Lebanon

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 is set at 7% since the issuance of Law no. 64, dated 26 October 2017.

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.

On 21 December 2023, the MoF issued Decision no. 880 outlining the criteria for determining rental income subject to income tax resulting from rental services. The Decision stated that revenues earned by taxpayers who are subject to real profit-based taxation will be subject to income tax on revenues generated from rental services in the following two scenarios:

• Taxpayers who own or invest in commercial communities (shopping centres), where they allocate portions of the real estate/spaces for commercial or residential use by others. This obligation remains regardless of the contractual agreement in place, whether it's a free management agreement or lease agreement and whether these taxpayers conduct their commercial activities within the shopping centres or solely invest in them through subleasing to others.  
• Taxpayers whose ownership or investment in buildings, real estate, or areas constitutes their only or primary business activity, regardless of whether additional services (such as secretarial and telecommunications services) are included in their activities or not.

Taxpayers subject to real profit-based taxation who generate revenues from rental services remain subject to BPT in all the cases not mentioned above (e.g. when renting is considered an incidental or secondary activity). All other taxpayers, not subject to tax based on real profit, generating rental income remain subject to BPT.

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, which was further amended as per the 2024 Budget Law starting from the year 2024 to range between LBP 1.2 billion and LBP 6 billion. The annual exemption also increased to LBP 360 million starting from 2024 onwards for each residential property.

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.