempt from VAT will be decided by the Palestinian Authority, within an upper limit of 12,000 US dollars.
  5. Subject to paragraph 6 below, each side will register for VAT purposes dealers who are subject to its powers and responsibilities, notwithstanding the place of their activity.
    1. Ongoing permanent businesses will register for VAT purposes with the VAT administration of the side exercising powers and responsibilities in the place in which they are situated.
    2. Notwithstanding subparagraph 6.a, ongoing permanent Israeli businesses situated outside the settlements and military locations will be registered for VAT purposes with the Civil Administration. The rules of Palestinian VAT legislation will apply to these businesses.
      The Civil Administration will transfer to the Palestinian Authority the net VAT collected from these businesses, after deduction of their refunds.
  6. For the purpose of this Annex, and for the purpose of the application of Appendix B of Annex V to this Annex pursuant to paragraph 17 below -
    1. A corporation will be regarded as either a Palestinian or an Israeli if the majority of its shares which grant rights to distribution of profits are held by Palestinians or by Israelis, respectively.
    2. For the purpose of subparagraph a. above, shares held by foreigners will be considered as shares held by Palestinians, except with regard to corporations operating within the settlements and military locations.
    3. The above mentioned principle regarding corporations will apply to partnerships, with the necessary adjustments.
    4. The registration for VAT purposes of corporations and partnerships in which Israelis and Palestinians hold equal rights to distribution of profits, will be according to the place of registration of the corporation or the partnership. Each side may bring such cases for discussion before the joint committee referred to in paragraph 16 below, if it considers that the place of registration for VAT purposes should be different.
  7. Foreign dealers will be registered for VAT purposes in accordance with their place of activity.
  8. The VAT levied on dealers registered for VAT purposes will accrue to the VAT administration with which the dealer is registered and the tax code of that side will apply.
  9. The principles set out in paragraphs 1-9 and 16-17 of this Annex shall also apply to wage-and-profit tax on financial institutions.
  10. There will be clearance of VAT revenues between Israel and the Palestinian Authority according to the following principles:
    1. The VAT clearance will apply to VAT on transactions between dealers registered with different VAT administrations. For the purpose of this paragraph, dealers registered with the Civil Administration shall be considered to be registered with the Palestinian Authority.
    2. The following procedures will apply to clearance of VAT revenues accruing from transactions by dealers registered for VAT purposes:
      1. To be acceptable for clearance purposes, special invoices, clearly marked for this purpose, will be used for transactions between dealers registered by the different sides.
      2. These 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 and that the amounts filled out in the invoice are stated also in NIS.
      3. For the purposes of tax rebates, such invoices will be valid for six months from their date of issue.
      4. Representatives of the two sides will meet once a month, on the twentieth 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:
        1. the number of the registered dealer issuing it;
        2. the name of the registered dealer issuing it;
        3. the number of the invoice;
        4. the date of issue;
        5. the amount of the invoice - with a separate reference to the amount of VAT, specified both numerically and in words; and
        6. the name and the VAT registration number of the recipient of the invoice.
      5. 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.
      6. 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 six months after receiving them.
      7. Each side will take the necessary measures to verify the authenticity of the invoices presented to it for clearance by the other side.
      8. Claims for VAT clearance which will not be found valid will be deducted from the next clearance payment.
      9. 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 subparagraphs (4) and (5) above.
      10. The two tax administrations will exchange lists of the dealers registered by them and will provide each other with the necessary documentation, if requested, for the verification of transactions.
      11. The subcommittee established under Article VI paragraph 5 of Annex IV of the Gaza - Jericho Agreement will deal with the implementation of the provisions of this paragraph.
  11. Pending the Interim Agreement, the following provisions shall apply with regard to VAT on imports:
    1. In addition to the clearance described in paragraph 11 above, VAT on imports paid by dealers registered with the Palestinian Authority who deduct input tax on such imports shall be remitted to the Palestinian Authority.
    2. The clearance shall be effected in the framework of the monthly settlement referred to in paragraph 10 above. For this purpose, the Palestinian Authority shall provide Israel with a list containing the following details.
      1. the VAT registration number of each dealer;
      2. the number of each import entry document; and
      3. the VAT amount included in each import entry document.
    3. The Palestinian Authority shall verify and confirm that the list referred to in subparagraph (b) does not include imports the final destination of which is the Gaza Strip or the Jericho Area. The remittance of VAT payments in respect of these imports shall continue to be in accordance with the Gaza-Jericho Agreement.
  12. VAT paid on transactions with dealers registered with Israel by not-for-profit Palestinian organizations and institutions registered with the Palestinian Authority, or by the Palestinian Authority where the transaction relates to powers and responsibilities transferred under this Agreement, will be remitted to the Palestinian Authority in accordance with the clearance system set out in paragraph 11. The same principle will apply to VAT paid on such transactions by Palestinian local authorities, once the powers and responsibilities regarding them are transferred to the Palestinian Authority.
  13. VAT paid on transactions with dealers registered with the Palestinian Authority by not-for-profit Israeli organizations and institutions, by Israeli local authorities, or by Israel, will be remitted to Israel in accordance with the clearance system set out in paragraph 11.
  14. Where the zero VAT rate on transactions by dealers registered with the Palestinian Authority is conditional upon the submission of proof by the dealer that foreign currency has been deposited with a financial institution, the deposit will be made in a financial institution operating in the West Bank. The definition of foreign currency for the purposes of this paragraph may be determined within the JEC.
  15. 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 Annex.
  16. VAT enforcement by the Palestinian Authority shall be in accordance with the principles set out in Appendix B attached to Annex V.


Appendix A

Laws, Regulations and Military Orders in the Sphere of VAT

  1. Law of Excise on Local Production, No. 16, 1963, except for the following articles (Hebrew Version):
    2(A), 2(B), 2(E), 3, 6A(2), 6A(5), 6A(6), 6A(8)
    6A(7) - will be subject to principles regarding the tax enforcement
  2. Regulations Regarding Excise on Local Production (Judea and Samaria), 1985, except for the following articles (Hebrew Version):
    2, 33, 118, 137, 147, 127
    31(A)1, will not apply in relation to authorizing use of "other document"
    53 (B), 70, 85, 86, 87A, 89, 92, 94, 103, 116, 116A(D)-(E), 117, 119(D), 129(C), 139(B) - will be subject to the principles regarding tax enforcement
    35(A)2, 35(A)3, 112, 115A, 116A(C), 119, Chapter 16, 139(A) - will be subject to principles regarding tax enforcement
  3. Regulations regarding Bookkeeping (Judea and Samaria), 1985
  4. Notification regarding Excise on Local Production (designating Egypt as bordering country) (Judea and Samaria), 1987