Calculation Methodology

General Income Tax use cases for Year of Income

  • Your Non-taxable Income is set at 75,000 per month.
  • If you earn 75,000 or less per month OR 900,00O or less per year, no Income Tax is deducted from your salary

Considerations for Monthly Calculations

  • If you earn more than 75,000 per month and less than or equal to 225,000 per month, 28% Income Tax is deducted
  • If you earn more than 225,000 per month, 1/3 of the gross salary you earn is your Non-Taxable Income
  • If you earn more than 225,000 per month, your Income Tax deducted is calculated in two (2) parts:

Before the deductions are made; 1/3 of the gross amount needs to be calculated as your Non-Taxable Income, then the following deductions are made:

  • NIS deductions
  • Medical and Life Insurance Premium Deduction. Premium paid is limited to ten percent (10%) of Gross Salary; or $30,000 monthly whichever is less.

After the deductions are made, the following tax calculations are applied:

1)   28% of the first 150,000 of your chargeable income is deducted and
2)   40% of every dollar of chargeable income above $150,000 is also deducted

Considerations for Annual Calculations

  • If you earn more than 900,000 per year and less than or equal to 2,700,000 per year, 28% Income Tax is deducted
  • If you earn more than 2,700,000 per year, 1/3 of the gross salary you earn is your Non-Taxable Income
  • If you earn more than 2,700,000 per year, your Income Tax deducted is calculated in two (2) parts:

Before the deductions are made; 1/3 of the gross amount needs to be calculated as your Non-Taxable Income, then the following deductions are made:

  • NIS deductions
  • Medical and Life Insurance Premium Deduction. Premium paid is limited to ten percent (10%) of Gross Salary; or $360,000 whichever is less.

After the deductions are made, the following tax calculations are applied:

  1. 28% of the first 1,800,000 of your chargeable income is deducted and
  2. 40% of every dollar of chargeable income above 1,800,000 is also deducted

Template to guide payroll users and vendors

To further assist payroll users and vendors while ensuring conformity to the above guidelines, the GRA has created some examples (see the link to Microsoft Excel file below) to serve as a guide. The Excel Workbook comprises of three (3) worksheets which provide calculated values over a one-year period for three different “pays” i.e. Monthly, Fortnightly and Weekly.

The Year to Date calculations e.g. NIS, Non-taxable allowance, Chargeable Income and the taxes deducted as per the 28% and 40% tax bands are generated automatically. You can enter the Gross Income paid to an employee as per the different pays and period stated above. All other values will be automatically calculated and displayed based on the Gross Income entered.

YTD Excel Template – 2022