Pension Schemes in the UAE and GCC

Governments in the UAE and other GCC countries provide pension schemes for working citizens. In the UAE, the Pensions and Social Security Authority (GPSSA) manages pensions and social security for eligible employees.

Who Needs to Register with GPSSA?

• UAE Nationals (holding a family book).

• GCC Nationals (from Saudi Arabia, Kuwait, Bahrain, Qatar, and Oman) working in the UAE.

Steps to Configure Payroll Taxes and Contributions

a) Enable Payroll Taxes and Contributions Accounting

• Go to Administration > Tax Settings > Enable "Payroll Taxes and Contributions Accounting" to account for taxes and contributions based on employee earnings.

• New GL accounts are available in the chart of accounts and it is categorized under the Tax Payables and Tax Receivables sections by default.

b) Add Accruals and Deduction Types

Go to HR and Payroll → Create a new Accrual and Deduction Type.

Tax Type:

Select a predefined tax type (e.g., Personal Income Tax) from the available options.

Taxes and Contribution Payer:

Taxes may be paid by either the employer or the employee. The employer is responsible for directly remitting the tax to the tax authority. If the employee is responsible, the tax amount is deducted from their salary.

For instance, if the contract salary is 10,000, the income tax is deducted, and the employee receives the net salary after tax.

Tax and Contribution Calculation Methods:

Taxes and contributions can be calculated using various methods:

• Percentage of Planned Earnings – Applied to the salary amount specified in the contract.

• Percentage of Actual Earnings – Based on the actual income earned.

• Fixed Amount – A predetermined tax amount specified in the contract. This value is transmitted to the portal and remains unchanged throughout the year, carrying over annually. If there are contract modifications, an authorized person must manually update the amount in the portal and further use it in the calculations in the software.

Calculation Rule in the First Month of Employment

• Do Not Calculate – No tax calculation will be applied in the first month.

• Calculate – The tax will be calculated for the full month.

• Calculate Proportionally to Worked Time – If the employee joins mid-month, the system will calculate tax based on the remaining working days.

Calculation Rule in the Month of Termination

• Do Not Calculate – No tax calculation will be applied for the termination month.

• Calculate – The tax will be calculated for the entire month.

• Calculate Proportionally to Worked Time – If the employee leaves mid-month, the system will calculate tax based on the actual working days.