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Lebanon

Country Name: Lebanese Republic
Currency: Lebanese Pound (LBP)
Primary Tax Authority: Ministry of Finance – Directorate of General Taxes
Key Legislation:

  • Income Tax Law
  • Value Added Tax (VAT) Law
  • Customs Law
  • Corporate Income Tax Law

Fiscal Authority Allocation

Centralized Fiscal System:
Lebanon operates a centralized tax system, with the Ministry of Finance, through the Directorate of General Taxes, responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), value-added tax (VAT), and customs duties.

Corporate Income Tax (CIT)

Standard Rate: 17%
Lebanon imposes a corporate income tax rate of 17% on the net taxable income of companies operating within the country. Both resident and non-resident companies are taxed on income generated from Lebanon.

Corporate Forms and Taxation:

  1. Domestic Companies: Subject to 17% CIT on their worldwide income.
  2. Foreign Companies: Subject to CIT on Lebanon-sourced income only.

Exemptions and Incentives:

  • Investment Law No. 360: Provides tax incentives to encourage investment in key sectors, such as technology, tourism, agriculture, and industry. These incentives include reduced corporate tax rates and exemptions from customs duties.
  • Free Zones: Businesses operating in free zones can benefit from CIT exemptions for up to 10 years, provided they meet regulatory requirements.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 11%
Lebanon applies a VAT rate of 11% on most goods and services. VAT is levied on domestic consumption, imports, and services. Businesses must register for VAT if they meet the annual turnover threshold.

Exemptions:
Certain essential goods and services, such as healthcare, education, and financial services, are exempt from VAT. Exports are zero-rated, allowing companies to reclaim VAT paid on inputs used for the production of export goods.

Personal Income Tax (PIT)

Progressive Rates:
Lebanon applies a progressive personal income tax system, with rates ranging from 2% to 25% depending on income level. The PIT rates for 2023 are as follows:

  • Up to LBP 9,000,000: 2%
  • LBP 9,000,001 to LBP 24,000,000: 4%
  • LBP 24,000,001 to LBP 54,000,000: 7%
  • LBP 54,000,001 to LBP 104,000,000: 11%
  • LBP 104,000,001 to LBP 225,000,000: 15%
  • LBP 225,000,001 to LBP 600,000,000: 20%
  • Above LBP 600,000,000: 25%

Additional Mandatory Contributions

Social Security Contributions:
Employers and employees must contribute to the National Social Security Fund (NSSF), which covers healthcare, pensions, and other social benefits.

  • Employer Contribution: Up to 23.5% of gross salary, depending on the type of benefits.
  • Employee Contribution: 3% of gross salary for healthcare and pension benefits.

Withholding Taxes

  • Dividends: 10%
  • Interest: 10%
  • Royalties: 15% for payments made to non-residents.
    Lebanon imposes withholding taxes on dividends, interest, and royalties. The withholding tax on royalties for non-residents is 15%, while dividends and interest are taxed at 10%.

Transfer Pricing Rules

Lebanon does not have formal transfer pricing regulations. However, related-party transactions must adhere to the arm’s-length principle, and cross-border transactions may be scrutinized to ensure fair market pricing.

Special Tax Regimes

  • Investment Law No. 360: Offers tax incentives to companies investing in technology, tourism, and other key industries. These incentives may include tax holidays, reduced CIT rates, and customs duty exemptions for up to 10 years.
  • Free Zones: Companies operating in designated free zones, such as the Beirut Free Zone, are exempt from corporate income tax for up to 10 years and benefit from customs duty reductions and exemptions.

Other Taxes

  • Customs Duties: Customs duties are levied on goods imported into Lebanon. The rates vary depending on the type of goods, with basic commodities often benefiting from reduced rates or exemptions.
  • Excise Taxes: Lebanon imposes excise taxes on specific goods such as alcohol, tobacco, and petroleum products.
  • Real Estate Transfer Tax: A transfer tax is levied on the sale of real estate, with the rate typically set at 5% of the property’s market value.

Double Taxation Agreements (DTAs)

Lebanon has signed several double taxation agreements (DTAs) with countries such as France, the United Kingdom, and Egypt. These agreements provide tax relief for cross-border income, reduce withholding taxes on dividends, interest, and royalties, and help avoid double taxation.

Local Taxes

Local municipalities may impose minor fees for services, but there are no significant local taxes imposed in Lebanon. All major taxes are administered centrally by the Ministry of Finance.

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed by May 31st of the following year. Personal income tax returns are due by April 30th. VAT returns are filed quarterly, and businesses must remit VAT collected to the tax authority.

Penalties for Late Filing:
Penalties for non-compliance include fines and interest on unpaid taxes. The Ministry of Finance imposes penalties for late filings, underreporting, or failure to pay taxes, with interest rates on unpaid taxes typically set at 1% per month.

Recent Developments

Economic Crisis and Impact on Taxation:
Lebanon has been facing a severe economic crisis, which has affected its tax system and revenue collection. Inflation, currency devaluation, and political instability have disrupted tax compliance and led to efforts to reform the tax system. The government is seeking international aid and loans to stabilize the economy and improve revenue collection.

Fiscal Reforms:
As part of its efforts to address the ongoing economic crisis, the Lebanese government is considering various fiscal reforms, including improving tax enforcement, digitalizing tax collection systems, and potentially increasing VAT rates to boost government revenue.

Investment Incentives:
In response to the economic challenges, Lebanon continues to promote foreign direct investment (FDI) in strategic sectors through tax incentives, reduced CIT rates, and customs duty exemptions. The government is focusing on infrastructure, renewable energy, and technology to attract investment and stimulate economic growth.

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