Company Registration in Palestine

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What is Incorporation of Company in Palestine?

The state of Palestine consists of West Bank, East Jerusalem, and the Gaza strip. The economic activity of this three sub-region of Palestine provides overall working status of economy either growth, stagnant and declining. The combination of this sub-region is one Palestine. As it is developing, there is a lot opportunity for corporate and any individual for significant growth as it is very clear that many stone of economy is upturned yet. Agriculture, handicrafts, Stonecutting, transportation, communication and tourism are explore and many more to add on. It does not fully explore and need another improved version of it in Palestine to have more economic growth of country. Foreign investors are welcomed as always with funding an idea to accelerate the steady growth of country.

Business Form & Structure

The business structure needs to be registered and should operate or run the business as per governing laws. Foreign investor can have their branch in Palestine which can be set up there but it does not have separate legal entity and an extension of the overseas parent company. Branch in another terms Permanent Establishment of Foreign Company, have profits are liable to Palestine corporate tax. Such branch required to file parent company accounts, prepared under Palestinian Company law, at Companies Controller. Company can be formed with variation based on its legal formation and structure.

Various form of Company under Companies Act in Palestine is described in brief as below:-

  1. Regular Public Company
  2. In this type of company, founders vary from 2 to 20. There is no specific capital requirement. All partners within a company are jointly liable for covering the debts of company and for all other contracts and obligations.

  3. Regular Limited Liability Company
  4. It is the extension of Regular Public Company which has variation of same number of founders. It consists of two kinds of partners either Limited or Unlimited which means in terms of debts and liability on it. Limited are those partners whose responsibility is fixed up to capital contribution and are not allowed to participate in affairs of company whereas the unlimited partner is vice versa. Partner with limited liability may not participate in the management of the company.

  5. Shareholding company (Public Shareholding) Limited Liability Company
  6. Under this kind of Company the minimum numbers of founders should be 7. The capital of company should not be less than JD 30,000 which shall consists of tradable shares that are offered to the Public. The responsibility of the shareholders is limited to the contribution of each person in the company's capital. A board of directors of 5 to 11 members elected for 4 years shall manage the company.

  7. Private Limited Liability Corporation
  8. The number of founders between 2-50 people. The company's capital must not be less than JD 2,000 (two thousand only) which shall be divided into shares that are not offered to the public. The responsibility of shareholder is limited to the contribution of each in the company's capital.

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

Current Corporation tax rate for corporate is 15% to taxable profit of 125,000 and 20% for more than 125,000.

Among this form of business structure, the most popular/standardized format of company is Private Limited Liability Company. So we can have brief discussion on incorporation of this company on step by step basis.

First: Reserve unique company name and obtain approval from Companies Comptroller. If the name is available for registration, payment of registration fees needs to be paid to the account of Ministry of National Economy or the Ministry of Finance at the Bank of Palestine.

Second: Appoint/hire the lawyer to sign the company documents. Draft the Article of Association (AOA) and company bylaws. These documents must then be stamped by the lawyer's bar association before being filed with the Companies’ Comptroller.

Third: Register at the Companies Comptroller
Person registering the company in Palestine require to submit the documents to Registrar like Article of Association (AOA, 3 copies), Company bylaws (3 copies), Shareholder identification card, verified company name, registration application (3 copies) and power of attorney. There are two types of fees, one that varies with the number of shareholders and another that is a percentage of the stated capital.

Fourth: Pay registration fees and open a bank account. Applicant required to pay a fee on application, unless paid to department the process of verification and registration does not start. Moreover company needs to open a corporate bank account for authenticity of share capital realization and to get registration with tax authorities.

Fifth: register for Income tax and VAT.
The tax offices are located at Ministry of Finance. The company receives the same unique registration number for both VAT and Income tax. It does not require founders or shareholders rather even an accountant also can get the registered of it from department.

Sixth: obtain business license from the municipality
Company on its registered office, the concern municipality issue notice to corporate for its requirement of registration on license from municipality before commencement of business/trade.

Seventh: obtain clearance of the internal policy manual (HR Issues)
The entire Human Resources related policy and documents need to send to Ministry of Labor as per its applicable labor law in Palestine, should get clearance from Ministry. This policy provide information on annual and sick leave policies, benefits and other HR policies must be clearly provided for approval.

Eighth: Obtain approval from the Ministry of Health and Fire Department
Ministry of Health and Fire Department, both are different and required to send application on both departments and has to get the approval for carrying out of business/trade in Palestine as per the applicable and governing rules and regulation in Country.

Ninth: Register with Chamber of Commerce

Last but not the least, incorporated company has to register on Chamber of Commerce as per Article 9 of the Chamber of Commerce Law of 2011. Company need to supplied AOA, Company bylaws and Company registration certificate to department and fees is determined based on company’s capital and on the nature’s of business.

Conclusion

Though it seems a lot of approval and permission to be taken from the government agency for simple set of business registration in Palestine, does not impact the time and cost of investors as the rate of growth and resources to be explored are high as it is very known the country is developing and good return is there for all aspects of economy. And even government of Palestine is working on improvement of time frame for incorporation of company in country.

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