Beirut

Taxation in Beirut, Lebanon

What are the tax rates in Beirut, Lebanon? How are corporations taxed? Here’s Teleports overview of personal, corporate and other taxation topics in Beirut, Lebanon.

Corporate taxation in Beirut

Teleport city rankings for corporate income tax

Corporate taxation puts Beirut in position 41 of all Teleport Cities.
WORSTBEST

Basis

Resident companies are taxed on their worldwide income, unless earned through foreign branches or subsidiaries.

Taxation of dividends

Dividends received from a Lebanese entity are taxable at a rate of 10%, although a reduced rate of 5% applies if certain conditions are satisfied. Dividends received from a foreign entity are taxable at a rate of 10%.

Residence

An entity is resident if it is registered in accordance with Lebanese law.

Losses

Taxable losses may be carried forward for three years. The carryback of losses is not permitted.

Incentives

Various incentives are granted for eligible investments.

Participation exemption

Dividends received from a Lebanese company are deducted from taxable income for purposes of the corporate income tax calculation.

Taxable income

Income tax is levied on taxable income related to all business activities, unless exempt by law. Taxable income is calculated as revenue less eligible expenses, except for insurance companies, public contractors, oil refineries and international transport, where taxable income is calculated as a percentage of total revenue.

Capital gains

Capital gains derived from the disposal of tangible and intangible assets and financial instruments are taxed at a rate of 10%.

Holding company regime

Holding companies are exempt from tax on profits and tax on dividend distributions. They are subject to a tax on capital, capped at LBP 5 million a year. Capital gains derived from the sale of an investment in a Lebanese subsidiary or associate are exempt if the investment is held for more than two years. No capital gain tax applies on gains derived from the disposal of an investment in a foreign subsidiary.

Other taxes on corporations

Capital duty

A one-time stamp duty is levied on an increase in the capital of a company, at an average cost of LBP 6,000 per million.

Real property tax

A built property tax is levied on rental income from Lebanese real property, at rates ranging between 4% and 14%. See also “Transfer tax,” below.

Payroll tax

Payroll tax is applied on tax brackets at rates ranging between 2% (for the lowest bracket) and 20% (for the bracket in excess of USD 80,000 a year). The employer withholds these amounts from the salary and remits the tax to the authorities on a quarterly basis.

Transfer tax

A 6% tax is levied on the transfer of real estate property.

Stamp duty

A stamp duty is levied on most contracts, at a rate of 0.3%. See also “Capital duty,” above.

Compliance for corporations

Basis

Residents are taxed on their worldwide income, nonresidents are taxed only on Lebanese-source income.

Residence

The current tax law is silent about the period that triggers individual residency, unless a tax treaty is applied.

Filing status

Married persons are taxed separately; joint assessment is not permitted.

Filing requirements

The tax return must be submitted by 31 May of the year following the fiscal/calendar year, unless the company has different authorized special fiscal year. In that case, the return must be filed within five months after the preceding period.

Consolidated returns

Consolidated returns are not permitted; each company must file a separate return.

Rates

A taxable individual is taxed at progressive rates that range from 4% up to 21%.

Tax year

The calendar year is the tax year, although exceptions are made when a parent company has a special fiscal year.

Taxable income

Taxable income comprises income from employment, income from a profession or personal establishment or income from a partnership.

Penalties

Nonsubmission of a return is subject to a penalty of 5% per month, capped at 100%, and a delay in payment is subject to a penalty accruing at a rate of 1% (1.5% for withholding tax and VAT) per month. In the case of an adjustment of the tax return, a 20% penalty applies on the difference between the net tax owed and the net tax due.

Deductions and allowances

Family deductions are granted in computing taxable income.

Other taxation in Beirut

Value added tax

Filing and payment

VAT returns must be filed and tax paid on a quarterly basis.

Rates

The standard rate is 10%; basic foods, health and educational, financial, insurance and banking services and the leasing of residential property are exempt.

Taxable transactions

VAT applies to most transactions involving goods and services.

Registration

Companies whose turnover exceeds USD 100,000 for four consecutive quarters must register for VAT purposes; otherwise, registration is voluntary from the starting date of the activity.

Anti-avoidance rules

Transfer pricing

The arm’s length principle applies to determine the taxable base of related party transactions (both resident and nonresident).

Other

Foreign ownership in a company owning more than 3,000 square meters in land requires approval via a ministerial decree.

Investment basics

Accounting principles/financial statements

IFRS. Financial statements must be prepared and filed annually.

Principal business entities

These are the limited liability company, joint stock company, partnership, branch and representative office of a foreign company.

Withholding tax

Dividends

Dividends paid to a resident or nonresident entity are subject to a 10% withholding tax, unless the rate is reduced under a tax treaty or certain conditions related to the listing of the company’s shares are satisfied, in which case the dividends benefit from a 50% reduction in tax.

Branch remittance tax

In addition to being subject to the normal corporate income tax rate, profits generated by a branch of a foreign entity are subject to an additional 10% tax.

Technical service fees

Technical or management fees paid to a nonresident are subject to a 7.5% withholding tax, unless the rate is reduced under a tax treaty.

Interest

Interest paid on bank deposits or bonds is subject to a 5% withholding tax; other interest paid is subject to a 10% withholding tax, unless the rate is reduced under a tax treaty.

Royalties

Royalties paid to a nonresident are subject to a 7.5% withholding tax, unless the rate is reduced under a tax treaty.