Palestine offers a legal framework that permits foreign participation across a broad range of economic activities. For an investor considering establishing a business, acquiring an existing company, or entering into a joint venture, the main legal issues usually concern ownership, corporate structure, licensing, available protections, incentives, and the enforceability of contractual rights.
This overview highlights the principal points to consider before entering the Palestinian market.
Foreign Ownership and Corporate Structure
Palestinian investment legislation generally permits non-Palestinian investors to participate in projects across sectors of the economy, subject to the laws governing the particular activity. The Investment Promotion Law allows a foreign investor to hold the proportion of project capital they choose, while regulated sectors may remain subject to additional requirements.[1]
The Companies Law No. 42 of 2021 provides several structures through which a business may operate, including limited liability companies, private shareholding companies, public shareholding companies, and branches of foreign companies.[2]
The appropriate structure will depend on the size and nature of the project, the number of investors, management arrangements, financing, liability exposure, and the intended exit strategy. For joint ventures in particular, the shareholders’ agreement is often as important as the incorporation documents because it governs matters such as decision-making, funding obligations, transfer rights, and deadlock procedures.
Registration and Licensing
Company registration is usually the first formal step, but some activities require additional approval from the relevant regulatory authority.
This is particularly relevant in sectors such as banking, insurance, telecommunications, energy, healthcare, pharmaceuticals, and other regulated industries. The licensing position should therefore be reviewed before the structure is finalized and significant capital is committed.
Investors should also consider employment, tax, leasing, intellectual property, and any approvals connected with the specific project.
Legal Protections for Investors
The Investment Promotion Law provides several protections that are relevant to both local and foreign investors.
Among these are protections concerning nationalization and expropriation. The law also provides a framework for compensation where property is lawfully expropriated for a public purpose.[1]
Another important provision concerns the transfer of financial resources outside Palestine. Article 10 of the Investment Promotion Law covers capital, profits, dividends, capital gains, interest, debt payments, management fees, and certain other payments, subject to applicable tax, insolvency, securities, judicial, and regulatory requirements.[1]
For foreign investors, these provisions make it important to structure distributions, financing, and payment arrangements properly from the outset.
Investment Incentives
Palestinian law provides tax and other incentives for qualifying projects, although eligibility depends on the nature of the project and satisfaction of the applicable legal requirements.
The incentive framework may apply to certain industrial, tourism, agricultural, export-oriented, employment-generating, and development projects. Preferential income-tax rates may also apply for qualifying investments during specified periods.[1][3]
Some activities are excluded from the ordinary tax-incentive regime, including certain commercial, financial, real-estate, telecommunications, and other activities.[4]
Accordingly, incentives should be reviewed on a project-by-project basis. They should not be assumed when preparing the financial model for a proposed transaction.
Acquisitions and Competition Law
Foreign investors may also enter the Palestinian market by acquiring shares in an existing business or establishing a joint venture.
These transactions now require consideration of the Competition Law No. 11 of 2025. The law regulates economic concentrations, including mergers, acquisitions, and certain arrangements resulting in control or joint management.[5]
Where the law applies, competition approval may need to be addressed before completion. This can affect the transaction timetable, conditions precedent, closing arrangements, and contractual obligations between the parties.
Contracts and Dispute Resolution
The legal documentation surrounding the investment should reflect the commercial arrangement and the risks of the transaction.
Depending on the project, this may include investment agreements, shareholders’ agreements, share-purchase agreements, financing documents, leases, employment contracts, supply arrangements, and intellectual-property licences.
For cross-border transactions, particular attention should be given to governing law, dispute resolution, authority to sign, payment terms, representations and warranties, termination rights, and enforcement.
Palestine has an Arbitration Law and is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.[6] Foreign judgments and arbitral awards may nevertheless require recognition and enforcement procedures before Palestinian courts, so the location of assets and the likely forum for enforcement should be considered when drafting the contract.
Due Diligence Before Investing
Before acquiring or funding an existing Palestinian business, legal due diligence should usually cover the company’s ownership and registration, corporate authority, licences, material contracts, employment matters, financing, disputes, tax position, real estate, intellectual property, and regulatory compliance.
The scope will vary considerably depending on the transaction. A technology company, manufacturing facility, property development, and regulated financial business will each present a different legal profile.
A well-structured review gives the investor a clearer understanding of the risks before signing and allows important issues to be addressed through the transaction documents.
Final Considerations
Palestinian law provides foreign investors with a workable framework for establishing companies, acquiring businesses, entering joint ventures, transferring returns, and benefiting from investment protections and, in qualifying cases, incentives.
The legal structure should be considered early in the transaction. Corporate form, licensing, contracts, tax treatment, regulatory approvals, and enforcement can all affect the viability of the project and the investor’s ability to operate and exit effectively.
Mohammed Nassar & Associates advises local and international clients on corporate establishment, investment structuring, commercial transactions, contracts, regulatory matters, mergers and acquisitions, due diligence, and Palestinian law.
This article is provided for general informational purposes only and does not constitute legal, tax, or investment advice. The applicable requirements may vary according to the sector, location, structure, and circumstances of each investment.
References
[1] Law No. 1 of 1998 on the Encouragement of Investment in Palestine, as amended.
[2] Decree-Law No. 42 of 2021 on Companies.
[3] Decree-Law No. 20 of 2016 amending the Law on the Encouragement of Investment No. 1 of 1998, together with Council of Ministers Decision No. 4 of 2015 on the Investment Promotion Regulation.
[4] Decree-Law No. 33 of 2020 amending the Law on the Encouragement of Investment No. 1 of 1998.
[5] Decree-Law No. 11 of 2025 on Competition.
[6] Arbitration Law No. 3 of 2000; Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 1958.