6. Articles V ( Direct Taxation ) and VI (Indirect Taxes on Local Production) of the Protocol on Economic Relations shall be replaced by the Articles attached as Appendices 1 and 2 to this Supplement.
   
   

APPENDIX 1

( Replacing Article V of the Protocol on Economic Relations )

ARTICLE V

Direct Taxation

1. Israel and the Palestinian side 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 the area under its tax responsibility.
   
   
3. Each tax administration may impose additional taxes on its residents ( individuals and corporations ) who conduct economic activities in areas under the tax responsibility of the other side.
   
   
4. Israel will transfer to the Palestinian side a sum equal to:
   
   
1. 75% of the income taxes collected from Palestinians from the West Bank and the Gaza Strip employed in Israel.
   
   
2. The full amount of the income taxes collected from Palestinians from the West Bank and the Gaza Strip employed in the Settlements.
   
   

5. When a Palestinian remits payment to an Israeli the following rules regarding deduction at source shall apply:
   
   
1. No tax shall be deducted at source on income from the sales of goods from the areas under Israeli tax responsibility, which are not supplied by means of a permanent establishment in the areas under Palestinian tax responsibility. Where income from the sales of goods is attributable to a permanent establishment in the areas under Palestinian tax responsibility, tax may be deducted at source, but only on such income as is attributable to such permanent establishment.
   
   
2. No tax shall be deducted at source on income derived by an Israeli from transportation activities, if the point of departure or the point of final destination is in the areas under Israeli tax responsibility.
   
   

6. When an Israeli remits payment to a Palestinian which is income accruing in or deriving in the West Bank and the Gaza Strip, the following rules regarding deduction at source shall apply:
   
   
1. No tax shall be deducted at source on income from the sales of goods from the areas under Palestinian tax responsibility which are not supplied by means of a permanent establishment in the areas under Israeli tax responsibility. Where income from the sales of goods is attributable to a permanent establishment in

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