Lebanon

Under the income tax law in Lebanon, tax is levied based on income type. Accordingly, the income tax law divides income into the following three categories:

• Chapter I: Profits from industrial, commercial, and non-commercial professions.
• Chapter II: Salaries and wages and pension salaries.
• Chapter III: Revenues from moveable capital (chapter III mainly covers all types of dividend income, board member appropriations from profits, and interest income, including interest on bonds and treasury bills).

The income tax law does not deal with what is known as global tax on income, where a progressive tax is levied on the individual's income grouped from different sources. Accordingly, where a taxpayer has income from different sources, each type of income will be taxed according to the tax chapter it falls under.

Employment income

Income tax is imposed on all salaries, wages, bonuses, allowances, life annuities, pension payments, and other benefits in cash and kind derived by employees.

Certain types of income, such as those received by certain diplomatic representatives and nursing staff, are exempt from income tax.

Stock options

The tax treatment of employee stock option benefits is not directly addressed in the income tax law or in its explanatory memos. In general, the benefit is a salary related benefit and is subject to tax in Lebanon. The benefit will be subject to social security contributions if it meets the criteria of continuity, consistency, and collectivity. The time at which a charge to tax or social security contributions can arise is shown below:

• Grant date: No income tax and no social security contributions.
• Vesting date: No income tax and no social security contributions.
• Exercise date: Income tax and social security contributions.
• Sale date: Whether it is an exercise gain or a sale gain, it is subject to income tax.

Moveable capital income

A WHT at a rate of 10% is levied on an income derived from moveable capital generated in Lebanon. Such taxable income is comprised of:

• Distributed dividends, interest, and income from shares.
• Directors' and shareholders' fees.
• Distribution of reserves or profits.
• Interest from loans to corporations.

Individuals are exempt from capital gains tax on the transfer of shares.

Decision no. 323, issued on 15 May 2023, stated that individuals are subject to 10% movable capital tax if they dispose of shares in Lebanese or foreign limited liability companies when the disposal of shares does not represent a commercial transaction for the seller.

In addition, Decision no. 322, issued on 15 May 2023, defined the application procedures of Article no. 87 of the Budget Law of 2022 related to tax on foreign movable capital income stating that taxes on income from foreign shares, bonds, and other foreign movable capital should be settled in foreign currency starting 15 November 2022.

Business income

Any individual of Lebanese or foreign nationality may engage in a business activity as a sole proprietor or become a partner in an existing or newly formed partnership. Under Lebanese law, there are two distinct types of partnerships, general partnerships and limited partnerships.

Sole proprietorships and general partnerships are taxed at progressive rates. Article 24 of Budget Law 2019 amended Article 32 on the Income Tax Law related to the annual progressive brackets for income tax on profits to become 4% to 25% instead of 4% to 21%. These rates are applicable starting from the year 2019.

The 2022 Budget Law amended the annual progressive brackets for income tax profits applicable starting 1 January 2022.

Limited partnerships are taxed at a flat rate of 17%. 

Foreign income

As per Article 82 of the Income Tax Law, individuals and holders of foreign stocks and bonds, or those receiving income from them, who are residing in Lebanon, are required to declare their income if they transfer their profits, interest, returns, or other revenues abroad, or receive them abroad, either directly or indirectly. The declaration must be made using the TH4/G form (attached). The declaration should be submitted before March 1st each year for the previous year's revenues, and the tax payment is due before April 1st.

In accordance with MoF Decision No. 111/1, dated March 17th, 2020, all taxpayers subject to Article 82 of the Income Tax Law are required to exclusively declare their foreign movable capital income, for the year 2019 and beyond, electronically through the MoF portal. 

As per Article 87 of the 2022 Budget Law, taxes on movable capital must be declared and paid in the currency in which the income is received, starting from 2022 onwards.

In line with MoF Notification No. 898/1 dated 22 April 2024, the exchange rates to be used to covert foreign income denominated in USD to the local currency in LBP are as follows: 

• From 2015 till 2020, the exchange rate to be used is 1,507.5. 

• For 2021, the exchange rate to be used is 27,400.