annual amount, as mentioned in para 17.

3. 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.
   
   
4. Banks in the Areas will convert NIS into other circulating currencies and vice - versa.
   
   
5. 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.
   
   

Article V

DIRECT TAXATION

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 its area.
   
   
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:
   
   
1. 75% of the income taxes collected from Palestinians from the Gaza Strip and the Jericho Area employed in Israel.
   
   
2. 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.
   
   

Article VI

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 $.

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