Exemptions

Permanent Exemptions

The following are exempt from tax:

1. Educational institutions.
2. Hospitals, orphanages, shelters that admit patients free of charge, and similar nursing and emergency aid institutions, within the limits of their net profits derived from public or private funds and subsidies.
3. Hospitals, orphanages, shelters, homes for the elderly, dispensaries, health institutions and similar nursing and emergency aid institutions that are owned or operated by non-profit institutions, associations, or bodies are exempt from tax on all their profits.
4. Mental health hospitals and tuberculosis sanatoriums.
5. Cooperative consumer companies, unions, and agricultural cooperatives, provided that they do not have a commercial character.
6. Agricultural investors, unless they display the produce of their lands, the livestock they raise there, or the products of such livestock in a place designated for sale, or sell them after processing.
7. Air and maritime navigation institutions, subject to reciprocity for foreign institutions belonging to countries where Lebanese institutions operate.
   Public utilities that do not compete with private institutions.
8. Tourism institutions of a craft nature.
9. Fees that may be collected by mukhtars pursuant to Article 17 of the Mukhtars Law, the remuneration provided for in Article 20 of the law issued by Decree No. 146/59 and its amendments (inheritance duty), and compensations that may be paid by the State to mukhtars.

Temporary Exemptions

First:

1. The profits of industrial institutions established in Lebanon as of 1980 are exempt from income tax for a maximum period of ten years from the date production begins, provided that all the following conditions are met and within the maximum limit stated in paragraph “D” below.
   • The factory must be established in one of the areas that the government wishes to develop, as determined by a decree issued by the Council of Ministers.
   • The institution must aim to produce new goods and materials that were not produced in Lebanon before January 1, 1980. New goods and materials mean those that were not previously produced in Lebanon, including those resulting from the conversion of raw materials into semi-finished or finished products, the conversion of semi-finished products into finished products, and new goods and materials produced by assembly industries by completing the manufacture of unfinished materials or goods imported from abroad.
   • The value of the fixed assets owned by the new institution in Lebanon and allocated to the production of new goods and materials must not be less than two million Lebanese pounds.
   • The total profits exempt from income tax during all exemption years must not, under any circumstances, exceed the value of the fixed assets before depreciation employed as of the date production begins.
2. Industrial institutions wishing to benefit from the above provisions must notify the competent financial department in writing before production begins, and attach to the notification the documents and detailed statements related to the value of their fixed assets and the specifications of their production.
3. The exemption is granted by decree upon the proposal of the Ministries of Finance and Industry and Petroleum.
4. The institution benefiting from the exemptions provided for in this law must submit to the competent financial department, within the deadline set for submitting annual business results declarations, all declarations and documents required under the Income Tax Law.
   It must also retain all accounting records and documents related to the exemption period for the period provided for in the Commercial Law.
5. The competent financial department exercises continuous supervision over institutions benefiting from the provisions of this law in order to verify their compliance with the imposed conditions.

Second:

1. Legislative Decree No. 50 dated 15/7/1983 exempted business banks and medium- and long-term credit banks from the income tax provided for in Chapter One of the Income Tax Law during the first seven years from the date of their establishment, provided that the following conditions are met:
   • The paid-up capital must be at least 30 million Lebanese pounds. Specialized banks registered on the list of banks before 30/6/1977 are exempted from this condition.
   • The purpose of the banks must be limited to using their revenues in medium- and long-term credit operations, direct investments, participations, purchase and sale of securities for their own account or for the account of others, and the issuance of medium- and long-term guarantees against sufficient collateral, as well as short-term guarantees provided that they relate to medium- and long-term operations.
   • They must refrain from accepting deposits or loans for a period of less than six months. However, the bank may give the depositor the possibility of withdrawal before maturity. If the depositor uses this right, interest at a rate of 5% shall be imposed automatically on the depositor in favor of the bank, calculated on the amount withdrawn and for the remaining period of the deposit.
2. The National Bank for Agricultural Development is exempted, pursuant to Legislative Decree No. 66 dated 25/6/1977, from any tax on its income, including the profits it earns and the interest it receives during the first ten years from the date of its final establishment.
3. Law No. 210 dated 26/5/2000 exempted legally recognized religious communities and every legal person belonging to them by law, provided that they do not compete with private institutions. To benefit from this exemption, the following conditions must be met:
4. The recognized religious communities must be listed in Annex No. 1 of Decision No. 61/LR dated 13/3/36.
5. The legal person must belong to the religious community pursuant to a provision in its personal status system having the force of law.

The funds and financial rights covered by the exemption must be owned or acquired by the religious community or by the legal person belonging to it by law, and must be used or prepared for use in order to achieve the specific purposes of the religious community or legal person, without any other purpose.

Partial Exemptions

Industrial institutions may cover, with a certain portion of their annual net profits, the amounts they allocate as of 1980 for their self-investments, subject to the following conditions:

1. The investment must be made to achieve one of the following purposes:
   • Establishing new industrial equipment that increases the institution’s production capacity in type or quantity. Investment in equipment or constructions of a temporary nature, such as those established for a specific worksite and removed when it ends, or in equipment and supplies imported under the temporary admission system, shall not be considered.
   • Building housing for employees and wage earners working in the institution in accordance with the Housing Law and its related regulations, provided that:
     • The housing remains owned by the institution for a period of not less than 12 years.
     • It is not used at any time for any purpose other than that for which it was prepared.
     • The annual rent collected for each dwelling does not exceed 15% of the total annual salaries and wages and permanent benefits of the employee or wage earner.
   • The provisions of exceptional wage laws shall not apply to these dwellings.
2. Industrial institutions wishing to benefit from the above provisions must notify the competent financial department in writing of their intention at least one month before starting the investment, specify the year in which they wish to begin deducting from their profits, and attach detailed statements of the investments they intend to make, under penalty of losing the right to benefit from the exemption.
   The commencement of investment is deemed to occur when the institution carries out any financial transaction arising from its final commitment with third parties in implementation of the investment purposes.
3. If the above conditions are met, the invested amounts in each operation are covered successively by deducting an amount whose maximum limit is 50% of the profits of the year in which the financial investment is made and the following three years. This percentage is raised to a maximum of 75% if the investment is made in one of the areas that the government wishes to develop, as determined by a decree issued by the Council of Ministers.
4. The percentage deducted from annual net profits and used to cover self-investments in accordance with the provisions above is exempt from income tax, provided that the deduction does not exceed the limits of the four years mentioned above for each investment operation.
5. In the event of violation of paragraph (5) of item “First” of Article 5 bis of the Income Tax Law, relating to failure to invest the deducted amounts from profits or breach of any of the conditions set for benefiting from the exemption, a penalty of one percent (1%) of the value of the deducted non-invested amounts shall be imposed for each month, with a fraction of a month considered a full month, starting from the year following the business year during which those amounts were deducted from profits, in addition to a late payment penalty, collection penalty, of 1% for each month of delay, with a fraction of a month considered a full month.