TAX RATES > Palestine Tax Rates - West Bank Tax Rates

Palestine Tax Rates

Palestine / West Bank Personal Income Tax

Palestine individual income tax is charged at progressive rates from 5% to 15%.

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

Residence - Residence may be established as follows:
(1) a Palestinian individual who has resided and maintained principal business activities in Palestine for 120 days during the year; or
2) a non-Palestinian individual who has resided and had a principal business activity in Palestine for 183 days during the year.

Tax Filing status - Each individual must file a tax return; joint filing of tax is not permitted.

Taxable income - Income comprises income from all sources, unless exempt by law, less allowable expenses incurred in the production of income and the standard deduction (see under "Deductions and allowances").

Taxation of Capital gains - Capital gains derived from the sale of property are tax exempt provided they are not derived from the principal business activities of the individual and do not recur more than once during the tax year. Capital gains from the sale of investments in securities are taxable.

Tax Deductions and allowances - Individual income is reduced by the standard deduction of USD 7,200 per year. There is a one-time deduction of USD 5,000 for the purchase of a dwelling home or USD 2,000 in interest on a home mortgage.

Other taxes on individuals:

Capital duty - No
Stamp duty - No
Capital acquisitions tax - No

Real property tax - The Ministry of Finance levies tax on property. Property tax may be deducted in computing income tax. The tax rate is 17% of the assessed value of rental income. Sixty percent of the property tax is set off against tax liability and 40% deducted in computing taxable income.

Inheritance/estate tax - No
Net wealth/net worth tax - No
Social security - No
Palestine Tax year - Palestien tax year is the calendar year

Filing and payment of Tax - Tax on employment income is withheld by the employer and remitted to the tax authorities. Self-employed individuals and employed individuals with income from other sources must file a selfassessment return within 4 months of the end of the tax year.

Penalties - 3% of tax liability per month up to a maximum of 20%.


Palestine / West Bank Corporate Tax

The corporate tax rate in Palestine / West Bank is 15% for resident and nonresident entities. Life insurance companies are taxed at a flat rate of 10% of life insurance premiums.

Residence - A corporation is resident if it is incorporated in Palestine or managed and controlled in Palestine.
Basis - Residents and legal entities, including branches of foreign entities, are taxed on their local taxable income.

Taxable income - Corporation tax is imposed on a company's net profits, which consist of business/trading income, passive income and gains from trading in securities and property (see under "Capital gains").

Taxation of dividends - Dividends received from resident companies are exempt from tax.

Taxation of Capital gains - Capital gains derived from the sale of property are tax exempt provided they are not derived from normal business activities of the entity and are not recurring more than once during the tax year. Capital gains from the sale of investments in securities are exempt from tax for financial institutions.

Losses - Losses may be carried forward for 5 years. Carried forward losses do not include capital losses from the sale of property and securities and unrealised losses from revaluations. The carryback of losses is not permitted.

Surtax - No
Alternative minimum tax - No
Foreign tax credit - No
Participation exemption - No
Holding company regime - No

Tax Incentives - Certain entities are granted tax incentives if approved by the agency for the encouragement of investment. Incentives are in the form of tax rate reductions for specified terms.

Withholding tax:

Dividends - Dividends are not subject to withholding tax.
Interest - Interest paid to a nonresident is not subject to withholding tax.
Royalties - The law is silent with regard to royalties. Therefore, it is assumed that royalty income is taxable.
Other - Payments for services provided by foreign entities is subject to a 10% withholding tax.
Branch remittance tax - No

Other taxes on corporations:

Capital duty - No
Payroll tax -There is no payroll tax on corporations. Salaries are taxed at the level of the individual.
Real property tax - The Ministry of Finance levies tax on property at a rate of 17% of the assessed value of rental income. Sixty percent of the property tax is set off against tax liability and 40% deducted in computing taxable income.
Social security - No
Stamp duty - No
Transfer tax - No
Other - No

Anti-avoidance rules:

Transfer pricing - No
Thin capitalisation - No
Controlled foreign companies - No
Disclosure requirements - No
Palestine Tax year - Palestine tax year is generally the calendar year; approval is granted to use a fiscal year.
Consolidated returns - Consolidated returns are not permitted. Each company must file a separate tax return.

Tax Filing requirements - A self-assessment regime applies. Advance payments of tax must be made based on the tax liability of the most recent year finalised with the tax authorities. For the first filing year, tax must be paid when the self-assessment return is filed. The tax return must be filed within 4 months of the tax year end.

Penalties - Penalties equal to 3% of the tax liability per month may apply up to a maximum of 20%.


Palestine / West Bank VAT (Value Added Tax)

The standard VAT rate in Palestine is 14.5%. Certain transactions are zero-rated or exempt.

For financial institutions, VAT is levied at the rate of 14.5% on gross salaries and on taxable income. VAT paid on salaries is not allowed to be deducted in the computation of VAT on taxable income. VAT paid on salaries and on taxable income is allowed to be deducted for income tax purposes.

Taxable transactions - VAT is levied on the sale of goods and the provision of services, and on imports.

VAT Registration - All entities and individuals must register for VAT purposes; there is no minimum threshold.

Filing and payment - A VAT return generally must be filed monthly or other basis as required.

Palestine / West Bank
Income Tax Rate

Palestine / West Bank
Corporate Tax Rate

Palestine / West Bank
Sales Tax / VAT Rate





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Last Update:  Nov 2010

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