Corporate - Income determination

Last reviewed - 23 January 2024

Inventory valuation

For tax purposes, inventory is valued using the weighted average cost method.

Capital gains

Capital gains are not generally subject to CIT but may be subject to capital gains tax. See Capital gains tax in the Other taxes section for more information.

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

Dividend income

Dividends received as a result of a taxable person’s activity are deemed trading income and are subject to 17% CIT. Dividends received as passive income are subject to 10% tax in Lebanon. However, dividends received from Lebanese entities are exempt from CIT, as the dividend tax is withheld at source, but are not exempt from further tax upon distribution from the recipient entity.

Stock dividends

The Lebanese law is silent on the tax implications of stock dividends. However, when share capital is increased by reducing retained earnings, no tax is applicable.

Interest income

Interest earned by corporations is considered as a tax-deductible expense starting 27 October 2017. No more relief is given on the WHT suffered on bank accounts, treasury bills, and bonds. The interest earned prior to 26 October 2017 is added to the taxable income.

The tax on interest revenue was set at 5% since the issuance of Law No. 473/2003 until October 2017. The government then introduced a new tax measure and amended some existing ones to cope with the changes of the economic situation in Lebanon and the need for more income to the treasury. These amendments resulted in increasing the tax on interest to 7% (Law No. 64, dated 26 October 2017).

Further economic setbacks led the government to further increase the tax on interest rate to 10% for three years from 1 August 2019 to 31 July 2022 (as per Decision No. 193/1), after which the 7% rate has been applied again.

Rental income

Rental income should be deducted from the accounting result to reach the taxable result. Moreover, expenses related to property that is rented out should be added back to the accounting result to reach the taxable result.

A BPT is paid on rental income at progressive rates ranging between 4% and 14%.

The 2022 Budget Law amended the net income brackets subject to BPT starting from the year 2022. 

Royalties income

Royalties received by a holding company from Lebanese companies for patents and the like are taxed at a rate of 10%. Royalties received by holding companies from abroad are exempt from tax.

Royalties received by other than holding companies are taxed as ordinary income at 17%.

Unrealised exchange gains/losses

Unrealised exchange gains and losses are not treated differently from any other gain or loss for tax purposes (i.e. unrealised exchange gains are subject to CIT at 17% and unrealised exchange losses are deductible for CIT purposes).

Foreign income

Resident corporations are not taxed on foreign-source income derived from activities carried out abroad through foreign branches.