LebanonTax Obligations Detailed

Employer tax obligations in Lebanon are multifaceted, encompassing payroll taxes, social security contributions, and other levies.

Payroll Taxes

• Progressive Tax Rates: Payroll tax is levied at progressive rates ranging from 2% to 25% on annual net taxable income. For 2025, the tax brackets are:
  • 0 to 360,000,000 LBP - 2%
  • 360,000,001 to 900,000,000 LBP - 4%
  • 900,000,001 to 1,800,000,000 LBP - 7%
  • 1,800,000,001 to 3,600,000,000 LBP - 11%
  • 3,600,000,001 to 7,200,000,000 LBP - 15%
  • 7,200,000,001 to 13,500,000,000 LBP - 20%
  • 13,500,000,001 and above - 25%
• Withholding and Declaration: Employers are responsible for withholding payroll taxes from employee salaries and declaring them to the tax authorities on a quarterly basis using the R10 form. Annual returns (R5, R6, R7) are due by the end of February of the following year.
• Foreign Currency Salaries: For employees paid in foreign currencies, the current exchange rate for tax calculation in 2025 is LL 89,500 per USD.

Social Security Contributions

• Employer Contributions: Employers contribute a total of 14% towards social security, divided as follows:
  • 8% for maternity and sickness benefits (capped at LL 90 million monthly salary, equivalent to LL 7,200,000 maximum contribution)
  • 6% for family benefits (capped at LL 12 million monthly salary, equivalent to LL 720,000 maximum contribution)
• End-of-Service Indemnity: Employers also contribute 8.5% of total annual earnings towards the employee's end-of-service indemnity, with no ceiling.
• Employee Contributions: Employees contribute 3% of their salary for the medical scheme. This contribution is capped at LL 90 million monthly salary, resulting in a maximum monthly contribution of LL 2,700,000.
• Foreign Employees: Salaries of foreign employees are generally subject to all social security contributions except the end-of-service indemnity. They do not receive family allowance or medical reimbursement benefits.

Corporate Income Tax

• Corporate Tax Rate: The corporate income tax rate in Lebanon is 17% of business income.

Other Taxes and Regulations

• Value Added Tax (VAT): The standard VAT rate in Lebanon is currently 11%.
• Withholding Tax (WHT): A WHT of 10% applies to interest income. For non-resident WHT, the rates are 8.5% for services and 3.4% for other income as of April 1, 2024.
• Minimum Wage: As of the information available, the national minimum wage in Lebanon is LBP 675,000 per month. Please note that this information may be outdated due to the fluctuating economic situation.

This information is current as of February 5, 2025, and is subject to change due to potential updates in Lebanon's tax laws and regulations. It is recommended to consult with a tax advisor for the most up-to-date and personalized guidance.

In Lebanon, employee tax deductions encompass various elements, including income tax, social security contributions, and specific allowances. As of February 5, 2025, the following overview applies, keeping in mind that tax regulations can change.

Income Tax

• Tax Rates and Brackets: Progressive tax rates apply to employee income, with specific thresholds and percentages outlined in the annual budget laws. For 2025, the tax brackets are anticipated to be adjusted based on 2024's structure (detailed below). It's crucial to refer to the latest official publications for the precise 2025 brackets. The 2024 rates, applied from January 1st, 2024, onward, were: * 2% for annual income up to LBP 360,000,000 * 4% for income between LBP 360,000,001 and 900,000,000 * 7% for income between LBP 900,000,001 and 1,800,000,000 * 11% for income between LBP 1,800,000,001 and 3,600,000,000 * 15% for income between LBP 3,600,000,001 and 7,200,000,000 * 20% for income between LBP 7,200,000,001 and 13,500,000,000 * 25% for income exceeding LBP 13,500,000,000
• Family Deductions: Taxpayers are eligible for deductions based on family status. For the period from February 16, 2024, to December 31, 2024, the deductions were LBP 450,000,000 for the individual, an additional LBP 225,000,000 for a non-working spouse, and LBP 45,000,000 for each dependent child (up to five children). The exact figures for 2025 should be confirmed with updated official sources.
• Currency Conversion: Salaries paid in foreign currencies, as of April 1, 2024 are to be converted to Lebanese pounds at a set market rate (such as the Sayrafa rate) before taxes are calculated.

Social Security Contributions

• Employee Contribution: Currently set at 3%, this rate applies to the employee's salary, and employers are responsible for deducting and remitting this amount to the National Social Security Fund (NSSF). This information is valid as of February 5, 2025, and may be subject to change. It's important to confirm this with official sources.
• NSSF Contributions: In addition to the employee's 3% contribution, employers make contributions to different NSSF branches, covering areas such as family allowances, sickness and maternity benefits, end-of-service indemnities, and other allocations.

Allowances and Deductible Expenses

• Transportation Allowance: As of February 15, 2024, the daily transportation allowance increased to LL 450,000 for the private sector.
• Schooling Allowance: A yearly schooling allowance of up to LL 6,000,000 for a maximum of three children is deductible.
• Other Deductions: Additional deductions may be permitted for specific expenses, such as contributions to approved pension schemes, certain scholarships, end-of-service indemnities, and other employer-provided benefits within defined limits and conditions. These conditions can include approval from the Ministry of Labour and general applicability to all employees. Certain benefits, like those for midwives or those permanently disabled due to the Beirut Port explosion, might be exempt from payroll tax.

Employer Responsibilities

Lebanese employers are obligated to deduct the appropriate taxes and social security contributions from employee salaries and remit these payments to the relevant authorities. Specific deadlines for filing and payment exist and should be adhered to, referring to the latest Ministry of Finance decrees for the current year.

Additional Notes

It is highly recommended to consult official government resources, including the Ministry of Finance website and official gazettes, to obtain the most current and precise details regarding tax regulations, rates, deadlines, and any recent amendments. Consulting with a tax advisor is also advisable for personalized guidance and clarification.

In Lebanon, the standard VAT rate is 11%, applied to most commercial transactions.

VAT Rates and Thresholds

• Standard Rate: 11%

• Registration Threshold: LBP 5 billion in one to four consecutive quarters. Importers and exporters must register regardless of turnover. Businesses with turnover between LBP 100 million and LBP 5 billion in 2020-2023 can deregister if previously registered.

Filing and Payment

• Filing Frequency: Quarterly

• Deadlines: As of February 5, 2025, the deadline for Q3 2024 VAT declarations and payments is January 20, 2025, due to extensions granted by the Ministry of Finance. Generally, deadlines are subject to change by the Ministry of Finance and it is crucial to stay updated on the latest announcements.

Exempt and Zero-Rated Supplies

• Zero-Rated: Exports of goods and services, export-related services, and international transport.

• Exempt: Banking, financial, and insurance services; postal services; education; real estate transfers; medical services and equipment; precious metals and stones; betting and gaming; public transport; agricultural products (including livestock, seeds, feed, and pesticides); books, newspapers, and magazines; basic foodstuffs and baby food; diesel fuel; solar power equipment for electricity generation (as of December 31, 2023). Note exemptions can be time-sensitive.

VAT Calculation and Administration

The Sayrafa rate is used to calculate VAT when the price of goods or services is in foreign currency. It is important to follow any updates or clarifications issued by the Ministry of Finance regarding exchange rate usage for VAT calculations.

General Information on VAT in Lebanon

VAT in Lebanon is governed by VAT Law No. 7308 and subsequent amendments. It's crucial to consult updated official sources and seek professional advice for specific situations. The Lebanese tax system is subject to changes, and regulations can be complex, highlighting the importance of expert consultation. Businesses operating or planning to operate in Lebanon should carefully consider these regulations and stay informed about potential updates. Using a Lebanese Pound (LBP) to USD converter can be useful for businesses operating internationally.

Lebanon's tax system offers various incentives for businesses and individuals.

Corporate Tax Incentives

• Standard Corporate Income Tax Rate: 17% (a regionally competitive rate).

• Tax Exemptions: Full corporate income tax exemptions are available for specific industries and entities, including:

  • Holding companies
  • Offshore companies (though this regime may be subject to change)
  • Educational institutions
  • Hospitals
  • Cooperative associations
  • Trade unions
  • Local air and sea transport companies
  • Tourist institutions.

• Tripoli Economic Zone (TSEZ): Businesses established in the TSEZ can benefit from several exemptions, including:

  • Corporate income tax exemption for investments exceeding US$300,000 (equivalent in Lebanese pounds) with at least 50% Lebanese employees.
  • Exemptions from VAT, customs duties, and excise taxes on equipment and supplies remaining within the TSEZ.
  • Income tax exemption on employee salaries.
  • Exemption from property taxes for business buildings within the TSEZ.

• Package Deal Contracts (PDC): The Investment Development Authority of Lebanon (IDAL) may grant exemptions of up to 100% on both corporate income tax and project dividends for up to 10 years. Further reductions are available on land registration, work permits, and construction permit fees through negotiation with the government.

Individual Tax Incentives

• Family Deductions: Individuals can claim family deductions ranging from LL 450 million to LL 900 million.
• Transportation Allowance: LL 450,000 per working day.
• Severance Payment Exemption: Termination or severance payments made to employees between February 15, 2024, and December 31, 2025, are exempt from payroll tax.
• Progressive Income Tax Rates: Individuals and business partners are subject to progressive income tax rates from 4% to 21%. Exact thresholds are subject to change and require further research.

Other Tax Considerations

• No Local/Regional Taxes: Businesses are not subject to taxes at the local or regional level.
• Foreign Investment Neutrality: The Lebanese tax structure generally does not differentiate between foreign and domestic investments.
• Double Taxation Agreements: Lebanon has a network of double taxation agreements, although the specifics require further investigation.
• Tax Incentives Under Review: Lebanon is currently undergoing tax reform. Future changes to tax incentives and regulations are possible.

General Investment Incentives in Lebanon

• Investment Law No. 360 (2001, amended): Offers tax incentives for qualifying projects.
• Kafalat Guaranteed Loans: These loans benefit from interest rate subsidies provided by the Lebanese Treasury and administered by the Central Bank. These loans offer a partial guarantee to lenders, thus reducing risk and allowing them to offer businesses more favorable loan conditions.

Note: This information is current as of February 5, 2025, and might be subject to change due to ongoing economic developments and potential legal revisions in Lebanon. Consult with a tax professional for the most up-to-date and personalized advice.