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Palestinians Adopt Revised Income Tax Law
A revised Income Tax Law was passed in October 2004, following its third reading at the PLC and has been sent back to the Council of Ministries, which is expected to incorporate it in 2005 Budget Law and make it effective as of 1 January 2005. The law compares favorably with international best practices and includes taxation of Palestinian income earned abroad.
Three individual income tax rates have been introduced for individuals of 8, 12 and 16 percent with limited exemptions. However, there is only one 16 percent rate for corporations without exemptions (except for a lower rate for life insurance).
This is the first unified income tax law for both the West Bank and Gaza, which are currently operating under two different tax codes of Jordanian and Egyptian origin, respectively. Moreover, the Ministry of Finance is working towards unifying all taxation under one administration, allowing for taxes and greater follow up of delinquent files. This should help in raising income tax collection, which so far has been lagging behind regional performance. Implementing regulations for the new income tax law are being drafted.
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