1. Local taxes Direct taxes (no ability to be avoided) 1- income taxes 2- property taxes Indirect taxes (can be avoided in some cases) 1- customs taxes 2- sales taxes (the same as VAT 14.5%)

2. Income Taxes Income: includes both taxable and nontaxable types of income. -This definition includes all income that belongs to the taxpayer. -Gross income is more specific term. -Items of gross income are included in computation of taxable income. - Taxable income is a net number and is the tax base. Tax = Tax base X Tax rate.

3. Deductions: -Deductions are amounts that tax law specifically allows as subtractions from gross income. -The rule is that an item may not be deducted unless the tax law specifically permits it. (article:8) -Deductions are characterized as expenses, losses, and exemptions. -An expense is a current period expenditure that is incurred to earn income. -Deductions for expenses are limited to those incurred in a trade or business in an income-producing activity. (article:8) “artificial person” And certain expenses that the law allowed to deducted it for individuals called exemptions and to determine their taxable incomes. (article:10)

4. Every taxpayer must hold (work with) regular accounting documents to keep debit and credit tax payments and make the adjustment end of the year. Palestinian income tax system is based on (self assessment) which requires taxpayers to report and pay their taxes correctly. (article:15 & 17) Assessment income Tax

5. Income defined Income “broadly Defined” ( includes income from all resources both taxable & nontaxable income ) Income “broadly Defined” ( includes income from all resources both taxable & nontaxable income ) Minus: excluded income (article:6 & 7) Minus: excluded income (article:6 & 7) Equals: gross income Minus: deduction and exemptions Minus: deduction and exemptions Equals: taxable income * tax rate (from tax law) * tax rate (from tax law) Equals: income tax

6. Case The income of Ali company= 250,000$,and the total salaries = 40,000$ Required: 1- calculate income tax ? -assume income tax rate = 15%.

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

8. Look to articles no:(1,2,3,4,5,10) in Palestinian Income tax law

9. case Omar work in private company with monthly salary 2000 NIS. Calculate the tax income if you know that he is married and has 2 sons under 18 years old. Note: The exchange rate for dollar 4 NIS.

10. Answer: Annual income = 2000*12= 24000 24000/4 = 6000$ Exemptions (article 10) Resident 3000 Wife 500 Sons 1000=500*2 Total =4500 Taxable income =1500* 8% 120$ annually (article 14) Tax value per month = 120$/ 12 =10$ 10$*4 = 40 NIS Salary after income tax= 1960 NIS

11. case Hassan work in private company with monthly salary 3000 NIS. He lives in a rent home 200$ monthly. He is married and have 5 sons. Required: Calculate the accrued income tax if you know that the exchange rate for dollar 4 NIS.

12. Answer: Annual income = 3000*12/4= 9000$ Exemptions Resident 3000 Wife 500 Sons 2500=500*5 Rent 2000 Total of exemptions =(8000) Taxable income =1000* 8% 80$ annually Tax value per month = 80$/ 12 =6.66$ 6.66$*4 = 26.6 NIS Salary after income tax= 2973.4 NIS

13. case Mr. Marwan work as manager for a company with monthly salary 9000 NIS and have bonus addition career 1500 and bonus addition high cost of living 750 and bonus addition for travel 250 Required: calculate the income tax if you know that he is married and have 2 sons. One of them study via Islamic university the exchange rate for dollar 5 NIS the exchange rate for dollar 5 NIS Note: Marwan work in private company so bonus for travel included with income tax

14. Answer: Base salary 9000 Bonus addition career 1500 bonus addition high cost of living 750 bonus addition for travel 250 Total salary 11500 *12/5= 27600$ Exemption: Resident 3000 Wife 500 Sons 500= 500*1 Student (university) 2500 Total of exemption = 6500$

15. Taxable income 27600- 6500= 21100$ 10000*8%= 800 6000*12%=720 5100*16%= 816 Annual income tax = 800+720+816=2336 Monthly income tax= 2336/12=194.6$ 194.6*5=1946 NIS Salary after income tax = 11500-1946=9554 NIS

16. case Mr. Jehad work in the Investment Bank with monthly base salary 309$ and bonus addition high cost of living amounted 80% of base salary. and bonus addition for cash risk 25.7$ monthly. If you know that his contribution of saving box with 5% of base salary. And social security contribution (pension) 32.02$. Mr. Jehad get 14 salaries yearly (banking system) If you know that his contribution of saving box with 5% of base salary. And social security contribution (pension) 32.02$. Mr. Jehad get 14 salaries yearly (banking system) Required: calculate the income tax in case 1- single. 2- (married + 4) and additional income from part time work 200$ for 6 months annually.

17. Answer: case 1 Base salary 309$ + addition high cost of living 247.2$ (309*80%) + addition for cash risk 25.7$ total monthly salary = 581.9$ total monthly salary = 581.9$ Deduct nontaxable income - saving box 15.45$ - social security contribution (pension) 32.02$ Total of nontaxable income = 47.47 Net income = 534.43 Annual net income =534.43*14= 7482.02$ Deduct the exemption Resident 3000 Net taxable income 4482.02*8% = 358.56$ Monthly income tax 358.56 / 12 = 29.88$

18. Answer: case 2 Base salary 309$ + addition high cost of living 247.2$ (309*80%) + addition for cash risk 25.7$ total monthly salary = 581.9$ total monthly salary = 581.9$ Deduct nontaxable income - saving box 15.45$ - social security contribution (pension) 32.02$ Total of nontaxable income = 47.47 Net income = 534.43 Annual net income =534.43*14= 7482.02$ + ( 200$*6)=8682.02 Deduct the exemption Resident 3000 Wife 500 Sons 2000 (500*4) Net taxable income 3182.02*8% = 254.56$ Monthly income tax 254.56 / 12 = 21.21$