Republic of Palau Tax Code

The Republic of Palau (PW) requires the calculation of an Income withholding tax, and a Social Security tax. The Social Security tax is to be paid by the employee and employer as a percentage of employee wages and cannot exceed the Quarterly wage base limit (calculated on a calendar quarter basis).

To accommodate the Income tax, set up a State Tax code using either the PW (Annualized) or P2 (Actual) code for the tax.

The "Annualized" method should only be used if you are sure your employees will be employed with you for the entire year. Otherwise, use the "Actual" method to make sure you do not over withhold Federal Income Tax.

Be sure to specify the Liability Accounts for State Withholding. State Unemployment does not affect the Palau Income Tax withholding.

To view or modify the State Withholding tax amount, select the PW employee on the Review/Modify Calculated Payroll form. On the Taxes tab, the "Code" drop-down list displays "SWT - State Withholding Tax" and the Jurisdiction column displays "PW."

In order to enter manual checks and/or set up or adjust entries, the employee must be established as a PW resident in their Employee Record - Taxes tab.

For more information, see State Taxes.