| Lebanon Income tax Income tax in Lebanon is imposed on an income received in a preceding year after deduction of family allowances. The fiscal year is a Gregorian calendar year. Individual income tax rates are progressive, and tax rates in 2009 on wages and salaries are as follows:
Income (L£) / Tax Rate
1 to 6,000,000: 2%
6,000,001 to 15,000,000: 4%
15,000,001 to 30,000,000: 7%
30,000,001 to 60,000,000: 11%
60,000,001 to 120,000,000: 15%
More than 120,000,001: 20%
Deduction of family allowances, on a progressive scale as follows:
- 4% on income below L£ 9,000.000
- 7% on the income bracket between L£ 9,000,000 and 24,000,000
- 12% on the income bracket between L£ 24,000,000 and 54,000,000
- 16% on the income bracket between L£ 54,000,000 and 104,000,000
- 21% on the income bracket above L£ 104,000,000.
Lebanon Corporate TaxLebanese resident companies are subject to Lebanese corporate tax on profits of any business carried on in Lebanon at a tax rate of 15% in 2009.
Individuals and Partners in a private company are subject to tax on profits, after deduction of family allowances, on a progressive scale as follows:
- 4% tax deduction on income below L£ 9,000.000
- 7% tax deduction on the income bracket between L£ 9,000,000 and 24,000,000
- 12% tax deduction on the income bracket between L£ 24,000,000 and 54,000,000
- 16% tax deduction on the income bracket between L£ 54,000,000 and 104,000,000
- 21% tax deduction on the income bracket above L£ 104,000,000.
Business income tax is imposed on net business income earned in the preceding year. Tax Returns of limited liability companies must be filed by 31 May in the year following the year of income.
Capital gains tax: Gains on the sale of fixed assets are principally taxed at a rate of 10%. However, gains, or a proportionate part thereof, are exempt of tax where the proceeds are invested in the construction of flats for company staff. Both ordinary and capital losses may be used to off-set against capital gains.
Branch profits tax: Branches of foreign companies are liable to the same income tax as Lebanese companies in respect of their profits realised in Lebanon. Profits earned by branches of foreign companies are deemed to be distributed dividends and are subject to 10% distribution tax on the amount of the profit after deduction of business income tax.
Other taxes: Stamp duty is payable on documents at a rate of 0.3% unless otherwise provided by law. The general rate applies to issue share capital, leases and other agreements, etc. The rate is reduced to 0.15% in respect of commercial bills.
Contributions to social security fund are as follows:
- Family Allowances: 6% of the employee monthly salary with a ceiling of Lebanese pounds 1,500,000 per month.
- Sickness: 9% of the employee monthly salary with a ceiling of Lebanese pounds 1,500,000 per month out of which the employee pays 2%.
- Termination Indemnity: 8.50% of the employee's total monthly salary.
Dividends: Lebanon Income tax law provides tax on distribution of dividends by Lebanese limited liability companies at a rate of 10% of the dividend paid. The distribution tax is payable regardless of whether the paying company is exempt from business income tax. Under certain conditions the rate is
reduced to 5%.
Interest deductions: Interest on business loans is normally deductible.
Losses: Losses can be carried forward for a period of three years following the year in which they were incurred.
Foreign sourced income: Income tax in Lebanon is territorial in general. Only profits realised in Lebanon and income derived from an activity in Lebanon is subject to Lebanese income tax.
Taxation based on turnover: Certain enterprises are not taxed on the actual net profits realised but apply a percentage of the annual turnover to arrive at their taxable profits. This is the case for:
- insurance companies
- contractors, in respect of sums received from work undertaken for the account of governmental institutions.
Foreign tax relief: There are no unilateral measures for the avoidance of double taxation.
Withholding tax: Remuneration paid to non-residents for services rendered in Lebanon are subject to a withholding tax at a rate of 7.50%. This rate is reduced to 2.25% when the sums paid relate to business activities.
Tax treaties: In order to avoid double taxation of some income, a treaty has been entered into with France to regulate bilateral relations. Treaties have been also signed with other countries mainly to avoid double taxation.
Tax on interests received: Interests received from bank deposit accounts, certificates of deposit, Lebanese treasury bills, debentures, etc are subject to a tax of 5%.
Airport Departure Fee: Every traveler leaving Lebanon through airports or harbours is subject to a departure fee of L£ 50,000 for economy class and L£ 70,000 for business and first class.
Value Added Tax (VAT) in LebanonThere are two VAT rates: a standard rate, currently 10%, and a zero rate. There are also exempt supplies which are supplies of goods and services that are not subject to VAT. Moreover any VAT incurred in making exempt supplies cannot be claimed as an input tax. Value Added Tax was first introduced in Lebanon in February 2002.
DASS Project in LebanonLebanon Ministry of Finance has launched in June 2002 a project for the reorganization and automation of the Deduction At Source on Salaries tax (DASS) at the Income Tax Department. The DASS is being updated and reorganized by a project team composed of public servants and consultants.
DASS Project consists of a tax on salaries paid by all employees of the private & public sectors. Tax is deducted at source, from the employee's salary, by the employer, who has the obligation to declare it and pay it to the treasury.
It is not a new tax and as such there is no increase in tax rates, and does not involve any modification in exemptions or family allowances. The DASS is part of the income tax law (legislative decree 144 dated 12/06/1959) of Lebanon.
The objectives of the DASS project are:
- To automate the existing procedures related to the deduction at source for the tax on salaries and wages:
. The Ministry of Finance will open a DASS account for each employer.
. The DASS administration will attribute a Personal Identification Number (PIN) to each employee of the private and public sectors for whom an identification card will be issued.
. The issuance and processing of declaration forms will be automated.
. To improve collection of this tax.
. To achieve payments directly through the banking system.
- To facilitate the relationship between the employers & employees and the administration.
- To prepare for the introduction of the comprehensive income tax.
Thus, DASS constitutes an important element of the tax reform program undertaken by Lebanon Ministry of Finance.
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