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.
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 100 million Lebanese pounds (LBP) 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.
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.
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% 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 15%.
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.
Lump-sum license fee
Decision no. 993/1, dated 21 November 2016, relating to imposing an annual lump-sum license fee was introduced. With some exceptions for certain types of companies (holdings and offshore companies, institutions exempt from tax as per Article 5 of the income tax law), the annual lump-sum license fee for joint stock companies is LBP 2 million, for limited liability companies is LBP 750,000, for establishments assessed based on real profit is LBP 550,000, and for taxpayers assessed on assumed profits is LBP 50,000. The above-mentioned license fees apply to local head offices, branches, outlets, and to any place in which the taxpayer carries on its activity or receives customers. For income tax purposes, the lump-sum license fee is considered as a non-deductible expense.
Decision No. 260/1, dated 31 May 2019, states that, as of FY 2021, the annual lump sum fee will be applicable for all taxpayers subject to CIT as per the above.
Employers are responsible for withholding and declaring payroll taxes on behalf of their employees. Article 23 of Budget Law 2019 amended Article 58 of the Income Tax Law related to brackets for the payroll progressive tax rates. Payroll tax is now levied at progressive rates of 2% to 25% instead of 2% to 20%. These rates are applicable starting 1 August 2019.
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.
- Borne by the employee: 3% for the medical scheme, on a maximum of LBP 2.5 million per month.