According to the principle of territoriality, taxes on salaries are due in Lebanon if one of the following conditions is met:
- The beneficiary of the salary is resident in Lebanon, regardless of the source of funding.
- The services that triggered the income are executed on Lebanese territory or have contributed to the welfare of a company located in Lebanon, even though the source of funding is outside Lebanon.
- The source of funding is in Lebanon, regardless of where the beneficiary resides or where the effort was made.
Personal income tax rates
Personal income tax (PIT) is levied on wages and salaries at progressive rates. The brackets for the progressive payroll tax rates became between 2% and 25%, instead of between 2% and 20%, as per Article 23 of Budget Law 2019, which amended Article 58 of the Income Tax Law. The new payroll tax rates are effective starting 1 August 2019.
These rates are reduced to half for retirement pensions and similar benefits.
PIT is also levied on business income (e.g. sole proprietorships, general partnerships) at progressive rates. The annual progressive brackets for income tax profits became between 4% and 25%, instead of between 4% and 21%, as per Article 24 of Budget Law 2019, which amended Article 32 of the Income Tax Law. The new rates for income tax profits are applicable starting the year 2019. See Business income in the Income determination section for more information.
Tax on capital gains and investment income
A new Law no. 64, dated 26 October 2017, introduced new tax measures related to the capital gains on disposal of real estate (not other types of fixed assets) that is taxed at 15% instead of 10% (not applicable for individuals on up to two principal residencies and if owned more than 12 years).
Tax on interest
The tax applied on interest and revenues from saving accounts, bank deposits, credit accounts, fiduciary accounts, debt securities, and certificates of deposits has increased as per Law No. 144 of Budget Law 2019.
Income, revenues, and interest earned from accounts opened at Lebanese banks and from treasury bonds are now subject to a 10% withholding tax (WHT) instead of 7%. This rate is effective starting 1 August 2019 and applied over a period of three years until 31 July 2022. The 7% rate will be applied again as of the day after the third year is completed.
Tax on piecemeal compensation
Lump-sum wages paid to labourers and wage earners in an ad hoc manner to undertake temporary work on a piecemeal or quantity basis are taxed at 3%, regardless of their magnitude and without any deductions.
Revenues earned by non-residents in Lebanon are subject to an effective tax rate of 2.25% of the revenue in the case of revenue from sale of materials and equipment and 7.5% of the revenue in the case of sale of services. The non-resident tax is a WHT.