Palestinian Economy - Regulatory reform in Palestine

14 May 2008
The Palestinian Authority (PA) has been pushing through a series of critical reforms ahead of the Bethlehem conference.
  • Company Law - completely new unified legislation in place

  • Investment Law amended - new tax breaks introduced

  • Income Tax Law - Income tax break for companies with start-up capital below $1m extended to seven from five years. The $1m threshold will be lowered to $100,000 for the IT sector. Any new company showing substantial re-investment in the same project during its seven year break, will then be granted a further 12 years on 50 per cent income tax.

Personal income tax

  • Basic threshold of tax-free income raised to $7,200 a year from $3,000

  • Top tax bracket limit raised to $20,000 a year from $16,000

  • Basic rate reduced to 5 per cent from 8 per cent on annual income up to $10,000

  • Mid rate reduced to 10 per cent from 12 per cent on annual income of $10-20,000

  • Top rate reduced to 15 per cent from 16 per cent on annual income over $20,000

  • Tax-free allowances introduced for personal transportation (up to 10 per cent of income) and loan repayments

Corporation tax

  • Corporation tax reduced to 15 per cent from 16 per cent

  • Deductibles:
    Training - 1 per cent of gross income or $100,000
    Research and development - 1 per cent of gross income or $100,000
    Investment in meeting quality standards - 1 per cent of gross income or $100,000
    Hospitality - 3 per cent of net income or $50,000

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