Value-added tax (VAT)
The standard VAT rate in Lebanon increased from 10% to 11% effective 1 January 2018. Unless specifically exempt, VAT is levied on all commercial transactions undertaken by business entities. Export of goods and services and export-related services, international transport, and some of the intermediate operations are zero-rated. Banking, financial services, and insurance operations are exempt from VAT.
Note that the recharge of expenses from an entity in Lebanon to another entity abroad is subject to VAT at 11% instead of 10% effective 1 January 2018.
The threshold for registration is turnover that exceeds LBP 100 million in four consecutive quarters.
Modern, simple, and efficient assessment means are adopted by the customs authorities (e.g. electronic declarations, declaration in advance, applying international procedures in clearing the goods, selective inspection, auditing the goods after their release, and adopting the unique declaration).
Customs rates are imposed and modified according to decisions from the Lebanese customs authorities. These decisions are adopted based on the need of the Lebanese markets of some goods and the will to protect national production sectors.
Safeguard measures are provided for in relation to imported goods. The purpose behind such measures is to protect the domestic production sectors when an increase of imports is witnessed when compared to the same period during the previous year.
The rates are determined based on a specific schedule created in conformity with the Harmonised System of Nomenclature. This conformity with the unified system allows Lebanon to represent an ‘importer friendly’ environment for importers.
The normal rates are applied where there is no preferential agreement. When the origin of the good or part of the good is from a country with which Lebanon has a preferential customs treatment, preferential rates apply.
Customs rates in Lebanon are either determined in percentage or paid as a lump sum per unit of imported products.
Excise taxes are mainly applicable in Lebanon on certain beverages and spirits, tobacco products, gasoline, and vehicles.
Built property tax (BPT)
The BPT is an annual progressive tax, ranging between 4% and 14%, on built property.
Two kinds of stamp duties are levied. A proportionate stamp duty of 0.4% (instead of 0.3%) effective 26 October 2017 is levied on all deeds and contracts (written or implied) that mention specific payments or other sums of money. A fixed stamp duty ranging between a minimum of LBP 250 and a maximum of LBP 2 million is applicable on documents in accordance with schedules appended to the stamp duty law.
Capital gains tax
Under local legislation, companies are permitted to revalue their fixed assets every five years. Capital gains recognised from such a revaluation, as well as any profits that may be realised from the disposal of fixed assets, are subject to a capital gains tax of 10%.
Income from disposal of shares realised by a company is subject to 15% capital gains tax.
Income from disposal of fixed assets realised by a company is subject to 15% capital gains tax when the shares are classified as financial assets on the company’s balance sheet.
Income from disposal of shares realised by a company whose main activity is the acquisition of investments is subject to 17% CIT.
The estimated cost of establishing a company in Lebanon is around 7,500 United States dollars (USD). This includes lawyer’s fees and registration fees. The registration fees will increase if the company is established with capital exceeding the minimum requirement. However, the registration fees should not normally exceed 1% of the value of capital.
For branch offices and representative offices, establishment costs are lower and may be estimated at USD 5,000.
When transferring ownership of real estate, registration fees of approximately 6% are applicable.
Employers are responsible for withholding and declaring payroll taxes on behalf of their employees. Payroll tax is levied at progressive rates of 2% to 20%.
Social security contributions
Social security contributions are the following:
- Borne by the employer: 8% for the maternity and sickness benefit schemes, on a maximum of LBP 2.5 million per month, and 6% for the family benefit schemes, on a maximum of LBP 1.5 million per month, in addition to 8.5% of total annual earnings for the end of service indemnity, with no ceiling, effective16 February 2017.
- Borne by the employee: 3% for the medical scheme, on a maximum of LBP 2.5 million per month, effective 16 February 2017.