Income Tax in Palestine

Palestine operates a progressive personal income tax (PIT) system with four brackets for resident individuals. This guide explains how personal income is taxed, what deductions are available, and how to comply with filing requirements.

Tax Residency

An individual is considered a tax resident of Palestine if they meet any of the following criteria:

  • Spend more than 183 days in Palestine in a calendar year
  • Have their primary place of abode in Palestine
  • Have their center of vital interests (economic and personal) in Palestine

Resident individuals are taxed on their worldwide income. Non-residents are taxed only on Palestine-source income.

Personal Income Tax Rates (2026)

Palestine uses a progressive tax rate structure for employment and business income. A personal allowance of ILS 75,000 applies, meaning the first ILS 75,000 of annual income is tax-free.

Annual Taxable Income (ILS) Tax Rate
0 – 75,000 0%
75,001 – 150,000 5%
150,001 – 250,000 10%
Above 250,000 15%

Deductions and Allowances

Standard Deductions

  • Personal Allowance: ILS 75,000 per year
  • Social Contributions: No formal social security system, no deductions
  • Charitable Donations: To approved organizations, up to a specified limit

Family Allowances

  • Married Couple: Joint filing available
  • Child Allowance: Allowance per dependent child available

Employment Income

Employment income includes salaries, wages, bonuses, commissions, and benefits in kind. Employers are required to withhold PIT from employee salaries and remit it to the tax authorities monthly.

Taxable Benefits in Kind

  • Company car: Based on vehicle value
  • Housing: Assessed value of employer-provided housing
  • Interest-free loans: Imputed interest
  • School fees: Amount paid by employer

Self-Employment and Business Income

Self-employed individuals and sole proprietors are taxed on their net business income at progressive PIT rates. Expenses directly related to the business activity are deductible. Simplified tax regimes exist for small businesses.

Filing Requirements

  • Annual Tax Return: Due by April 30 of the following year
  • PAYE Returns: Monthly, by the 15th of the following month
  • Estimated Tax Payments: For self-employed individuals, quarterly installments

Penalties

  • Late filing: Percentage of tax due, plus monthly interest
  • Late payment: Monthly interest on outstanding amount
  • Understatement: Penalty on understated tax
  • Fraud: Up to 100% of tax evaded, plus criminal prosecution