Lebanon Personal Income Tax

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 sal­aries 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 in curred in connection with the performance of employment duties if they are supported by invoices or similar documents

Net employment income is taxed at progressive rates ranging from 2% to 20%. For a table of the rates applicable to employ­ment, 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 21% (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, bro­kerage 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 (LBP)

Exceeding                        Not exceeding

 

Tax on

lower amount
LBP

Rate on
excess

%

0 6,000,000 0 2
6,000,000 15,000,000 120,000 4
15,000,000 30,000,000 480,000 7
30,000,000 60,000,000 1,530,000 11
60,000,000 120,000,000 4,830,000 15
120,000,000 13,830,000 20

 

The following tax rates apply to the lump-sum profits of sole traders derived from industrial, commercial and non-commercial professions.

Lump-sum profits (LBP)

Exceeding                       Not exceeding

 

Tax on

lower amount
LBP

Rate on
excess

%

0 9,000,000 0 4
9,000,000 24,000,000 360,000 7
24,000,000 54,000,000 1,410,000 12
54,000,000 104,000,000 5,010,000 16
104,000,000 13,010,000 21

 

Nonresident persons and entities without a registered place of business in Lebanon who earn business income 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 authorities.

Other taxes

Built property tax. Built property tax is generally imposed on rental income, including fees for services provided by the land­lord to the tenant. However, it is imposed on estimated rental in come 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 (LBP)

Exceeding                              Not exceeding

 

Tax rate

%

0 20,000,000 4
20,000,000 40,000,000 6
40,000,000 60,000,000 8
60,000,000 100,000,000 11
100,000,000 14

 

Built property tax can be waived if the property is used by its owner who is conducting commercial or industrial activities sub­ject 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 de ceased, may claim deductions ranging between LBP8 million and LBP40 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 3
30,000,000 60,000,000 5
60,000,000 100,000,000 7
100,000,000 200,000,000 10
200,000,000 12


Parents

Amount of inheritance  
Exceeding Not exceeding Rate
LBP LBP %
0 30,000,000 6
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 3 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.

Rent contracts must be registered each year and are subject to stamp duty at a rate of 0.3% of the rent.

Social security

Lebanon operates a compulsory social security scheme that requir es 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. Social security contributions by em ployers are payable on a quarterly basis for companies with less 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.

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 7% for employers and 2% for employees. Only employers make con tributions 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 Secu rity National Fund if their contracts are signed outside Lebanon 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.

Tax filing and payment procedures

Under the Lebanese income tax law, employers are responsible for withholding payroll tax and social security contributions 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.

Double tax relief and tax treaties

Lebanon has signed double tax treaties with the following coun­tries.

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.

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.