EY
P.O. Box 11-1639
Starco Building Block B
9th Floor
Omar Daouk Street
Beirut Lebanon
Executive and immigration contacts
Romeo Gedeon
Zeina Frenn
A. Income tax
+961 (1) 760-800
Fax: +961 (1) 760-822/3 Email: romeo.gedeon@lb.ey.com
+961 (1) 760-800 Fax: +961 (1) 760-822/3 Email: zeina.frenn@lb.ey.com
Who is liable. All resident and nonresident individuals are subject to income tax on their income derived in Lebanon. However, certain individuals, such as agricultural workers, nurses and clergymen, are exempt from tax.
Income subject to tax. The following are the three categories of taxable income:
• Profits of sole traders from industrial, commercial and noncommercial professions
• Salaries, wages and pensions
• Income from movable capital (dividends, interest and other types of investment income)
Employment income. Individuals are subject to tax on their sal aries and wages earned in Lebanon.
Gross employment income includes total salaries and allowances, wages, indemnities, bonuses, gratuities and other benefits in cash and in kind.
In determining net employment income, the following deductions may be claimed:
• Representation allowances up to 10% of basic salary
• Transportation allowance provided under the Labor Law
• Personal allowances
• Schooling allowances allowable by the Labor Law
• In general, all allowances granted to cover disbursements incurred in connection with the performance of employment duties if they are supported by invoices or similar documents
The maximum allowed per diem is LBP50,000 for national trips and LBP150,000 for international trips.
Net employment income is taxed at progressive rates ranging from 2% to 25%. For a table of the rates applicable to employ ment, see Rates.
Self-employment income. Sole traders are taxed on the basis of lump-sum profits, which are equal to a specified percentage of gross income.
Sole traders must submit to the Ministry of Finance before 1 Feb r uary of each year a statement showing their total gross income and sales during the preceding year. They are taxed at progressive rates ranging from 4% to 25% (for a table of rates applicable to self-employment income, see Rates).
Gross income is defined as the total gross proceeds from all operations concluded by the taxpayer during the year preceding the year of assessment. It includes the value of commodities, goods, instruments or materials sold or hired, commissions, bro kerage fees, interest, exchange differences and fees.
Deductions
Personal deductions and allowances. Resident individuals are entitled to the following family exemptions, which are deducted from taxable income.
Status Annual exemption (LBP)
Taxpayer 7,500,000
Spouse 2,500,000
First child 500,000
Second child 500,000
Third child 500,000 Fourth child 500,000 Fifth child 500,000
If both parents work, the allowance of LBP500,000 per child for the taxpayer’s first five children is granted equally. Rates. The following tax rates apply to employment income.
Taxable income Tax rate Tax due Cumulative tax due LBP % LBP LBP
First 6,000,000 2 120,000 120,000
Next 9,000,000 4 360,000 480,000
Next 15,000,000 7 1,050,000 1,530,000
Next 30,000,000 11 3,300,000 4,830,000
Next 60,000,000 15 9,000,000 13,830,000 Next 105,000,000 20 21,000,000 34,830,000 Above 225,000,000 25
The following tax rates apply to the lump-sum profits of sole traders derived from industrial, commercial and noncommercial professions.
Lump-sum profits
Tax rate Tax due Cumulative tax due LBP % LBP LBP
First 9,000,000 4 360,000 360,000
Next 15,000,000 7 1,050,000 1,410,000
Next 30,000,000 12 3,600,000 5,010,000
Next 50,000,000 16 8,000,000 13,010,000
Next 121,000,000 21 25,410,000 38,420,000
Above 225,000,000 25
Nonresident persons and entities that do not have a workplace to conduct business in Lebanon and that earn income subject to
income tax in Lebanon or generate revenues by themselves in Lebanon are taxed on a deemed profit of the amounts received from Lebanon. The deemed profit percentage is 50% on services and 15% on products, and the tax rate is 15%. Consequently, the effective tax rate is 7.5% for income derived from services and 2.25% for income derived from the supply of products. The tax must be withheld by the resident party and paid to the tax author ities.
B. Other taxes
Built property tax. Built property tax is generally imposed on rental income, including fees for services provided by the land lord to the tenant. However, it is imposed on estimated rental income determined by the Department of Built Property Tax if any of the following conditions apply:
No rent contract exists.
• The property is occupied by the owner.
The property is occupied by another party for no rent (free of charge).
Tax is calculated on the net income from property, which equals the gross rental income subject to Built Property Tax, as described above, less allowable expenses as stated in the rent contracts. These expenses are specified by law and are limited to a certain percentage of income.
To qualify unoccupied property for exemption from the Built Property Tax, the owner must file the relevant declaration to the competent authorities within a month from the date on which the property was vacated.
The following tax rates are applied to the net income from each property to determine the Built Property Tax.
Taxable income Tax Exceeding Not exceeding rate LBP LBP
Built property tax can be waived if the property is used by its owner who is conducting commercial or industrial activities sub ject to corporate income tax.
Inheritance and gift tax. Inheritance and gift taxes are imposed in Lebanon and consist of a flat tax and a proportional tax.
The flat tax is imposed at a rate of 0.5% of the gross inheritance or gift amount less an exemption of LBP40 million.
The net amount of the inheritance, after the deduction of the flat tax, is distributed among the various heirs in accordance with the law. Each heir, depending on his or her relationship with the deceased, may claim deductions ranging between LBP24 million and LBP120 million. The following inheritance tax rates apply to the amount of the inheritance, reduced by the deduction.
Children, spouses and grandchildren
Amount of inheritance
Exceeding Not exceeding Rate LBP LBP % 0 30,000,000
30,000,000 60,000,000
60,000,000 100,000,000
100,000,000 200,000,000
200,000,000
Amount of inheritance
Parents
Exceeding Not exceeding Rate LBP LBP % 0 30,000,000
30,000,000 60,000,000 9 60,000,000 100,000,000 12 100,000,000 200,000,000 16 200,000,000 18
Siblings
Amount of inheritance
Exceeding Not exceeding Rate LBP LBP % 0 30,000,000 9 30,000,000 60,000,000 12 60,000,000 100,000,000 16 100,000,000 200,000,000 20 200,000,000 24 Cousins
Amount of inheritance
Exceeding Not exceeding Rate LBP LBP % 0 30,000,000 12 30,000,000 60,000,000 16 60,000,000 100,000,000 21 100,000,000 200,000,000 26 200,000,000 350,000,000 31 350,000,000 36
Other beneficiaries
Amount of inheritance
Exceeding Not exceeding Rate LBP LBP % 0 30,000,000 16 30,000,000 60,000,000 21 60,000,000 100,000,000 27 100,000,000 200,000,000 33 200,000,000 350,000,000 39 350,000,000 45
Gift tax rates are the same as the inheritance tax rates. Stamp duty. Under the Lebanese Stamp Duty Law, fiscal stamps at a rate of 4 per 1,000 must be affixed to all deeds or contracts. Payment of stamp duty is due within five days from the date of signature of the deed or contract. A fine equal to five times the duty is imposed if the stamp duty is paid after the deadline or if it is not paid at all.
If the value of the contract or subcontract is not determined or will be determined at a later stage, a fixed stamp duty of LBP5,000 (USD3.3) must be affixed on the contract. In addition to the fixed stamp duty, the beneficiary must settle a propor tional stamp duty of 4 per 1,000 on raising an invoice.
Rent contracts must be registered each year and are subject to stamp duty at a rate of 4 per 1,000 of the rent.
Capital Gain Tax. Gains on the disposal of real estate properties are subject to Capital Gain Tax at a rate of 15% if either of the following circumstances exists:
• They are realized by persons who are not subject to income tax or who previously benefited from permanent, special or excep tional exemptions from this tax.
• They are realized by persons who are subject to income tax, but the real estate property is not part of their profession.
The taxable gain equals the difference between the disposal value and the cost of the asset, and taxpayers (meeting the above defini tion) may deduct 8% of the gain per year for every full year between the date of acquisition and the date of disposal of the property. An owner as classified above is exempt from tax on the sale of a real estate property if the owner holds the asset for at least full 12 years. Otherwise, the owner must pay Capital Gain Tax on the difference described above in the year of disposal.
C. Social security
Lebanon operates a compulsory social security scheme that requires contributions from both employers and employees. The social security scheme in Lebanon covers the following areas:
• Sickness and maternity
• Family allowance
• End-of-service indemnity
Contributions. All companies that have at least one employee must register with the Social Security National Fund within one month of beginning operations. New employees must be registered within 15 days from the date of their employment.
Contributions to the social security scheme are calculated as percentages of monthly salaries and wages including overtime, gratuities and fringe benefits. For the sickness and maternity and family allowance schemes, the maximum amounts on which contributions are calculated are LBP2,500,000 and LBP1,500,000, respectively.
For the sickness and maternity scheme, the contribution rates are 8% for employers and 3% for employees. Only employers make contributions to the family allowances and end-of-service indemnity schemes. The contribution rates are 6% and 8.5%, respectively.
Non-Lebanese employees need not be registered with the Social Security National Fund if their contracts are signed outside Lebanon with foreign entities and if they can prove that they enjoy social security benefits in their home country similar to the benefits granted in Lebanon.
Totalization agreements. Lebanon has entered into totalization agreements with Belgium, France, Italy and the United Kingdom to prevent double payment of social security contributions by expatriates working in Lebanon.
D. Tax filing and payment procedures
Under the Lebanese income tax law, employers are responsible for withholding payroll tax and employees’ social security contri butions from employees’ salaries on a monthly basis and remit the withholdings to the tax authorities every three months. Employees are not required to file tax returns. Social security contributions by employers are payable on a quarterly basis for companies with fewer than 10 employees and on a monthly basis for larger companies. Employee contributions are withheld by the employer and paid to the authorities together with the employer’s contribution.
E. Double tax relief and tax treaties
Lebanon has signed double tax treaties with the following coun tries.
Algeria Iran Romania Armenia Italy Russian Federation Bahrain Jordan Senegal Belarus Kuwait Sudan* Bulgaria Malaysia Syria Cuba* Malta Tunisia Cyprus Morocco Turkey Czech Republic Oman United Arab Egypt Pakistan Emirates France Poland Ukraine Gabon* Qatar Yemen
* These treaties are not yet being enforced.
A double tax treaty between Lebanon and Saudi Arabia is cur rently under negotiation; however, its content is not yet available, and there is no information regarding its expected date of entry into force.
F. Entry visas and work permits
All expatriates working in Lebanon must have a work permit and a residence permit. Such permits may be issued only at the request of an employer.
To obtain a work permit, the following items must be submitted:
• A special work permit application completed and signed by the applicant and the employer.
• A list of the names of the foreign employees (if any) at the office of the employer that must be signed and sealed by the employer.
• The address of the employer.
• The passport or the identity card of the expatriate. The Minister of Labor retains a photocopy of this document.
• A medical report evidencing that the expatriate is free from epidemic diseases.
• A photocopy of the employer’s registration in Lebanon.
• A list of authorized signatures of the employer.
• A certified copy of the employment contract entered into between the employer and the expatriate.
• A quittance (discharge or clearance certificate) issued by the Social Security National Fund.