Personal income tax rates in Libya are progressive up to 15%. A new tax law will lower these rates to 10% (see below).
There is also a Jihad tax on persons (or 'Jehad Tax' - imposed since the 1970s for the purposes of "national defense") with rates ranging between 1% - 3%.
With respect to the international taxation agreements, personal income tax is a direct tax levied on income of an individual. Taxpayers are classified into resident and non-resident. Income tax brackets in Libya are as follows:
Income Tax Rate
0 TO 4,800 LYD 8%
4,801 TO 9,600 LYD 10%
More than 9,601 LYD 15%
Jihad tax on persons Varies from 1% to 3% depending on income
FRINGE BENEFITS TAX
Fringe benefits are considered to be a part of the salary paid to an employee and are thus subject to social security and income taxes. Fringe benefits taxable are evaluated on the basis of their market value.
New Personal Tax Law in Libya
A new Income Tax Law (Law 7 of 2010) became effective on 28 April 2010. However, the Executive Regulations which support the new law are still to be issued. In the intervening period, the Executive Regulations of the previous law (Law 11 of 2004) will continue to be effective.
The new law replaces the personal income tax rates of 8% to 15% with the following rates:
- Taxable income of LYD 12,000 and below will be subject to 5% personal tax; and
- Taxable income of over LYD 12,000 will be subject to 10% personal tax.
In addition, the annual personal allowances have been revised to:
Per dependent child 300
The effective Jehad Tax rate of 3% on taxable income remains in force.
The new law also exempts the following income from personal income tax:
- Overseas income of Libyan nationals and foreign workers
- Income of employees of administrative bodies funded by the central budget
- End of service indemnity.
Company income tax in Libya is progressive up to 40%. There is a Jihad tax (Defence Tax) of 4% on companies. A new tax law will replace these tax rates of 15% to 40% on taxable profits with a new flat rate tax of 20%, while the Jihad tax remains (read below).
Companies in Libya are taxable according to a progressive scale:
Income of Companies Tax Rate
Up to 200,000 LYD 15%
From 200,000 to 500,000 LYD 20%
From 500,000 to 1,000,000 LYD 25%
From 1,000,000 to 1,500,000 LYD 30%
From 1,500,000 to 2,000,000 LYD 35%
More than 2,000,000 LYD 40%
Companies are liable to corporate income tax on their profits stemming from any business they carry on in Libya. Foreign companies not carrying on business in Libya but deriving certain types of income from Libya are subjected to company tax.
There is a jihad tax (imposed since the 1970s for the purposes of "national defense") on companies. It applies to the annual taxable benefit society and it is 4% on taxable income.
REAL ESTATE TAX
The purchase of real estate is subject to a registration duty of 2% on the purchase.
CAPITAL GAINS TAX
Capital gains are treated as income and are taxed at the same rate of company tax.
DETERMINATION OF TAXABLE INCOME
FOREIGN SOURCED INCOME
According to the Libyan tax legislation, revenues from foreign-sources that were subject to tax payment in the country of origin are not taxed. Non-resident legal entities are taxable on their Libyan source income. The taxable capital gain is the difference between the sale price and the purchase cost. Relief from foreign taxes in Libya depends on whether a double tax treaty has been concluded by Libya.
The Libyan tax legislation has established a certain number of incentives to investment and creation of projects in certain sectors of activity, either by Libyan or foreign promoters being resident or non-resident or in partnership according to the overall development strategy. These are mainly aimed at accelerating growth rate and job creation. Free zones are mainly in the Mesrata area.
RESTRICTION ON FOREIGN INVESTMENT
Foreign investors have the choice between:
- Setting up a Branch Office which requires the participation of a Libyan partner company or individual and is technically open in all fields of business. Due to a 2006 General People's Committee (GPC) decree (#443), the branch manager or deputy manager must be a Libyan national and the office must be either a joint stock or limited liability company.
- Setting up a Joint Venture / Joint Stock Company which allows for participation in "all economic activities". To establish a joint stock company requires a minimum capital investment of 1 million Libyan Dinars (LD)
Libyan ownership in Joint Stock Companies must be a minimum of 51%. The majority of the company's board of directors, as well as its director, must also be Libyan nationals.
All foreign companies seeking to do business in Libya after 14 November 2021 (companies present and operating in Libya before 14 November 2021 and projects specifically approved by the GPC to operate otherwise) are required to enter as joint ventures with a Libyan entity. Foreign ownership in these joint venture companies can be up to 65%. This GPC decision does not apply to companies coming into Libya under the terms of Law #5 of 1997, representative offices and companies entering under Law #7 of 2004. Application of this law was still unclear, particularly as it pertains to the opening of branch offices in Libya. Law 443 remains controversial, particularly as several major foreign firms have thus far resisted government efforts to force compliance.
Law No. 5 of 1997 allows for 100% foreign equity ownership of companies licensed under the law. It provides for various preferences for licensed projects such as an exemption from corporate income tax for five years with a possible extension of three years provided net profits are reinvested in the project. It provides exemptions from some customs duties and excise taxes on exported goods, and allows for foreign ownership of land. Investors are also afforded some protection against expropriation and permitted access to arbitration.
In 2006 a Decree lowered the floor on foreign capital investment qualifying for entry under Law #5 to 5 million LD (2 million LD if 50% or more of the project is owned by Libyans) (GPC Decree # 86 of 2006). Through Law No. 5 (1997), "Encouragement of Investment Decision," the government attempted to diversify its oil-dependent economy, encourage technical training of Libyan nationals and enhance regional development. Sectors targeted under this law include but are not limited to agriculture, industry, tourism, services and health.
The provisions of Law No. 5 attempt to lower the tax and customs fee burden on qualifying companies. For example:
- Imported machinery, tools and other capital equipment are exempt from all customs duties and taxes.
- Any equipment, spare parts, or primary materials needed for the project operation are exempt for a period of five years.
- The affected project is exempt from income tax on its activities for a period of five years from the date of the commencement of production or work.
- Goods directed for export are exempt from excise tax and from the fees and taxes imposed on exports.
- Stamp duty tax is exempt on commercial documents
- Finally, profits from the project will enjoy the same exemption if reinvested
The foreign investor has the right to repatriate dividends and net profits generated by the project and the capital invested if the project reaches maturity or upon liquidation or sale of the business or within six months after the date of investment if the project is not feasible due to circumstances that are not attributable to him.
The only withholding tax in Libya is on interest at 5%.
The transfer is regulated by the Central Bank of Libya. In major cases, an authorisation from a bank is necessary.
More flexible than before, it is managed by the Directorate of exchange controls attached to the Libyan Central Bank. Since 16 June 2003, Libyan authorities have managed to establish in the capital market a single exchange rate. Its value is approximately 1 euro = 1.6 LYD. The Libyan dinar is not a convertible currency and is used for current operations in the country. However, the foreign investor has the right to open an account in convertible foreign currencies with a commercial bank or the Bank for Arab Jamahiriya abroad.
New Income Tax Law
A new Income Tax Law (Law 7 of 2010) became effective on 28 April 2010. However, the Executive Regulations which support the new law are still to be issued. In the intervening period, the Executive Regulations of the previous law (Law 11 of 2004) will continue to be effective. Where any conflict exists between the new law and the previous regulations, the new law will prevail.
The new law replaces the previous scale rates of 15% to 40% on taxable profits with a new flat rate tax of 20%. Jehad Tax of 4% on taxable profits remains.
In addition, the Tax Department's right to assess branches of foreign companies on a deemed profit basis also remains. New tax exemptions have also been introduced for the following income:
- Agricultural Income - previously only exempt from tax for the first 10 years and then subject to tax at a rate of 5%.
- Income arising from regional development programs as defined by a General People's Committee (the cabinet - law making body) Decision.
The statute of limitations for income tax purposes is now limited to seven years. Previously the period was unlimited, but years were effectively closed on the completion of a tax audit.
The late payment penalty maximum limit of 12% remains but other penalties have increased as follows:
- A fine of not less than three times the amount of unpaid tax due shall be applied to any person who fails to pay tax by the due date;
- Without prejudice to any harsher penalty, a fine of not less than four times the amount of tax due and unpaid will be applied to any person who, with intent to evade all or part of the tax, commits any of the following acts or abets, agrees, or aids a person to commit such an act:
. Making false statements in declarations submitted under the law
. Preparing false accounts, books and records, reports, or budgets
. Using fraudulent means to conceal or attempt to conceal taxable amounts due under the law.
It is important to note that at the time of going to press, there have been indications that amendments may be made to the new law.
New Stamp Duty and Customs Law
Law 8 of 2010 amends some of the schedules for Stamp Duty with effect from 28 April 2010. Perhaps the most notable revision (i.e. Schedule 28A) is the rate for main contracts which has been reduced from 2% to 1%. Schedule 28A now also specifically includes Exploration Production Sharing Agreements.
The Customs Law, Law 10 of 2010, became effective on 5 May 2010. The new law cancels Law 67 of 1972, as amended, Law 32 of 1974 and Law 97 of 1976. Law 10 allows the Minister of Planning and Finance to levy an additional duty of not more than 5% on the customs duties on some goods. The law also requires importers and exporters to abide by agreements protecting intellectual property rights.
Temporary imports are to be initially imported for a period of six months but can be extended to a maximum of three years and temporary exports are for a maximum of three years.
The law maintains the rights of investors in Free Zones for exemption to customs duties and taxes.
Other Regulatory Reforms
Law 9 of 2010, Investment Law, replaces Law 5 of 1997 (Investment Law), Law 6 of 2007 (National Capital Investment Law) and Article 10 of Law 7 of 2004 (Tourism Investment Law). One key update is that the extension of three years on general investments is now limited to projects in relation to the following investment objectives:
- Meeting the food requirements of Libya
- Equipment that saves energy or water, or contributes to environmental protection
- Regional development.
All projects registered outside of the Tourism Investment Law were previously able to apply for the three year exemption extension, so the new rules are more restrictive by excluding such other projects.
The 10 year exemption period for tourism projects remains.
Under the regulatory reform, a new Labour Law and a new Stock Markets Law have been issued. The issuance of the new Commercial Code is also anticipated soon.
There is no Sales Tax / VAT in Libya.
Income Tax Rate
Corporate Tax Rate
Sales Tax / VAT Rate
Last Update: Nov 2010
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