Lebanon Tax & Business Guide - Deloitte

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Basic facts
Population 3.6m Inflation 4.0% (2006)*
Main languages Arabic (official), English, French GDP per head US$5,540 (2006)*
Currency Lebanese pound (LBP) GDP growth -6.4% (2006)*
GDP sources 12% agriculture, 21% industry, 67% services
*Economist Intelligence Unit estimates.
Political environment

Lebanon is a parliamentary republic. A unicameral National Assembly is evenly divided between Muslims and Christians. The president, currently Emile Lahoud, is head of state and is elected for a six-year term by the National Assembly. The presidentÌs term was extended under exceptional circumstances in 2004 for three years.

The next elections are due in November 2007 (presidential) and May 2009 (legislative).
Foreign trade and investment
Exports US$2.8bn (2006)* Imports US$8.4bn (2006)*
*Economist Intelligence Unit estimates.

Leading export markets: Switzerland, the UAE and Saudi Arabia.

Major exports: Jewellery, inorganic chemicals and various consumer goods.

The Investment Development Authority of Lebanon (IDAL), a public agency responsible for promoting investments in the country, has a Ïone-stop shopÓ service to issue permits and licences for investors, and provides investment incentives such as tax exemptions, subject to the approval of the Council of Ministers.
Business and financing
Business forms Joint stock company, limited liability company, holding company

Other forms of business organisation are offshore companies, limited partnerships and general partnerships.

Foreign investors may establish Lebanese companies, participate in joint ventures, or establish local branches or subsidiaries of their company, including holding and offshore companies, which are subject to special regulations. Specific requirements apply for real estate companies or for those owning property in excess of 3,000 sq metres. Acquiring shares in banks and financial institutions in excess of 5% of the share capital requires the approval of the Banque du Liban (the central bank).
Labour environment
Unemployment rate Not recorded Minimum wage LBP 300,000 (monthly)

Lebanon has a Federation of Labour Unions (CGTL), recognised by the government, whose membership is limited exclusively to Lebanese workers. The CGTLÌs activities are mainly limited to demanding cost-of-living increases and other social benefits.

The minimum wage indicated above is a notional amount.
Taxation
Corporate tax
Main rate 15%

Resident and non-resident companies are taxed only on income sourced in Lebanon. Foreign companies are subject to Lebanese tax if they have a permanent establishment in Lebanon or derive income from a permanent establishment. Joint stock and limited liability companies are taxed at a flat rate of 15% on their business income. A distribution tax is payable, amounting to 10% of the distributed profits of joint stock and limited liability companies, except for joint stock companies listed on the Beirut Stock Exchange, or companies with a 20% shareholding by foreign companies whose shares are listed in their home countries, in which case the tax on dividends is reduced to 5%.
Individual tax
Progressive rates to 20% on salaries

Resident and non-resident individuals are taxed only on their Lebanese-source income. Wages and salaries are taxed at progressive rates to 20%. Business income of individuals and general partnerships is taxed at progressive rates up to 21%. Dividend income and other income from movable capital are taxed at 10%.
Capital gains
Taxed at 10%

Capital gains are taxed at a rate of 10%.
Indirect tax
VAT standard rate 10%

Value-added tax (VAT) applies to most transactions at a rate of 10%. Exemptions include exports, basic foodstuffs, agricultural inputs, banking and financial services, insurance, medical and educational services, and letting of residential property.

Registration is compulsory for businesses with an annual taxable turnover of LBP 150m, and voluntary registration is possible for businesses with turnover below this amount.
Tax administration and compliance
Tax year Companies: accounting/calendar year; Individuals: calendar year

Tax is assessed on income of the preceding year. Companies may elect to use their accounting period rather than the calendar year. Tax returns of joint stock and limited liability companies are due by May 31st following the end of the income year. Other taxpayers must file a return by March 31st following the end of the income year.
Additional tax information
Withholding taxes Dividends 10%, Interest on bank deposits 5%, Interest in general 10%, Interest on bonds and debentures 5%, Royalties 7.5%. The withholding tax rates may be reduced under an applicable tax treaty.
Tax treaties Lebanon has concluded more than 20 tax treaties.
Dividends Dividends received by residents and non-residents are taxed at 10%.
Revenue protection There are no transfer-pricing or anti-haven (CFC) rules.
Groups There is no provision for group taxation.
Incentives Holding companies; offshore companies; large projects subject to IDAL/government approval, in addition to subsidised funding for tourism, agricultural and industrial projects.
Other taxes Inheritance tax, Stamp duty