Lebanon

Foreign tax credit

There are no specific regulations concerning foreign tax credit in Lebanon.

Holding companies

Lebanese holding companies are exempt from CIT and from WHT on dividends. However, they are subject to a tax on their paid-up capital and reserves. In any given tax year, total tax payments on paid-up capital and reserves are capped at LBP 50 million starting from fiscal year 2022 as per the 2022 Budget Law instead of LBP 5 million.

Interest, management fees, and royalties received by holding companies from abroad are exempt from tax in Lebanon.

Holding companies are subject to a 10% tax on interest received from loans granted for a period of less than three years to companies operating in Lebanon. Management fees received by the holding company from companies operating in Lebanon are subject to a 5% tax. Capital gains on financial assets in Lebanese companies held for less than two years are subject to a 15% tax. Royalties received from Lebanese companies for patents and the like are taxed at a rate of 10%.

Offshore companies

Offshore companies are exempt from CIT and from the WHT on dividends and are instead subject to a lump-sum annual tax of LBP 50 million starting from fiscal year 2022 as per the 2022 Budget Law instead of LBP 1 million. Contracts related to offshore activities outside Lebanon are exempt from Lebanese stamp duty.

Offshore companies are required to be registered as SAL companies and, with a few exceptions, are subject to the same regulations as a SAL company. The business objectives of an offshore company are limited.

Permanent exemptions from CIT

Companies and organisations that are granted an indefinite exemption from CIT include the following:

• Educational institutions.
• Hospitals, orphanages, asylums, and other shelters that admit patients free of charge.
• Shipping, sea, and air transport associations (subject to certain restrictions).
• Farmers, provided they do not display farm produce and cattle outlets or sell products and meat after conversion tax.
• Syndicates and other types of professional associations.
• Miscellaneous non-profit organisations and co-operatives.
• Holding companies and offshore companies.
• Public sector bodies that do not compete with private institutions.

Reinvestment incentives

Industrial companies using operating profit to finance certain capital investments are exempt from up to 50% of their CIT liabilities for a period of up to four years, provided that such exemptions do not exceed the original investments made. In areas designated ‘development zones’, 75% of a company’s tax liabilities may be exempt.

In order to take advantage of this regulation, investments should consist of capital expenditures designed to increase a company’s manufacturing capacity or of investments in housing facilities for the company’s staff and other employees.

Incentives for companies established in specific areas

As per the 2022 Budget Law, companies established in specific areas after the date of issuance of the Law (i.e. 15 November 2022) and until 31 December 2024 that are operating in specific regions that the government wishes to develop are exempt from Income Tax Law for seven years following the initiation of its activities. Such companies may benefit from an exemption on construction license fees and a 50% reduction on registration and annual traffic fees of its vehicles for the same period of seven years.

To benefit from this tax exemption, the company’s capital should not be less than USD 1 million transferred from foreign funds or paid in cash and at least 60% of its employees are Lebanese nationals with a minimum of 50 Lebanese nationals. 

Incentives granted by the Investment Development Authority of Lebanon (IDAL)

In its role as national investment promotion agency, the IDAL offers, through its Investment Law No.360, a series of financial and non-financial incentives to investment projects in various sectors. There are two incentive schemes that investors can choose from:

Incentives for large scale projects: The Package Deal Contract (PDC) Scheme

The PDC is a contract between the Lebanese government and the investor through which local and foreign investors alike can receive the following incentives: 

• 100% exemption from CIT for up to ten years.
• 100% exemption from project dividends taxes for up to ten years.
• 100% exemption from Land Registration Fees.
• Up to 50% reduction on Work and Residence Permits Fees.
• Up to 50% reduction on Construction Permits Fees.
• Obtaining the immediate issuance of work permits of all categories.

Incentives for small and medium enterprise (SME) projects: The Investment Project by Zone (IPZ) Scheme

The IPZ scheme is catered for small and medium sized projects and is designed to provide the highest support to projects located in the regions with the highest socio-economic challenges. The following incentives are granted under this scheme: 

• Exemptions from CIT, which can run up to 100% for a period of up to ten years.
• Exemptions from project dividends taxes, which can run up to 100% for a period of up to ten years.
• Obtaining the immediate issuance of work permits of all categories.

The above-mentioned exemptions are granted based on the following criteria:

• Investment size.
• Sector of operation.
• Number of jobs created.
• Geographical location of the project.