Handling Additional Statutory Exemptions in Palestine

Ask Developer
1

Dear Support Team,

In Palestine, there are additional statutory exemptions that need to be considered in the payroll/tax calculation process. For example:

  • University Student Exemption: An exemption of up to 6,000 NIS per year, with a maximum of two dependent students.
  • Transportation Allowance: An exemption of 10% of the salary as transportation allowance.

Could you please advise how these exemptions can be configured or processed in the system?

Thank you for your guidance and support.

Best regards,

2

These kind of exemptions are usually handled when you file your annual tax return, isn’t it?

3

**No, the tax deduction on salaries is applied on a monthly basis, where the employee is responsible for the income tax due on them.
What exists in the system is a legal table through which the income tax is calculated to be deducted from the employee’s salary and paid to the Tax Authority.
To reach this amount, the employee is entitled to certain exemptions.
Example:
An employee with a salary of 5,000 NIS – to calculate the taxable deduction:
• Residency exemption: 3,000 NIS
→ Taxable income becomes 2,000 NIS
• If the employee has a university student, they receive an exemption of 600 NIS

Therefore, I believe exemptions should be added before the legal table.**

4

**No, the tax deduction on salaries is applied on a monthly basis, where the employee is responsible for the income tax due on them.
What exists in the system is a legal table through which the income tax is calculated to be deducted from the employee’s salary and paid to the Tax Authority.
To reach this amount, the employee is entitled to certain exemptions.
Example:
An employee with a salary of 5,000 NIS – to calculate the taxable deduction:
• Residency exemption: 3,000 NIS
→ Taxable income becomes 2,000 NIS
• If the employee has a university student, they receive an exemption of 600 NIS

Therefore, I believe exemptions should be added before the legal table.**

5

OK, if I understand you correctly:

  1. The monthly PAYE tax is calculated after considering an employee’s personal tax exemptions
  2. There are different tax exemptions for different conditions
  3. If I add a new module “Tax Exemption” where exemption items are set up, then added to an employee’s Salary profile, these could be deducted from their Gross Salary before calculating PAYE tax

Is it correct?

6

yes its correct

7

Noted with thanks.

I will look into this later: HR.my Upcoming Features Todo List