Beirut
EY
Mail address:
P.O. Box 11-1639
ey.com/globaltaxguides
+961 (1) 760-800
Fax: +961 (1) 760-822
Send all telecommunications to Beirut “Attn R. Gedeon EY”
Lebanon
Street address: Starco Building
South Block B, 9th Floor
Mina El Hosn
Beirut
Lebanon
Business Tax Services
Zeina Frenn
Business Tax Advisory
Romeo Gedeon
Zeina Frenn
Tax Policy and Controversy
Romeo Gedeon
+961 (1) 760-800
Email: zeina.frenn@lb.ey.com
+961 (1) 760-800
Email: romeo.gedeon@lb.ey.com
+961 (1) 760-800
Email: zeina.frenn@lb.ey.com
+961 (1) 760-800
Email: romeo.gedeon@lb.ey.com
Updates provided under the 2024 Budget Law (Budget Law No. 324 dated, 15 February 2024) have been incorporated into this chapter.
A. At a glance
(a) Applicable to both residents and nonresidents.
(b) Bank interest is subject to a 7% withholding tax for residents and nonresidents.
(c) Applicable if the royalties are received by Lebanese holding companies (see Section B).
(d) Profits derived by branches operating in Lebanon are presumed to be distributed and consequently are subject to remittance tax.
(e) Taxable losses related to 2020 can be exceptionally carried forward for an additional year according to Article 24 of the 2022 Budget Law No. 10 (Law No. 10), dated 15 November 2022.
Capital gains. Capital gains on the disposal of fixed assets are taxed at a rate of 15% under Law No. 64.
If a company reinvests all or part of a capital gain subject to the 15% rate to construct permanent houses for its employees during a two-year period beginning with the year following the year in which the gain was realized, it may obtain a refund of the tax imposed on the reinvested gain.
Administration. The official tax year is the calendar year. Companies or branches may use a different tax year if they obtain prior approval of the tax authorities.
Corporations with a financial year-end of 31 December must file their tax returns by 31 May of the year following the year in which the income is earned. Other corporations must file their returns within five months of their financial year-end. The tax authorities may grant a one-month extension at the request of the taxpayer if the taxpayer’s circumstances warrant the extension. Tax must be paid by the same deadline.
If a taxpayer does not submit timely returns, the tax authorities impose a fine of 10% of the tax due on the taxable profits reported on the return or as determined by the tax authorities, for each month or part of a month that the return is late. The minimum penalty is LBP6,750,000 for joint stock companies, LBP4,500,000 for limited liability companies, and LBP750,000 for other taxpayers. The maximum penalty is 100% of the tax due. For failure to pay tax by the due date, a penalty of 2% (3% for tax withheld at source) of the tax due is imposed for each month or part of a month that the tax remains unpaid.
The withholding nonresident tax due as per Article 41 of the Income Tax Law (Legislative Decree No. 144, dated 12 July 1959) must be declared and paid quarterly within a period of 15 days from the end of each quarter after withholding the calculated tax in accordance with Article 42 of the Income Tax Law. An annual nonresident tax return should be submitted, including the nonresident tax declared and paid in the four quarters of the year, within the deadline for the submission of the corporate income tax return of the company.
Dividends and interest. Dividends are subject to dividend withholding tax of 10%. Interest is subject to a 10% movable capital tax or 8.5% nonresident withholding tax, depending on each case.
Dividends received by a Lebanese corporation from another Lebanese corporation are excluded from the taxable income of the receiving company. However, dividends redistributed by a parent company to its shareholders or partners are subject only to a withholding tax of 10%.
Dividends distributed by Lebanese holding companies and offshore companies are exempt from dividend withholding tax.
Dividends and interest income earned by banks and financial institutions and generated from trading activity are subject to tax at the regular corporate tax rate of 17%.
Dividends received by banks from their subsidiaries are subject to a 10% dividend withholding tax at the level of the subsidiary.
C. Determination of trading income
General. Taxable income is calculated based on the accounting profit together with the tax adjustments. Lebanese taxpayers should follow International Financial Reporting Standards in maintaining their books of accounts.
Deductions are allowed for expenses incurred wholly and exclusively for business purposes. Branches, subsidiaries and affiliates of foreign companies may deduct the portion of foreign head office overhead charged to them if the auditors of the head office present to the tax authorities a certificate confirming that the overhead was fairly and equitably allocated to the various subsidiaries, associated companies and branches and that the amount of head office overhead charged back to the Lebanese entity is in accordance with the limits set by the Ministry of Finance. However, the deductible portion of the overhead charged back to the Lebanese entity is subject to a tax of 8.5% (see Section D).
Inventories. Inventories are normally valued at the lower of cost or net realizable value. Cost is usually determined using the firstin, first-out or weighted average cost method.
Provisions. The following are the only provisions that are allowed for tax purposes:
• The actual amount due at the balance-sheet date for employees’ end-of-service indemnities
• Doubtful debts owed by debtors that have been declared legally bankrupt
• A provision for obsolete inventory if the procedures described below are followed
Banks and financial institutions may deduct provisions for doubtful debts before declaration of bankruptcy of the debtor if they obtain the approval of the Banking Control Commission of the Central Bank of Lebanon.
Tax depreciation. Depreciation must be calculated using the straight-line method. The MOF has specified the minimum and maximum depreciation rates. A company may select appropriate rates within these limits for its activities. Companies must notify the relevant income tax authorities of the adopted depreciation rates before the declaration deadline. Otherwise the company is considered eligible for the minimum depreciation rates only. Minimum Maximum Assets rate (%) rate (%)
Developed buildings from concrete for use in the commercial, tourism and service sectors (for example, offices, shops, stores, restaurants, hotels and hospitals)
Nature of tax Rate
Registration duty; paid by purchaser of land or buildings; levied on the fair-market value of the building Lebanese citizens 3% Non-Lebanese citizens 5%
Fee on the sale contract amount; payable within 15 days of the contract date; considered as a tax credit with respect to the total registration fees, provided that the registration occurs within one year after the contract date 2%
Annual tax on Lebanese holding companies LBP50 million
Annual tax on Lebanese offshore companies (tax is imposed in full from the first year of company’s operations, regardless of the month operations begin)
E. Miscellaneous matters
LBP50 million
Foreign-exchange controls. Lebanon does not impose any formal foreign-exchange controls.
Anti-avoidance legislation. Under the Lebanese tax law, criminal or tax penalties may be imposed for specified tax-avoidance schemes.
Related-party transactions. Transactions with related entities must be carried out on an arm’s-length basis.
F. Tax treaties
Lebanon has entered into double tax treaties with Algeria, Armenia, Bahrain, Belarus, Bulgaria, Cuba (not enforced), Cyprus, the Czech Republic, Egypt, France, Gabon (not enforced), Iran, Italy, Jordan, Kuwait, Malaysia, Malta, Morocco, Oman, Pakistan, Poland, Qatar, Romania, the Russian Federation, Senegal, Sudan (not enforced), Syria, Tunisia, Türkiye, Ukraine, the United Arab Emirates and Yemen.
A double tax treaty between Lebanon and Saudi Arabia is currently under negotiation; however, at the time of writing, its content was not yet available and there was no information regarding its date of entry into force.