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 LL 250 and a maximum of LL 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.
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.
The Ministry of Labor issued decree no. 9129 dated 19 May 2022 relating to the increase of the cost of living allowance to employees subject to the Labor Law. The increase is applicable starting 1 April 2022.
The employees’ basic monthly salary (as at 1 March 2022) is subject to an increase as follows:
- For salaries that do not exceed 4,000,000 LL, an increase of 1,325,000 LL is applicable starting 1 April 2022. The increase is considered part of the basic salary.
- For salaries that exceed 4,000,000 LL, the increase should be based on a mutual agreement between the employee and employer taking into consideration any local collective agreements and the International Labor Organization Convention.
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 LL 2.5 million per month, and 6% for the family benefit schemes, on a maximum of LL 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 LL 2.5 million per month.
Following decree no. 9129 issued by the Ministry of Labor, the National Social Security Fund (NSSF) issued circular no. 686 dated 6 June 2022 increasing the monthly ceilings of the “Sickness and maternity” and “Family allowance” schemes starting 1 April 2022 as follows:
- The monthly ceilings of the sickness and maternity contributions increased LL 1,325,000 to become LL 3,825,000.
- The monthly ceilings of the family allowance contributions increased LL 1,325,000 to become LL 2,825,000.
Subsequently, the Ministry of Labor issued decree no. 9415 dated 16 June 2022 related to the adjustment of the monthly ceiling of the “Sickness and maternity” for the purpose of calculating the NSSF contributions:
- The monthly ceiling of the sickness and maternity contributions should increase to become LL 5,000,000.
The decree is applicable starting 1 July 2022.