Local taxesLocal taxes

Direct taxes (no ability to be avoided)Direct taxes (no ability to be avoided)

11 - -income taxesincome taxes

22 - -property taxesproperty taxes

Indirect taxes (can be avoided in some cases)Indirect taxes (can be avoided in some cases)

11 - -customs taxescustoms taxes

22 - -sales taxes (the same as VAT 14.5%)sales taxes (the same as VAT 14.5%)

Income TaxesIncome TaxesIncome:Income: includes both taxable and nontaxable types of includes both taxable and nontaxable types of incomeincome. .

--This definition includes all income that belongs to the This definition includes all income that belongs to the taxpayertaxpayer..

--Gross income is more specific termGross income is more specific term..

--Items of gross income are included in computation of Items of gross income are included in computation of taxable incometaxable income..

- -Taxable income is a net number and is the tax baseTaxable income is a net number and is the tax base..

Tax = Tax base X Tax rateTax = Tax base X Tax rate . .

DeductionsDeductions::

--Deductions are amounts that tax law specifically allows Deductions are amounts that tax law specifically allows as subtractions from gross incomeas subtractions from gross income..

--The rule is that an item may not be deducted unless the The rule is that an item may not be deducted unless the tax law specifically permits it. (article:8)tax law specifically permits it. (article:8)

--Deductions are characterized as Deductions are characterized as expenses, losses, and expenses, losses, and exemptionsexemptions..

--An expense isAn expense is a current period expenditure that is a current period expenditure that is incurred to earn incomeincurred to earn income . .

--Deductions for expenses are limited to those incurred Deductions for expenses are limited to those incurred in a trade or business in an income-producing in a trade or business in an income-producing activityactivity. . (article:8)(article:8) “artificial person “artificial person””

And certain expenses that the law allowed to deducted And certain expenses that the law allowed to deducted it for it for individuals individuals called called exemptions exemptions andand to determine to determine their taxable incomes. (article:10)their taxable incomes. (article:10)

Every taxpayer must hold (work with) Every taxpayer must hold (work with) regular accounting documents to keep regular accounting documents to keep debit and credit tax payments and make debit and credit tax payments and make the adjustment end of the yearthe adjustment end of the year . .

Palestinian income tax system is Palestinian income tax system is based on (self assessment) which based on (self assessment) which requires taxpayers to report and requires taxpayers to report and pay their taxes correctlypay their taxes correctly. . (article:15 & (article:15 & 17)17)

Assessment income TaxAssessment income Tax

Income definedIncome defined

Income “broadly Defined”Income “broadly Defined” ( (includes income from all includes income from all resources both resources both taxable & nontaxable incometaxable & nontaxable income))

Minus:Minus: excluded income excluded income (article:6 & 7)(article:6 & 7)

Equals: gross incomeEquals: gross income

Minus: Minus: deduction and exemptionsdeduction and exemptions

Equals: taxable incomeEquals: taxable income

* * tax rate (from tax law)tax rate (from tax law)

Equals: income taxEquals: income tax

CaseCase

The income of Ali company= 250,000$ ,and The income of Ali company= 250,000$ ,and the total salaries = 40,000$the total salaries = 40,000$

RequiredRequired::11 - -calculate income taxcalculate income tax ? ?

--assume income tax rate = 15%assume income tax rate = 15% . .

AnswerAnswer

taxable incometaxable income = 250,000- 40,000= 210,000= 250,000- 40,000= 210,000Income tax = 210,000*15%= 31,500Income tax = 210,000*15%= 31,500

Look toLook to

articles no:(1,2,3,4,5,10)articles no:(1,2,3,4,5,10)

inin

Palestinian Income tax lawPalestinian Income tax law

casecase

Omar work in private company with monthly Omar work in private company with monthly salary 2000 NIS. Calculate the tax income if salary 2000 NIS. Calculate the tax income if you know that he is married and has 2 sons you know that he is married and has 2 sons under 18 years oldunder 18 years old..

Note: The exchange rate for dollar 4 NISNote: The exchange rate for dollar 4 NIS..

AnswerAnswer::Annual income = 2000*12= 24000Annual income = 2000*12= 24000

24000/424000/4 = = 6000$6000$Exemptions Exemptions (article 10)(article 10)

Resident 3000Resident 3000Wife 500Wife 500

Sons 1000=500*2Sons 1000=500*2Total =4500Total =4500Taxable income =1500* 8% 120$ Taxable income =1500* 8% 120$ annually annually (article 14)(article 14)

Tax value per month = 120$/ 12 =10$Tax value per month = 120$/ 12 =10$10$10$**44 = = 4040 NISNIS

Salary after income tax= 1960 NISSalary after income tax= 1960 NIS

casecase

Hassan work in private company with monthly Hassan work in private company with monthly salary 3000 NISsalary 3000 NIS..

He lives in a rent home 200$ monthlyHe lives in a rent home 200$ monthly..

He is married and have 5 sonsHe is married and have 5 sons..

RequiredRequired::

Calculate the accrued income tax if you know Calculate the accrued income tax if you know that the exchange rate for dollar 4 NISthat the exchange rate for dollar 4 NIS..

AnswerAnswer::

Annual income = 3000*12/4= 9000$Annual income = 3000*12/4= 9000$

ExemptionsExemptions

Resident 3000Resident 3000

Wife 500Wife 500

Sons 2500=500*5Sons 2500=500*5

Rent 2000Rent 2000

Total of exemptions =(8000)Total of exemptions =(8000)

Taxable income =1000* 8% 80$ annuallyTaxable income =1000* 8% 80$ annually

Tax value per month = 80$/ 12 =6.66$Tax value per month = 80$/ 12 =6.66$

6.66$6.66$**44 = = 26.626.6 NISNIS

Salary after income tax= 2973.4 NISSalary after income tax= 2973.4 NIS

casecase

Mr. Marwan work as manager for a company with Mr. Marwan work as manager for a company with monthly salary 9000 NIS and have bonus addition monthly salary 9000 NIS and have bonus addition career 1500 and bonus addition high cost of career 1500 and bonus addition high cost of living 750 and bonus addition for travel 250living 750 and bonus addition for travel 250

Required: calculate the income tax if you know that Required: calculate the income tax if you know that he is married and have 2 sonshe is married and have 2 sons..

One of them study via Islamic universityOne of them study via Islamic university

the exchange rate for dollar 5 NISthe exchange rate for dollar 5 NIS

Note: Marwan work in private company so bonus Note: Marwan work in private company so bonus for travel included with income taxfor travel included with income tax

AnswerAnswer::

Base salary 9000Base salary 9000

Bonus addition career 1500Bonus addition career 1500

bonus addition high cost of living 750bonus addition high cost of living 750

bonus addition for travel 250bonus addition for travel 250

Total salary 11500 *12/5= 27600$Total salary 11500 *12/5= 27600$

ExemptionExemption::

Resident 3000Resident 3000

Wife 500Wife 500

Sons 500= 500*1Sons 500= 500*1

Student (university) 2500Student (university) 2500

Total of exemption = 6500$Total of exemption = 6500$

Taxable income 27600- 6500= 21100$Taxable income 27600- 6500= 21100$1000010000**8%8% = =80080060006000**12%12%==72072051005100**16%16% = =816816

Annual income tax = 800+720+816=2336Annual income tax = 800+720+816=2336Monthly income tax= 2336/12=194.6$Monthly income tax= 2336/12=194.6$

194.6194.6**55==19461946 NISNISSalary after income tax = 11500-1946=9554 Salary after income tax = 11500-1946=9554 NISNIS

casecase

Mr. Jehad work in the Mr. Jehad work in the Investment BankInvestment Bank with with monthly monthly base salarybase salary 309$ and bonus addition 309$ and bonus addition high cost of living amounted 80% of base salary. high cost of living amounted 80% of base salary. and bonus addition for cash risk 25.7$ monthlyand bonus addition for cash risk 25.7$ monthly..

If you know that his contribution of saving box with If you know that his contribution of saving box with 5% of base salary. And social security 5% of base salary. And social security contribution (pension) 32.02$. contribution (pension) 32.02$. Mr. Jehad get 14 Mr. Jehad get 14 salaries yearlysalaries yearly (banking system) (banking system)

Required: calculate the income tax in caseRequired: calculate the income tax in case

11 - -singlesingle..

22( -( -married + 4married + 4 ) )and additional income from part time and additional income from part time work 200$ for 6 months annuallywork 200$ for 6 months annually..

Answer: case 1Answer: case 1

Base salary 309$Base salary 309$

+ +addition high cost of living 247.2$ (309*80%)addition high cost of living 247.2$ (309*80%)

+ +addition for cash risk 25.7$addition for cash risk 25.7$

total monthly salary = 581.9$total monthly salary = 581.9$

Deduct nontaxable incomeDeduct nontaxable income-saving box 15.45$saving box 15.45$

-social security contribution (pension) 32.02$social security contribution (pension) 32.02$

Total of nontaxable income = 47.47Total of nontaxable income = 47.47

Net income = 534.43Net income = 534.43

Annual net income =534.43*14= 7482.02$Annual net income =534.43*14= 7482.02$

Deduct the exemptionDeduct the exemption

Resident 3000Resident 3000

Net taxable income 4482.02*8% = 358.56$Net taxable income 4482.02*8% = 358.56$

Monthly income tax 358.56 / 12 = 29.88$Monthly income tax 358.56 / 12 = 29.88$

Answer: case 2Answer: case 2Base salary 309$Base salary 309$

+ +addition high cost of living 247.2$ (309*80%)addition high cost of living 247.2$ (309*80%) + +addition for cash risk 25.7$addition for cash risk 25.7$

total monthly salary = 581.9$total monthly salary = 581.9$Deduct nontaxable incomeDeduct nontaxable income

-saving box 15.45$saving box 15.45$-social security contribution (pension) 32.02$social security contribution (pension) 32.02$

Total of nontaxable income = 47.47Total of nontaxable income = 47.47Net income = 534.43Net income = 534.43Annual net income =534.43*14= 7482.02$ + Annual net income =534.43*14= 7482.02$ + ( 200$*6)=8682.02( 200$*6)=8682.02Deduct the exemptionDeduct the exemptionResident 3000Resident 3000Wife 500Wife 500Sons 2000 (500*4)Sons 2000 (500*4)Net taxable income 3182.02*8% = 254.56$Net taxable income 3182.02*8% = 254.56$

Monthly income tax 254.56 / 12 = 21.21$Monthly income tax 254.56 / 12 = 21.21$