Individual Income Tax - Palestine

 

Palestinian residents and nonresidents are taxed only on income sourced in Palestine.

Resident is one of the following:-

  1. Palestinian individual who had resided and had business activities in Palestine for 120 days during the year.
  2. Non-Palestinian who had resided in and had a principal business activity in Palestine for 183 days during the year.

Tax Filing:-

Self-employed individuals and employed individuals with multiple income sources must file a self- assessment return within four months of the end of the tax year.

Tax on employees’’ salaries is paid by the employer to the tax authorities, no need to file.

Annual income In NIS (1) Tax Bracket
From 1 to 75,000 5%
From 75,001 to 150,000 10%
From 150,001 onwards 15%

(1) Amounts in tax brackets above are after deducting the annual individual exemption of NIS 36,000.

 

 

  • Taxes on share of profit or cash dividends equal to 10% deducted from the source of income but this law subject is inactive until 31/12/2015.
  • Capital gains – Capital gains are taxed at regular rates; however, 25% of the capital gains derived from the sale of investments in equity securities and bonds are exempt.

 

 Exemptions and Deductions

  • Annual exemption for resident equal to 36,000 or 3,000 monthly.
  • Deduction for purchase or build residence up to NIS 30,000 for one time or, exemption equal to the amount paid for interest on residence loan limited to NIS 4,000 annually up to ten years.
  • Deduction for university education of taxpayer, spouse and children. For an amount of NIS 6,000 annually up to two student per year.
  • The lesser of Actual amount paid for transportation or up to 10% of gross salaries is exempted from tax.
  • Employee contribution in funds such as pension, provident, health insurance, social security or other ministers’ approved fund is not subject to income tax.
  • Donations expenses deducted from taxable income up to 20% of taxable income after deducting the carried over losses and exemptions.

 

Property Tax

Tax on property is levied at a rate of 17% of the assessed value of rental income.

  • 40% of property tax will be deducted from taxable income as an accepted expense.
  • 60% of property tax will be deducted directly as credit from income tax due.

 

Tax Advances

The taxpayer must pay in advance for the current year an amount equal to 100% of income tax imposed on the last tax year closed. One payment, four quarterly payments or based on special arrangement with tax officer.

 

Deduction at source

  1. The organizations must deduct 5% of taxpayer income from interests/ profits/ commissions revenues from deposits or 10% of revenues and prizes.
  2. For any payment over NIS 3,000 the payee must present a deduction at source certificate with zero percent tax deduction the organization alternatively must:-
  • Deduct amount equal to 5% of fees paid for professional services provided by Doctors, Lawyers, Engineers, Accountants, and consultant.
  • Deduct amount equal to 10% of any expenses payment other than professional services.
  • Deduct a percentage as stated in deduction at source certificate.
  • The organization or payee must not split the invoices or the payments to avoid obtaining deduction at source certificate.

Penalties will be imposed on taxpayer for the lateness in paying taxes, advances or submitting tax reports and forms to income tax authority.

According to Income tax law article #30 the following encouragement discounts were stated:-

For tax year 2016:-

  1. Discount equal to 8% of tax advances due if the paid within the first two month of 2016.
  2. Discount equal to 6% of tax advances due if the paid in the third month of 2016.

The Tax advances will be determined based on data on tax system, the advances amount could be change based on taxpayer updated data.

The taxpayer must notice that when tax department accept postdated checks the check could take up to two weeks from the date of check to be withdrawn from banks, so taxpayer must be alert to not issue checks at end of discount period as they may lose the discount.

According to Income tax law article #19 the following encouragement discounts were stated:-

For tax year 2015:-

  1. Discount equal to 4% of tax due if the tax report submitted and the tax due paid within the first month of 2016.
  2. Discount equal to 2% of tax due if the tax report submitted and the tax due paid within the second and third month of 2016.