Protocol on Economic Relations between
the Government of the State of Israel and the P.L.O.,
representing the Palestinian people
Paris, April 29, 1994
The two parties view the economic domain as one of the
cornerstone in their mutual relations with a view to
enhance their interest in the achievement of a just,
lasting and comprehensive peace. Both parties shall
cooperate in this field in order to establish a sound
economic base for these relations, which will be
governed in various economic spheres by the principles
of mutual respect of each other's economic interests,
reciprocity, equity and fairness.
This protocol lays the groundwork for strengthening the
economic base of the Palestinian side and for exercising
its right of economic decision making in accordance with
its own development plan and priorities. The two parties
recognise each other's economic ties with other markets
and the need to create a better economic environment for
their peoples and individuals.
FRAMEWORK AND SCOPE OF THIS PROTOCOL
1. This protocol establishes the contractual agreement
that will govern the economic relations between the two
sides and will cover the West Bank and the Gaza Strip
during the interim period. The implementation will be
according to the stages envisaged in the Declaration of
Principles on Interim Self Government Arrangements
signed in Washington D.C. on September 13, 1993 and the
Agreed Minutes thereto. It will therefore begin in the
Gaza Strip and the Jericho Area and at a later stage
will also apply to the rest of the West Bank, according
to the provisions of the Interim Agreement and to any
other agreed arrangements between the two sides.
2. This Protocol, including its Appendixes, will be
incorporated into the Agreement on the Gaza Strip and
the Jericho Area (in this Protocol - the Agreement),
will be an integral part thereof and interpreted
accordingly. This paragraph refers solely to the Gaza
Strip and the Jericho Area.
3. This Protocol will come into force upon the signing
of the Agreement.
4. For the purpose of this Protocol, the term
"Areas" means the areas under the jurisdiction
of the Palestinian Authority, according to the
provisions of the Agreement regarding territorial
jurisdiction. The Palestinian Jurisdiction in the
subsequent agreements could cover areas, spheres or
functions according to the Interim Agreement. Therefore,
for the purpose of this Protocol, whenever applied, the
term "Areas" shall be interpreted to mean
functions and spheres also, as the case may be, with the
THE JOINT ECONOMIC COMMITTEE
1. Both parties will establish a Palestinian-Israeli
Joint Economic Committee (hereinafter - the JEC) to
follow up the implementation of this Protocol and to
decide on problems related to it that may arise from
time to time. Each side may request the review of any
issue related to this Agreement by the JEC.
2. The JEC will serve as the continuing committee for
economic cooperation envisaged in Annex III of the
Declaration of Principles.
3. The JEC will consist of an equal number of members
from each side and may establish sub-committees
specified in this Protocol.
A sub-committee may include experts as necessary.
4. The JEC and its sub-committees shall reach their
decisions by agreement and shall determine their rules
of procedure and operation, including the frequency and
place or places of their meetings.
IMPORT TAXES AND IMPORT POLICY
1. The import and customs policies of both sides will be
according to the principles and arrangements detailed in
a. The Palestinian Authority will have all powers and
responsibilities in the sphere of import and customs
policy and procedures with regard to the following:
1. Goods on List Al, attached hereto as Appendix I
locally-produced in Jordan and in Egypt particularly and
in the other Arab countries, which the Palestinians will
be able to import in quantities agreed upon by the two
sides up to the Palestinian market needs as estimated
according to para 3 below.
2. Goods on List A2, attached hereto as Appendix II,
from the Arab, Islamic and other countries, which the
Palestinians will be able to import in quantities agreed
upon by the two sides up to the Palestinian market needs
as estimated according to para 3 below.
b. The import policy of the Palestinian Authority for
Lists Al and A2 will include independently determining
and changing from time to time the rates of customs,
purchase tax, levies, excises and other charges, the
regulation of licensing requirements and procedures and
of standard requirements. The valuation for custom
purposes will be based upon the GATT 1994 agreement as
of the date it will be introduced in Israel, and until
then - on the Brussels Definition of Valuation (BDV)
system. The classification of goods will be based on the
principles of "the Harmonized Commodity Description
and Coding System". Concerning imports referred to
in Article VII of this Protocol (Agriculture), the
provisions of that Article will apply.
3. For the purposes of para 2(a) above, the Palestinian
market needs for 1994 will be estimated by a
sub-committee of experts. These estimates will be based
on the best available data regarding past consumption,
production, investment and external trade of the Areas.
The sub-committee will submit its estimate within three
months from the signing of the Agreement. These
estimates will be reviewed and updated every six months
by the sub-committee, on the basis of the best data
available regarding the latest period for which relevant
data are available, taking into consideration all
relevant economic and social indicators. Pending an
agreement on the Palestinian market needs, the previous
period's estimates adjusted for population growth and
rise in per-capita GNP in the previous period, will
serve as provisional estimate.
4. The Palestinian Authority will have all powers and
responsibilities to independently determine and change
from time to time the rates of customs, purchase taxes;
levies, excises and other charges on the goods on List
B, attached hereto as Appendix III, of basic food items
and other goods for the Palestinian economic development
program, imported by the Palestinians to the Areas.
a. With respect to all goods not specified in Lists Al,
A2 and B, and with respect to quantities exceeding those
determined in accordance with paras 2(a) & 3 above
(hereinafter - the Quantities), the Israeli rates of
customs, purchase tax, levies, excises and other
charges, prevailing at the date of signing of the
Agreement , as changed from time to time, shall serve as
the minimum basis for the Palestinian Authority. The
Palestinian Authority may decide on any upward changes
in the rates on these goods and exceeding quantities
when imported by the Palestinians to the Areas.
b. With respect to all goods not specified in Lists A1
and A2, and with respect to quantities exceeding the
Quantities, Israel and the Palestinian Authority will
employ for all imports the same system of importation,
as stipulated in para 10 below, including inter alia
standards, licensing, country of origin, valuation for
customs purposes etc.
6. Each side will notify the other side immediately of
changes made in rates and in other matters of import
policy, regulations and procedures, determined by it
within its respective powers and responsibilities as
detailed in this Article. With regard to changes which
do not require immediate application upon decision,
there will be a process of advance notifications and
mutual consultations which will take into consideration
all aspects and economic implications.
7. The Palestinian Authority will levy VAT at one rate
on both locally produced goods and services and on
imports by the Palestinians (whether covered by the
three Lists mentioned above or not), and may fix it at
the level of 15% to 16%.
8. Goods imported from Jordan, Egypt and other Arab
countries according to para 2(a)(1) above (List Al) will
comply with rules of origin agreed upon by a joint
sub-committee within three months of the date of the
signing of the Agreement. Pending an agreement, goods
will be considered to have been "locally
produced" in any of those countries if they conform
with all the following:
i. They have been wholly grown, produced, or
manufactured in that country, or have been substantially
transformed there into new or different goods, having a
new name, character, or use, distinct from the goods or
materials from which they were so transformed;
ii. They have been imported directly from the said
iii. The value or the costs of the materials produced in
that country, plus the direct processing costs in it, do
not fall short of 30 percent of the export value of the
goods. This rate may be reviewed by the joint committee
mentioned in para 16 a year after the signing of the
iv. The goods are accompanied by an internationally
recognized certificate of origin;
v. No goods will be deemed as substantially new or
different goods, and no material will be eligible for
inclusion as domestic content, by virtue of having
merely undergone simple combining or packaging, or
dilution with water or other substances, which do not
materially alter the characteristics of the said goods.
1. Each side will issue import licences to its own
importers, subject to the principles of this Article and
will be responsible for the implementation of the
licensing requirements and procedures prevailing at the
time of the issuance of the licenses. Mutual
arrangements will be made for the exchange of
information relevant to licensing matters.
2. Except for the goods on Lists Al and A2 and their
Quantities - in which the Palestinian Authority has all
powers and responsibilities, both sides will maintain
the same import policy (except for rates of import taxes
and other charges for goods in List B) and regulations
including classification, valuation and other customs
procedures, which are based on the principles governing
international codes, and the same policies of import
licensing and of standards for imported goods, all as
applied by Israel with respect to its importation.
Israel may from time to time introduce changes in any of
the above, provided that changes in standard
requirements will not constitute a non-tariff-barrier
and will be based on considerations of health, safety
and the protection of the environment in conformity with
Article 2.2. of the Agreement on Technical Barriers to
trade of the Final Act of the Uruguay Round of Trade
Negotiations. Israel will give the Palestinian Authority
prior notice of any such changes, and the provisions of
para 6 above will apply.
a. The Palestinian Authority will determine its own
rates of customs and purchase tax on motor vehicles
imported as such, to be registered with the Palestinian
Authority. The vehicle standards will be those applied
at the date of the signing of the Agreement as changed
according to para 10 above. However, the Palestinian
Authority may request, through the sub-committee on
transportation, that in special cases different
standards will apply. Used motor vehicles will be
imported only if they are passenger cars or dual-purpose
passenger cars of a model of no more than three years
prior to the importation year. The sub-committee on
transportation will determine the procedures for testing
and confirming that such used cars comply with the
standards' requirements for that model year. The issue
of importing commercial vehicles of a model prior to the
importation year will be discussed in the joint
sub-committee mentioned in para 16 below.
b. Each side may determine the terms and conditions for
the transfer of motor vehicles registered in the other
side to the ownership or use of a resident of its own
side, including the payment of the difference of import
taxes, if any, and the vehicle having been tested and
found compatible with the standards required at that
time by its own registration administration, and may
prohibit transfer of vehicles.
a. Jordanian standards, as specified in the attached
Appendix I, will be acceptable in importing petroleum
products into the Areas, once they meet the average of
the standards existing in the European Union countries,
or the USA standards, which parameters have been set at
the values prescribed for the geographical conditions of
Israel, the Gaza Strip and the West Bank. Cases of
petroleum products which do not meet these
specifications will be referred to a joint experts'
committee for a suitable solution. The committee may
mutually decide to accept different standards for the
importation of gasoline which meet the Jordanian
standards even though, in some of their parameters, they
do not meet the European Community or USA standards. The
committee will give its decision within six months.
Pending the committee's decision, and for not longer
than six months of the signing of the Agreement, the
Palestinian Authority may import to the Areas, gasoline
for the Palestinian market in the Areas, according to
the needs of this market, provided that:
1. this gasoline is marked in a distinctive colour to
differentiate it from the gasoline marketed in Israel;
2. the Palestinian Authority will take all the necessary
steps to ensure that this gasoline is not marketed in
a. The difference in the final price of gasoline to
consumers in Israel and to consumers in the Areas, will
not exceed 15% of the official final consumer price in
Israel. The Palestinian Authority has the right to
determine the prices of petroleum products, other than
gasoline, for consumption in the Areas.
b. If Egyptian gasoline standards will comply with the
conditions of sub-para (a) above, the importation of
Egyptian gasoline will also be allowed.
5. In addition to the points of exit and entry
designated according to the Article regarding Passages
in Annex I of the Agreement for the purpose of export
and import of goods, the Palestinian side has the right
to use all points of exit and entry in Israel designated
for that purpose. The import and export of the
Palestinians through the points of exit and entry in
Israel will be given equal trade and economic treatment.
6. In the entry points of the Jordan River and the Gaza
a. Freight shipment
The Palestinian Authority will have full responsibility
and powers in the Palestinian customs points
(freight-area) for the implementation of the agreed upon
customs and importation policy as specified in this
protocol, including the inspection and the collection of
taxes and other charges, when due.
Israeli customs officials will be present and will
receive from the Palestinian customs officials a copy of
the necessary relevant documents related to the specific
shipment and will be entitled to ask for inspection in
their presence of both goods and tax collection.
The Palestinian customs officials will be responsible
for the handling of the customs procedure including the
inspection and collection of due taxes.
In case of disagreement on the clearance of any shipment
according to this Article, the shipment will be delayed
for inspection for a maximum period of 48 hours during
which a joint sub-committee will resolve the issue on
the basis of the relevant provisions of this Article.
The shipment will be released only upon the
b. Passengers customs lane
Each side will administer its own passengers customs
procedures, including inspection and tax collection. The
inspection and collection of taxes due in the
Palestinian customs lane will be conducted by customs
officials of the Palestinian Authority.
Israeli customs officials will be invisibly present in
the Palestinian customs lane and entitled to request
inspection of goods and collection of taxes when due. In
the case of suspicion, the inspection will be carried
out by the Palestinian official in a separate room in
the presence of the Israeli customs official.
7. The clearance of revenues from all import taxes and
levies, between Israel and the Palestinian Authority,
will be based on the principle of the place of final
destination. In addition, these tax revenues will be
allocated to the Palestinian Authority even if the
importation was carried out by Israeli importers when
the final destination explicitly stated in the import
documentation is a corporation registered by the
Palestinian Authority and conducting business activity
in the Areas. This revenue clearance will be effected
within six working days from the day of collection of
the said taxes and levies.
8. The Joint Economic Committee or a sub-committee
established by it for the purposes of this Article will
deal inter alia with the following:
1. Palestinian proposals for addition of items to Lists
Al, A2 and B. Proposals for changes in rates and in
import procedures, classification, standards and
licensing requirements for all other imports;
2. Estimate the Palestinian market needs, as mentioned
in para 3 above;
3. Receive notifications of changes and conduct
consultations, as mentioned in para 6 above;
4. Agree upon the rules of origin as mentioned in para 8
above, and review their implementation;
5. Coordinate the exchange of information relevant to
licensing matters as mentioned in para 9 above;
6. Discuss and review any other matters concerning the
implementation of this Article and resolve problems
1. The Palestinian Authority will have the right to
exempt the Palestinian returnees who will be granted
permanent residency in the Areas from import taxes on
personal belongings including house appliances and
passenger cars as long as they are for personal use.
2. The Palestinian Authority will develop its system for
temporary entry of needed machines and vehicles used for
the Palestinian Authority and the Palestinian economic
Concerning other machines and equipment, not included in
Lists Al, A2 and B, the temporary entry will be part of
the import policy as agreed in para 10 above, until the
joint sub-committee mentioned in para 16 decides upon a
new system proposed by the Palestinian Authority. The
temporary entry will be coordinated through the joint
3. Donations in kind to the Palestinian Authority will
be exempted from customs and other import taxes if
destined and used for defined development projects or
non-commercial humanitarian purposes. The Palestinian
Authority will be responsible exclusively for planning
and management of the donors' assistance to the
Palestinian people. The Joint Economic Committee will
discuss issues pertaining to the relations between the
provisions in this Article and the implementation of the
principles in the above paragraph.
MONETARY AND FINANCIAL ISSUES
1. The Palestinian Authority will establish a Monetary
Authority (PMA) in the Areas. The PMA will have the
powers and responsibilities for the regulation and
implementation of the monetary policies within the
functions described in this Article.
2. The PMA will act as the Palestinian Authority's
official economic and financial advisor.
3. The PMA will act as the Palestinian Authority's and
the public sector entities' sole financial agent,
locally and internationally.
4. The foreign currency reserves (including gold) of the
Palestinian Authority and all Palestinian public sector
entities will be deposited solely with the PMA and
managed by it.
5. The PMA will act as the lender of last resort for the
banking system in the Areas.
6. The PMA will authorize foreign exchange dealers in
the Areas and will exercise control (regulation and
supervision) over foreign exchange transactions within
the Areas and with the rest of the world.
a. The PMA will have a banking supervision department
that will be responsible for the proper functioning,
stability, solvency and liquidity of the banks operating
in the Areas.
b. The banking supervision department will predicate its
supervision on the international principles and
standards reflected in international conventions and
especially on the principles of the "Basle
c. The supervision department will be charged with the
general supervision of every such bank, including:
The regulation of all kinds of banking activities,
including their foreign activities;
The licensing of banks formed locally and of branches,
subsidiaries, joint ventures and representative offices
of foreign banks and the approval of controlling
The supervision and inspection of banks.
" The PMA will relicense each of the five branches
of the Israeli banks operating at present in the Gaza
Strip and the West Bank, as soon as its location or the
authorities regarding it come under the jurisdiction of
the Palestinian Authority. These branches will be
required to comply with the general rules and
regulations of the PMA concerning foreign banks, based
on the "Basle Concordat". Para I0 d, e, and f
below will apply to these branches.
a. " Any other Israeli bank wishing to open a
branch or a subsidiary in the Areas will apply for a
license to the PMA and will be treated equally to other
foreign banks, provided that the same will apply to the
Palestinian banks wishing to open a branch or a
subsidiary in Israel.
b. Granting of a license by both authorities will be
subject to the following arrangements based on the
"Basle Concordat" valid on the date of signing
of the Agreement and to the host authority's prevailing
general rules and regulations concerning opening of
branches and subsidiaries of foreign banks.
In this para 10 "host authority" and
"home authority" apply only to the Bank of
Israel (BOI) and the PMA.
c. A bank wishing to open a branch or establish a
subsidiary will apply to the host authority, having
first obtained the approval of its home authority. The
host authority will notify the home authority of the
terms of the license, and will give its final approval
unless the home authority objects.
d. The home authority will be responsible for the
consolidated and comprehensive supervision of banks,
inclusive of branches and subsidiaries in the area under
the jurisdiction of the host authority. However, the
distribution of supervision responsibilities between the
home and the host authorities concerning subsidiaries
will be according to the "Basle Concordat".
e. The host authority will regularly examine the
activities of branches and subsidiaries in the area
under its jurisdiction. The home authority will have the
right to conduct on site examinations in the branches
and subsidiaries in the host area. However, the
supervision responsibilities of the home authority
concerning subsidiaries will be according to the
Accordingly, each authority will transfer to the other
authority copies of its examination reports and any
information relevant to the solvency, stability and
soundness of the banks, their branches and subsidiaries.
f. The BOI and the PMA will establish a mechanism for
cooperation and for the exchange of information on
issues of mutual interest.
a. " The New Israeli Sheqel (NIS) will be one of
the circulating currencies in the Areas and will legally
serve there as means of payment for all purposes
including official transactions. Any circulating
currency, including the NIS, will be accepted by the
Palestinian Authority and by all its institutions, local
authorities and banks, when offered as a means of
payment for any transaction.
b. Both sides will continue to discuss, through the JEC,
the possibility of introducing mutually agreed
Palestinian currency or temporary alternative currency
arrangements for the Palestinian Authority.
a. " The liquidity requirements on all deposits in
banks operating in the Areas will be determined and
announced by the PMA.
b. Banks in the Areas will accept NIS deposits. The
liquidity requirements on the various kinds of NIS
deposits (or deposit linked to the NIS) in banks
operating in the Areas will not be less than 4% to 8%,
according to the type of deposits. Changes of over 1% in
the liquidity requirements on NIS deposits (or deposits
linked to the NIS) in Israel will call for corresponding
changes in the above mentioned rates.
c. The supervision and inspection of the implementation
of all liquidity requirements will be carried out by the
d. The reserves and the liquid assets required according
to this paragraph will be deposited at the PMA according
to rules and regulations determined by it. Penalties for
non compliance with the liquidity requirements will be
determined by the PMA.
" The PMA will regulate and administer a discount
window system and the supply of temporary finance for
banks operating in the Areas.
a. " The PMA will establish or license a clearing
house in order to clear money orders between the banks
operating in the Areas, and with other clearing houses.
b. The clearing of money orders and transactions between
banks operating in the Areas and banks operating in
Israel will be done between the Israeli and the
Palestinian clearing houses on same working day basis,
according to agreed arrangements.
" Both sides will allow correspondential relations
between each others' banks.
" The PMA will have the right to convert at the BOI
excess NIS received from banks operating in the Areas
into foreign currency, in which the BOI trades in the
domestic inter-bank market, up to the amounts determined
per period, according to the arrangements detailed in
para 16 below.
a. " The excess amount of NIS, due to balance of
payments flows, that the PMA will have the right to
convert into foreign currency, will be equal to:
1. Estimates of all Israeli "imports" of goods
and services from the Areas, valued at market prices
(inclusive of taxes), which were paid for in NIS, less:
i. the taxes collected by the Palestinian Authority on
all Israeli "imports" from the Areas and
rebated to Israel in NIS, and
ii. the taxes collected by Israel on all Israeli
"imports" from the Areas and included in their
market value, and not rebated to the Palestinian
2. Estimates of all Israeli "exports" of goods
and services to the Areas, valued at market prices
(inclusive of taxes), which were paid for in NIS, less
i. the taxes collected by Israel on such
"exports" and rebated to the Palestinian
ii. the taxes collected by the Palestinian Authority on
such "exports" and included in their market
value, and not rebated to Israel;
3. The accumulated net amounts of foreign currency
converted previously into NIS by the PMA, as recorded in
the BOI Dealing Room.
b. The said flows and amounts will be calculated as of
the date of the signing of the Agreement.
Notes to para 16:
i. The estimates of the said "exports and
imports" of goods and services will include inter
alia labor services, NIS expenditure of tourists and
Israelis in the Areas and NIS expenditure of
Palestinians of the Areas in Israel.
ii. Taxes and pension contributions on
"imports" of labor services, paid to
"importing" side and rebated to the
"exporting" one, will not be included in the
estimates of the sums to be converted, as the
"exports'" earnings of labor services are
recorded in the statistics inclusive of them, although
they do not accrue to the individuals supplying them.
" The PMA and the BOI will meet annually to discuss
and determine the annual amount of convertible NIS
during the following calendar year and will meet
semi-annually to adjust the said amount. The amounts
determined annually and adjusted semi-annually will be
based on data and estimates regarding the past and on
forecasts for the wi following period, according to the
formula mentioned in para 16. The first meeting will be
as soon as possible within three months after the date
of the signing of the Agreement.
a. " The exchange of foreign currency for NIS and
vice-versa by the PMA will be carried out through the
BOI Dealing Room, at the market exchange rates.
b. The BOI will not be obliged to convert in any single
month more than 1/5 of the semi-annual amount, as
mentioned in para 17.
c. There will be no ceiling on the annual foreign
currency conversions by the PMA into NIS. However, in
order to avoid undesirable fluctuations in the foreign
exchange market, monthly ceilings of such conversions
will be agreed upon in the annual and semi-annual
meetings referred to in para 17.
d. Banks in the Areas will convert NIS into other
circulating currencies and vice-versa.
e. The Palestinian Authority will have the authorities,
powers and responsibilities regarding the regulation and
supervision of capital activities in the Areas,
including the licensing of capital market institutions,
finance companies and investment funds.
1. Israel and the Palestinian Authority will each
determine and regulate independently its own tax policy
in matters of direct taxation, including income tax on
individuals and corporations, property taxes, municipal
taxes and fees.
2. Each tax administration will have the right to levy
the direct taxes generated by economic activities within
3. Each tax administration may impose additional taxes
on residents within its area on (individuals and
corporations) who conduct economic activities in the
other side's area.
4. Israel will transfer to the Palestinian Authority a
sum equal to:
a. 75% of the income taxes collected from Palestinians
from the Gaza Strip and the Jericho Area employed in
b. The full amount of income taxes collected from
Palestinians from the Gaza Strip and Jericho Area
employed in the settlements.
5. The two sides will agree on a set of procedures that
will address all issues concerning double taxation.
INDIRECT TAXES ON LOCAL PRODUCTION
1. The Israel and the Palestinian tax administrations
will levy and collect VAT and purchase taxes on local
production, as well as any other indirect taxes, in
their respective areas.
2. The purchase tax rates within the jurisdiction of
each tax administration will be identical as regards
locally produced and imported goods.
3. The present Israeli VAT rate is 17%. The Palestinian
VAT rate will be 15% to 16%.
4. The Palestinian Authority will decide on the maximum
annual turnover for businesses under its jurisdiction to
be exempt from VAT, within an upper limit of 12,000 US
5. The VAT on purchases by businesses registered for VAT
purposes will accrue to the tax administration with
which the respective business is registered.
Businesses will register for VAT purposes with the tax
administration of the side of their residence, or on the
side of their ongoing operation.
There will be clearance of VAT revenues between the
Israeli and Palestinian VAT administrations on the
a. The VAT clearance will apply to VAT on transactions
between businesses registered with the VAT
administration of the side in which they reside.
b. The following procedures will apply to clearance of
VAT revenues accruing from transactions by businesses
registered for VAT purposes:
1. To be acceptable for clearance purposes, special
invoices, clearly marked for this purpose, will be used
for transactions between businesses registered with the
2. The 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.
3. For the purpose 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 20th 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:
a. The number of the registered business issuing it;
b. The name of the registered business issuing it;
c. The number of the invoice;
d. The date of issue;
e. The amount of the invoice;
f. The name of the recipient of the invoice.
5. The clearance claims will be settled within 6 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 demand,
with invoices for verification purposes. Each tax
administration will be responsible for providing
invoices for verification purposes for 6 months after
7. Each side will take the necessary measure 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 inter-connected computer system for tax
rebates to businesses and for VAT clearance between the
two sides is operational, it will replace the clearance
procedures specified in sub-paras (4) - (8).
10. The two tax administrations will exchange lists of
the businesses registered with them and will provide
each other with the necessary documentation, if
required, for the verification of transactions.
11. The two sides will establish a sub-committee which
will deal with the implementation arrangements regarding
the clearance of VAT revenues set above.
6. VAT paid by not-for-profit Palestinian organizations
and institutions, registered by the Palestinian
Authority, on transactions in Israel, will accrue to the
Palestinian tax administration. The clearance system set
out in para 5 will apply to these organizations and
1. Both sides will attempt to maintain the normality of
movement of labor between them, subject to each side's
right to determine from time to time the extent and
conditions of the labor movement into its area. If the
normal movement is suspended temporarily by either side,
it will give the other side immediate notification, and
the other side may request that the matter be discussed
in the Joint Economic Committee.
The placement and employment of workers from one side in
the area of the other side will be through the
employment service of the other side and in accordance
with the other sides' legislation. The Palestinian side
has the right to regulate the employment of Palestinian
labor in Israel through the Palestinian employment
service, and the Israeli Employment Service will
cooperate and coordinate in this regard.
a. Palestinians employed in Israel will be insured in
the Israeli social insurance system according to the
National Insurance Law for employment injuries that
occur in Israel, bankruptcy of employers and maternity
b. The National Insurance fees deducted from the wages
for maternity insurance will be reduced according to the
reduced scope of maternity insurance, and the
equalization deductions transferred to the Palestinian
Authority, if levied, will be increased accordingly.
c. Implementation procedures relating thereto will be
agreed upon between the Israeli National Insurance
Institute and the Palestinian Authority or the
appropriate Palestinian social insurance institution.
a. Israel will transfer to the Palestinian Authority, on
a monthly basis, the equalization deductions as defined
by Israeli legislation, if imposed and to the extent
levied by Israel. The sums so transferred will be used
for social benefits and health services, decided upon by
the Palestinian Authority, for Palestinians employed in
Israel and for their families.
The equalization deductions to be so transferred will be
those collected after the date of the signing of the
Agreement from wages of Palestinians employed in Israel
and from their employers.
These sums will not include
1. Payments for health services in places of employment.
2. 2/3 of the actual administrative costs in handling
the matters related to the Palestinians employed in
Israel by the Payments Section of the Israeli Employment
4. Israel will transfer, on a monthly basis, to a
relevant pension insurance institution to be established
by the Palestinian Authority, pension insurance
deductions collected after the establishment of the
above institution and the completion of the documents
mentioned in para 6.
These deductions will be collected from wages of
Palestinians employed in Israel and their employers,
according to the relevant rates set out in the
applicable Israeli collective agreements. 2/3 of the
actual administrative costs in handling these deductions
by the Israeli Employment Service will be deducted from
the sums transferred. The sums so transferred will be
used for providing pension insurance for these workers.
Israel will continue to be liable for pension rights of
the Palestinian employees in Israel, to the extent
accumulated by Israel before the entry into force of
this para 4.
5. Upon the receipt of the deductions, the Palestinian
Authority and its relevant social institutions will
assume full responsibility in accordance with the
Palestinian legislation and arrangements, for pension
rights and other social benefits of Palestinians
employed in Israel, that accrue from the transferred
deductions related to these rights and benefits.
Consequently, Israel and its relevant social
institutions and the Israeli employers will be released
from, and will not be held liable for any obligations
and responsibilities concerning personal claims, rights
and benefits arising from these transferred deductions,
or from the provisions of paras 2-4 above.
6. Prior to the said transfers, the Palestinian
Authority or its relevant institutions, as the case may
be, will provide Israel with the documents required to
give legal effect to their aforesaid obligations,
including mutually agreed implementation procedures of
the principles agreed upon in paras 3-5 above.
7. The above arrangements concerning equalization
deductions and/or pension deductions may be reviewed and
changed by Israel if an authorized court in Israel will
determine that the deductions or any part thereof must
be paid to individuals, or used for individual social
benefits or insurance in Israel, or that it is otherwise
unlawful. In such a case the liability of the
Palestinian side will not exceed the actual transferred
deductions related to the case.
8. Israel will respect any agreement reached between the
Palestinian Authority, or an organization or trade-union
representing the Palestinians employed in Israel, and a
representative organization of employees or employers in
Israel, concerning contributions to such organization
according to any collective agreement.
a. The Palestinian Authority may integrate the existing
health insurance scheme for Palestinians employed in
Israel and their families in its health insurance
services. As long as this scheme continues, whether
integrated or separately, Israel will deduct from their
wages the health insurance fees ("health
stamp") and will transfer them to the Palestinian
Authority for this purpose.
b. The Palestinian Authority may integrate the existing
health insurance scheme for Palestinians who were
employed in Israel and are receiving pension payments
through the Israeli Employment Service, in its health
insurance services. As long as this scheme continues,
whether integrated or separately, Israel will deduct the
necessary sum of health insurance fees ("health
stamp") from the equalization payments and will
transfer them to the Palestinian Authority for this
10. The JEC will meet upon the request of either side
and review the implementation of this Article and other
issues concerning labor, social insurance and social
11. Other deductions not mentioned above, if any, will
be jointly reviewed by the JEC. Any agreement between
the two sides concerning these deductions will be in
addition to the above provisions.
12. Palestinians employed in Israel will have the right
to bring disputes arising out of employee - employer
relationships and other issues before the Israeli Labor
Courts, within these courts' jurisdiction.
13. This Article governs the future labor relations
between the two sides and will not impair any labor
rights prior to the date of signing of the Agreement.
1. There will be free movement of agricultural produce,
free of customs and import taxes, between the two sides,
subject to the following exceptions and arrangements.
2. The official veterinary and plant protection services
of each side will be responsible, within the limits of
their respective jurisdiction, for controlling animal
health, animal products and biological products, and
plants and parts thereof, as well as their importation
3. The relations between the official veterinary and
plant protection services of both sides will be based on
mutuality in accordance with the following principles,
which will be applied in all the areas under their
a. Israel and the Palestinian Authority will do their
utmost to preserve and improve the veterinary standards.
b. Israel and the Palestinian Authority will take all
measures to reach equivalent and compatible standards
regarding animal disease control, including mass
vaccination of animals and avians, quarantines,
"stamping out" measures and residue control
c. Mutual arrangements will be made to prevent the
introduction and spread of plant pests and diseases, for
their eradication and concerning residue control
standards in plant products.
d. The official veterinary and plant protection services
of Israel and the Palestinian Authority will coordinate
and regularly exchange information regarding animal
diseases, as well as plant pests and diseases, and will
establish a mechanism for immediate notification of the
outbreak of such diseases.
4. Trade between the two sides in animals, animal
products and biological products will be in keeping with
the principles and definitions set out in the current
edition of the OIE National Animal Health Code as
updated from time to time (hereinafter - I.A.H.C.).
5. Transit of livestock, animal products and biological
products from one side through the area under the
jurisdiction of the other side, should be conducted in a
manner aimed at the prevention of diseases spreading to
or from the consignment during its movement. For such a
transit to be permitted, it is a prerequisite that the
veterinary conditions agreed upon by both sides will be
met in regard to importation of animals, their products
and biological products from external markets. Therefore
the parties agree to the following arrangements.
6. The official veterinary services of each side have
the authority to issue veterinary import permits for
import of animals, animal products and biological
products to the areas under its jurisdiction. In order
to prevent the introduction of animal diseases from
third parties, the following procedures will be adopted:
a. The import permits will strictly follow the
professional veterinary conditions for similar imports
to Israel as prevailing at the time of their issuance.
The permits will specify the country of origin and the
required conditions to be included in the official
veterinary certificates which should be issued by the
veterinary authorities in the countries of origin and
which should accompany each consignment.
Each side may propose a change in these conditions. The
change will come into force 10 days after notice to the
other side, unless the other side requested that the
matter be brought before the Veterinary Sub-Committee
specified in para 14 (hereinafter - VSC). If it is more
stringent than the prevailing conditions - it will come
into force 20 days after the request, unless both sides
decide otherwise through the VSC, and if more lenient -
it will come into force only if agreed upon by both
sides through the VSC. However, if the change is urgent
and needed for the protection of animal and public
health, it will come into force immediately after notice
by the other side and will remain in force unless and
until both sides agree otherwise through the VSC.
b. The official veterinary certificates will include the
provisions regarding OIE Lists A & B Diseases as
specified in the I.A.H.C. When the I.A.H.C. allows
alternative requirements regarding the same disease, the
most stringent one will be adopted unless otherwise
agreed upon by the VSC.
c. When infectious diseases which are not included in
Lists A & B of the I.A.H.C. exist or are suspected,
on scientific grounds, to exist in the exporting
country, the necessary veterinary import conditions that
will be required and included in the official veterinary
certificates, will be discussed in the VSC, and in the
case of different professional opinions, the most
stringent ones will be adopted.
d. The import of live vaccines will be permitted only if
so decided by the VSC.
e. Both sides will exchange, through the VSC,
information pertaining to import licensing, including
the evaluation of the disease situation and zoosanitary
capability of exporting countries, which will be based
upon official information as well as upon other
f. Consignments which do not conform with the above
mentioned requirements will not be permitted to enter
the areas under the jurisdiction of either side.
7. Transportation of livestock and poultry and of animal
products and biological products between areas under the
jurisdiction of one side through areas under the
jurisdiction of the other side, will be subject to the
following technical rules:
a. The transportation will be by vehicles which will be
sealed with a seal of the official veterinary services
of the place of origin and marked with a visible sign
"Animal Transportation" or "Products of
Animal Origin" in Arabic and Hebrew, in coloured
and clearly visible letters on white background;
b. Each consignment will be accompanied by a veterinary
certificate issued by the official veterinary services
of the place of origin, certifying that the animals or
their products were examined and are free of infectious
diseases and originate from a place which is not under
quarantine or under animal movement restrictions.
8. Transportation of livestock and poultry, animal
products and biological products destined for Israel
from the Areas and vice versa will be subject to
veterinary permits issued by the official veterinary
services of the recipient side, in keeping with the OIE
standards used in international traffic in this field.
Each such consignment will be transported by a suitable
and marked vehicle, accompanied by a veterinary
certificate in the form agreed upon between the official
veterinary services of both sides. Such certificates
will be issued only if permits of the recipient side are
9. In order to prevent the introduction of plant pests
and diseases to the region, the following procedures
will be adopted:
a. The transportation between the Areas and Israel, of
plants and parts thereof (including fruits and
vegetables), the control of pesticide residues in them
and the transportation of plant propagation material and
of animal feed, may be inspected without delay or damage
by the plant protection services of the recipient side.
b. The transportation between the Areas through Israel
of plants and parts thereof (including fruits and
vegetables) as well as of pesticides, may be required to
pass a phytosanitary inspection without delay or damage.
c. The official Palestinian plant protection services
have the authority to issue permits for the import of
plants and parts thereof as well as of pesticides from
external markets. The permits will be based on the
prevailing standards and requirements.
The permits will specify the required conditions to be
included in the official Phytosanitary Certificates
(hence P.C.) based upon the standards and the
requirements of the International Plant Protection
Convention (I.P.P.C.)and those of the European and
Mediterranean Plant Protection Organization (E.P.P.O.)
which should accompany each consignment. The P.C.'s will
be issued by the plant protection services in the
countries of origin. Dubious or controversial cases will
be brought before the sub-committee on plant protection.
10. The agricultural produce of both sides will have
free and unrestricted access to each others' markets,
with the temporary exception of sales from one side to
the other side of the following items only: poultry,
eggs, potatoes, cucumbers, tomatoes and melons. The
temporary restrictions on these items will be gradually
removed on an increasing scale until they are finally
eliminated by 1998, as listed below:
Year Poultry Eggs Potatoes Cucumbers Tomatoes Melons
(tons) (millions) (tons) (tons) (tons) (tons)
1994 5,000 30 10,000 10,000 13,000 10,000
1995 6,000 40 13,000 13,000 16,000 13,000
1996 7,000 50 15,000 15,000 19,000 15,000
1997 8,000 60 17,000 17,000 22,000 17,000
1998 unlimited unlimited unlimited unlimited unlimited
Note: The above figures refer to the combined quantities
marketed from the West Bank and Gaza Strip to Israel and
vice-versa. The Palestinian Authority will notify Israel
the apportioning of these quantities between these areas
concerning the quantities pertaining to the Palestinian
12. The Palestinians will have the right to export their
agricultural produce to external markets without
restrictions, on the basis of certificates of origin
issued by the Palestinian Authority.
13. Without prejudice to obligations arising out of
existing international agreements, the two sides will
refrain from importing agricultural products from third
parties which may adversely affect the interests of each
14. Each side will take the necessary measures in the
area under its jurisdiction to prevent damage which may
be caused by its agriculture to the environment of the
15. The two sides will establish sub-committees of their
respective official veterinary and plant protection
services, which will update the information and review
issues, policies and procedures in these fields. Any
changes in the provisions of this Article will be agreed
upon by both sides.
16. The two sides will establish a sub-committee of
experts in the dairy sector in order to exchange
information, discuss and coordinate their production in
this sector so as to protect the interests of both
sides. In principle, each side will produce according to
its domestic consumption.
1. There will be free movement of industrial goods free
of any restrictions including customs and import taxes
between the two sides, subject to each side's
a. The Palestinian side has the right to employ various
methods in encouraging and promoting the development of
the Palestinian industry by way of providing grants,
loans, research and development assistance and
direct-tax benefits. The Palestinian side has also the
right to employ other methods of encouraging industry
resorted to in Israel.
b. Both sides will exchange information about the
methods employed by them in the encouragement of their
c. Indirect tax rebates or benefits and other subsidies
to sales shall not be allowed in trade between the two
3. Each side will do its best to avoid damage to the
industry of the other side and will take into
consideration the concerns of the other side in its
4. Both sides will cooperate in the prevention of
deceptive practices, trade in goods which may endanger
health, safety and the environment and in goods of
5. Each side will take the necessary measures in the
area under its jurisdiction to prevent damage which may
be caused by its industry to the environment of the
6. The Palestinians will have the right to export their
industrial produce to external markets without
restrictions, on the basis of certificates of origin
issued by the Palestinian Authority.
7. The JEC will meet and review issues pertaining to
1. The Palestinian Authority will establish a
Palestinian Tourism Authority which will exercise, inter
alia, the following powers in the Areas.
a. Regulating, licensing, classifying and supervising
tourist services, sites and industries.
b. Promoting foreign and domestic tourism and developing
the Palestinian tourist resources and sites.
c. Supervising the marketing, promotion and information
activities related to foreign and domestic tourism.
2. Each side shall, under its respective jurisdiction,
protect, guard and ensure the maintenance and good
upkeep of historical, archaeological, cultural and
religious sites and all other tourist sites, to fit
their status as well as their purpose as a destination
3. Each side will determine reasonable visiting hours
and days for all tourist sites in order to facilitate
visits at a wide variety of days and hours, taking into
consideration religious and national holidays. Each side
shall publicize such opening times. Meaningful changes
in the opening times will take into consideration
tourist programs already committed to.
4. Tourist buses or any other form of tourist transport
authorized by either side, and operated by companies
registered and licensed by it, will be allowed to enter
and proceed on their tour within the area under the
jurisdiction of the other side, provided that such buses
or other vehicles conform with the EEC technical
specifications [I. currently adopted.] All such vehicles
will be clearly marked as tourist vehicles.
5. Each side will protect the environment and the
ecology around the tourist sites under its jurisdiction.
In view of the importance of beaches and maritime
activities for tourism, each side will do its best
efforts to ensure that development and construction on
the Mediterranean coast, and especially at ports (such
as Ashqelon or Gaza), will be planned and carried out in
a manner that will not adversely affect the ecology,
environment or the functions of the coastline and
beaches of the other side.
6. Tourism companies and agencies licensed by either
side shall enjoy equal access to tourism - related
facilities and amenities in border points of exit and
entry according to the regulations of the authority
a. Each side will license, according to its own rules
and regulations, travel agents, tour companies, tour
guides and other tourism businesses (hereinafter -
tourism entities) within its jurisdiction.
b. Tourism entities authorized by either side, will be
allowed to conduct tours that include the area under the
jurisdiction of the other side, provided that their
authorization as well as their operation will be in
accordance with rules, professional requirements and
standards agreed upon by both sides in the sub-committee
mentioned in para 9.
Pending that agreement, existing tourism entities in the
Areas which are currently allowed to conduct tours that
include Israel, will be allowed to continue to do so,
and Israeli authorized tourism entities will continue to
be allowed to conduct tours that include the Areas.
In addition, any tourism entity of one side that the
tourism authorities of the other side will certify as
fulfilling all its rules, professional requirements and
standards, will be allowed to conduct tours that include
that other side.
8. Each side will make its own arrangement for
compensation of tourists for bodily injury and property
damages caused by political violence in the areas under
its respective jurisdiction.
9. The JEC or a tourism sub-committee established by it
shall meet upon the request of either side in order to
discuss the implementation of the provisions of this
Article and resolve problems that may arise. The
sub-committee will also discuss and consider tourist
issues of benefit to both sides, and will promote
educational programs for tourism entities of both sides
in order to further their professional standards and
their ethics. Complaints of one side against the
behaviour of tourism entities of the other side will be
channelled through the committee.
Note: It is agreed that the final wording in the last
sentence in para 4 will be adopted according to the
final wording in the relevant provisions of the
1. The authorities, powers and responsibilities in the
insurance sphere in the Areas, including inter alia the
licensing of insurers, insurance agents and the
supervision of their activities, will be transferred to
the Palestinian Authority.
a. The Palestinian Authority will maintain a compulsory
absolute liability system for road accident victims with
a ceiling on the amount of compensation based upon the
1. Absolute liability for death or bodily injury to road
accident victims, it being immaterial whether or not
there was fault on the part of the driver and whether or
not there was fault or contributory fault on the part of
others, each driver being responsible for persons
travelling in his vehicle and for pedestrians hit by his
2. Compulsory insurance for all motor vehicles, covering
death or bodily injury to all road accident victims,
3. No cause of action in tort for death or bodily injury
resulting from road accidents.
4. The maintenance of a statutory fund (hereinafter -
the Fund) for compensation of road accident victims who
are unable to claim compensation from an insurer for the
i. the driver liable for compensation is unknown;
ii. the driver is not insured or his insurance does not
cover the liability involved; or
iii. the insurer is unable to meet his liabilities.
5. Terms in this Article will have the same meaning as
in the legislation prevailing at the date of signing of
the Agreement concerning compulsory motor vehicle
insurance and compensation of road accident victims.
6. Any change by either side in the rules and
regulations regarding the implementation of the above
mentioned principles will require prior notice to the
other side. A change which might substantially affect
the other side will require prior notice of at least
a. Upon the signing of the Agreement the Palestinian
Authority will establish a Fund for the Areas
(hereinafter - the Palestinian Fund) for the purposes
detailed in para 2(a)(4) above and for the purposes
detailed below. The Palestinian Fund will assume the
responsibilities of the statutory Road Accident Victims
Compensation Fund in the West Bank and the Gaza Strip
(hereinafter - the Existing Fund) regarding the Areas,
according to the prevailing law at that time.
Accordingly, the Existing Fund will cease to be
responsible for any liability regarding accidents
occurring in the Areas from the date of signing of the
b. The Existing Fund will transfer to the Palestinian
Fund, after the assumption of the above mentioned
responsibilities by it, the premiums paid to the
Existing Fund by the insurers for vehicles registered in
the Areas, pro-rata to the unexpired period of each
a. Compulsory motor vehicle insurance policies issued by
insurers licensed by either side will be valid in the
territories of both sides. Accordingly, a vehicle
registered in one side covered by such a policy will not
be required to have an additional insurance coverage for
travel in the areas under the other side's jurisdiction.
These insurance policies will cover all the liabilities
according to the legislation of the place of the
b. In order to cover part of the liabilities which may
incur due to road accidents in Israel by uninsured
vehicles registered in the Palestinian Authority, the
Palestinian Fund will transfer to the Israeli Fund, on a
monthly basis, for each insured vehicle, an amount equal
to 30% of the amount paid to the Israeli Fund by an
insurer registered in Israel, for the sat-ne type of
vehicle, for the same period of insurance (which will
not be less than 90 days).
5. In cases where a victim of a road accident wishes to
claim compensation from an insurer registered by the
other side or from the Fund of the other side or in
cases where a driver or an owner of a car is sued by a
victim, by an insurer or by the Fund of the other side,
he may nominate the Fund of his side as his proxy for
this purpose. The Fund so nominated may address any
relevant party from the other side directly or through
the other sides' Fund.
6. In the case of a road accident in which neither the
registration number of the vehicle nor the identity of
the driver are known, the Fund of the side which has
jurisdiction over the place of the accident will
compensate the victim, according to its own legislation.
7. The Fund of each side will be responsible towards the
victims of the other side for any liability of the
insurers of its side regarding the compulsory insurance
and will guarantee their liabilities.
8. Each side will guarantee its Fund's liabilities
according to this Article.
9. The two sides will negotiate within three months from
the date of the signing of the Agreement a cut-off
agreement between the Existing Fund and the Palestinian
Fund concerning accidents which occurred in the Areas
prior to the date of the signing of the Agreement,
whether claims have been reported or not. The cut-off
agreement will not include compensation for Israeli
victims involved in accidents which occurred in the
Areas prior to the date of the signing of the Agreement.
a. The two sides will establish immediately upon the
signing of the Agreement, a sub-committee of experts
(hereinafter - the Sub-Committee) which will deal with
issues regarding the implementation of this Article,
1. Procedures concerning the handling of claims of
victims of the one side from insurers or from the Fund
of the other side;
2. Procedures concerning the transfer of the amounts
between the Funds of both sides as mentioned in para
3. The details of the cut-off agreement between the
Existing Fund and the Palestinian Fund, as set out in
para 9 above;
4. Any other relevant issue raised by either side.
b. The Sub-Committee will act as a continuous committee
for issues regarding this Article.
c. The two sides will exchange, through the
Sub-Committee, the relevant information regarding the
implementation of this Article, including police
reports, medical information, relevant statistics,
premiums, etc. The two sides will provide each other
with any other assistance required in this regard.
11. Each side may require the re-examination of the
arrangements set out in this Article a year after the
date of the signing of the Agreement.
12. Insurers from both sides may apply for a license to
the relevant authorities of the other side, according to
the rules and regulations regarding foreign insurers in
the latter side. The two sides agree not to discriminate
against such applicants.
Done in Paris, this twenty ninth day of
For the Government of Israel
Finance Minister Avraham Shohat
For the PLO
Abu Ala (Ahmed Korei)