Lebanon

Value-added tax (VAT)

The standard VAT rate in Lebanon is 11%. 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. As per the 2022 Budget Law, solar power equipment used to generate electricity are exempt from VAT from the date this Law is published (November 2022) until 31 December 2023.

Note that the recharge of expenses from an entity in Lebanon to another entity abroad is subject to VAT at 11%.

The threshold for mandatory registration is a turnover that exceeds LL 100 million in four consecutive quarters.

The 2024 Budget Law, increased the threshold for mandatory registration from LL100 million to LL5 billion over a period of one to four consecutive quarters. The new threshold is applicable starting the year 2024. 

On 27 April 2023, the Ministry of Finance (MoF) published Decree no. 11230 in the Official Gazette, whereby Article 18 of the VAT Law no. 7308, which states that VAT should be calculated following the official exchange rate, was replaced to mention that in instances where the price of the service or good is denominated in foreign currency, and until a unified exchange rate is set, the counter value of the foreign currency to be used for VAT calculation purposes should be Sayrafa rate. 

Customs duties

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.

Based on Article 59 of Budget Law 2019, 3% in additional custom fees is enforced for three years on imported goods that are subject to VAT, except for fuel, industrial equipment, and raw materials used in manufacturing and agriculture. The 2022 Budget Law imposed an additional customs fee of 3%, to be applicable for an additional year (i.e. until 31 December 2023) which was extended until 31 December 2024 as per the 2024 Budget Law. An exemption of customs and 3% additional duty is applied for solar power equipment used to generate electricity from 15 November 2022 until 31 December 2023.

In addition, a customs fee of 10% is imposed on imported goods with similar substitutes manufactured in Lebanon in sufficient quantities and on imported luxury items. This fee is applicable for a period of 5 years.

Excise taxes

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.

The 2022 Budget Law amended the net income brackets subject to built property tax starting the year 2022. 

The 2024 Budget Law further amended the net income brackets subject to built property tax starting the year 2024 to range from LL 1.2 billion to LL 6 billion. 

Stamp duty

Two kinds of stamp duties are levied. A proportionate stamp duty of 0.4% is levied on all deeds and contracts (written or implied) that mention specific payments or other sums of money.

The 2022 Budget Law amended the Stamp Duty Law to state that the fixed stamp duty due on invoices, receipts and debit and credit notes should be settled through monthly declarations within 15 days after the end of the month starting 1 January 2023. 

The Ministry of Finance issued Decision no. 684 on 23 November 2022 to clarify that the Sayrafa rate is the exchange rate that should be used to convert the value of contracts and deeds (and any other similar documentation) denominated in foreign currency into the local currency (LL) for the purpose of calculating the respective stamp duty.

The 2024 Budget Law amended the Stamp Duty Law to state that; provided the stamp duty fee does not exceed LL 3 billion, the duty can be processed by marking machines operated by authorised individuals. 

In addition, the 2024 Budget Law increased the fixed amount of stamp duty to LL100,000 on contracts that do not contain a specific amount and LL20,000 on unpaid invoices. 

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 15%.

The MoF issued Law no. 330 on 5 December 2024 which amended article 45 of the Income Tax Law allowing taxpayers subject to the lumpsum method to revalue their fixed assets every year (instead of every 5 years) starting from the end of the year 2023 till 31 December 2026, based on the principles applicable to taxpayers subject to the real profit.

In addition, Law no. 330 mentioned that individuals and taxpayers who are not subject to income tax, or who benefit from special or permanent income tax exemptions, or those subject to income tax and owning real estate properties not used for generating operating income (e.g., real estate companies), are subject to a reduced tax rate of 1% instead of 15% on the disposal of non-residential real estates until 31 December 2026.

Income from disposal of fixed assets realised by a company is subject to 15% capital gains tax. In case of sale of shares and parts in Lebanese and foreign companies, any capital gains realised by a Lebanese corporate entity (other than holding, offshore or a company whose activity is to trade in financial investments) is subject to tax at 15% if those financial assets are classified as non-current assets on the company’s balance sheet.

Income from disposal of shares realised by a resident company whose main activity is the acquisition of investments is subject to 17% CIT.

Income from disposal of shares realised by a non-resident company is subject to 10% movable capital tax when the shares are not classified as financial non-current assets on the company’s balance sheet. 

Registration taxes

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.

Payroll taxes

Employers are responsible for withholding and declaring payroll taxes on behalf of their employees.

On September 5 2024 the MoF issued Decision no. 959 determining the mechanism for the calculation and payment of the payroll tax for salaries paid in part or full in foreign currencies as follows:

1. For the period from January 1 to March 31, 2024, salaries paid in fresh USD are calculated using the exchange rate of 1 USD = 15,000 LL. However, if salaries are paid by cheque or via an internal bank transfer (i.e., not in fresh USD), the first 3,000 USD is calculated at the exchange rate of 1 USD = 8,000 LBP, and any amount exceeding 3,000 USD is calculated at the exchange rate of 1 USD = 1,507.5 LBP.
2. For the period starting April 1, 2024, salaries are calculated using the exchange rate of 1 USD = 89,500 LBP, regardless of the payment method.

The aforementioned Law has also amended the brackets of employment income subject to payroll progressive tax rates for 2024 and 2025. Payroll tax is levied at progressive rates of 2% to 25%  on annual payroll tax brackets between LL 317,250,000 and LL 11,896,875,000 for 2024 and between LL 360 million and LL 13.5 billion for 2025. The annual family exemptions were also amended as follows: 

1. For the period from January 1, 2024, to February 15, 2024 (inclusive), family exemptions will be calculated according to the rates specified in the 2022 Budget Law, i.e., LL 4,687,500 for a single individual.
2. From February 16, 2024, onwards, the exemptions will be calculated based on the rates outlined in the 2024 Budget Law, i.e., LL 393,750,000 for a single individual.
3. Starting January 1, 2025, the family exemption for each single individual will be 450,000,000 LL to add 225,000,000 LL for married individuals with an unemployed spouse. In addition to 45,000,000 LL for each legitimate child.

Additionally, the Ministry of Finance issued Decree no.11226 which increased the minimum wage to LL 9,000,000 for monthly basic salary for employees subject to the Labor Law. This increase is applicable starting 26 April 2023. 

Later on, the MoF issued Decree no. 13164 which increased the minimum wage of the employees subject to the Labor Law to LL 18,000,000, effective 1 April 2024.

Moreover, Decree no. 1311 exempts termination/severance payments from payroll tax for payments made to employees between February 15, 2024, and December 31, 2025.

Social security contributions

For the purpose of calculating social security contributions, sickness and maternity ceiling amount is set as follows:

• Starting September 2023,  LL 216,000,000 per year (equivalent to LL 18,000,000 per month) 
• Starting March 2024, 5 times the minimum monthly wage of LBP 9,000,000 (equivalent to LL 45,000,000)
• Starting April 2024, 5 times the minimum monthly wage of LBP 18,000,000 (equivalent to LL 90,000,000)

In addition, memorandum no. 734, dated 29 December 2023, has set the monthly ceiling amounts for family allowance social security contributions LL 12,000,000 per month, starting 1 January 2024.

Accordingly, social security contributions are calculated as follows: 

• Borne by the employer: 8% for the maternity and sickness benefit schemes, on a maximum base of LL 90 million (amounting to LL 7,200,000 as a maximum per month), and 6% for the family benefit schemes, on a maximum base of LL 12 million (amounting to LL 720,000 as a maximum per month), in addition to 8.5% of total annual earnings for the end-of-service indemnity, with no ceiling.
• Borne by the employee: 3% for the medical scheme, on a maximum base of LL 90 million (amounting to LL 2,700,000 as a maximum per month).

On the 30th of November 2023, the Ministry of Labor (“MoL”) issued Decree no. 12599 published in the Official Gazette whereby it increased the family allowances given by the  Social Security Department to be as follows:

• LL 600,000 for the wife instead of LL 60,000;
• LL 330,000 for each child instead of LL 33,000 (for a maximum of 5 children).

The Decree is applicable starting from December 2023.

Moreover, on February 1, 2024, the NSSF issued Memorandum no. 740 whereby it set the exchange rate to be used for the conversion of the salaries paid in foreign currencies to the highest official exchange rate published by the Central Bank (currently LL 89,500/USD 1). 

Furthermore, based on the provisions of Article 92 of the 2024 Budget Law, the tax authorities are required to provide a copy of the payroll tax declarations to the Social Security department for reconciliation purposes and to notify them of any discrepancies.

In the event of differences, any discrepancy uncovered during the reconciliation between the amounts declared to the tax authorities and those reported to the Social Security Fund will incur a penalty of ten times the amount of the difference.