Exemptions

Permanent Exemptions

The following are exempt from tax:

1. Educational institutions.
2. Hospitals, shelters and refuges that admit patients free of charge, and the nursing and ambulance institutions they own, within the limits of their net profits derived from public or private funds and donations.
3. Hospitals, shelters, refuges, homes for the elderly, dispensaries and clinics, as well as the nursing and ambulance institutions owned or operated by institutions, associations or entities that do not seek profit, are exempt from tax on all their profits.
4. Mental health hospitals and tuberculosis clinics.
5. Cooperative consumer companies, unions and agricultural cooperatives, provided they do not have a commercial character.
6. Institutions and nurseries whose laws or bylaws do not provide for the distribution of profits among their founders, managers or partners.
7. Air and maritime navigation institutions, subject to reciprocity for foreign institutions in which Lebanese institutions have ownership.
8. Public utilities that do not compete with private institutions.
9. The public institution for encouraging investment in Lebanon.
10. Fees that warehouse operators may collect under Article 17 of the Warehouses Law and the remunerations provided for in Article 20 of the law issued by Decree No. 146/59 and its amendments, as well as compensations that may be paid by the State to warehouse operators.

Temporary Exemptions

First:

1. Income tax is exempted for a maximum period of ten years from the date of commencement of production for the profits of industrial institutions established in Lebanon as of 1980, provided that all the following conditions are met:
   • The factory must be established in one of the regions that the Government wishes to develop, as determined by decree adopted by the Council of Ministers.
   • The institution must aim to produce new goods and materials that were not produced in Lebanon before 1 January 1980. New goods and materials include products resulting from transforming raw materials into semi-finished or finished products, or transforming semi-finished products into finished products, as well as new goods and materials produced through assembly or installation industries using imported unfinished goods or materials.
   • The value of the fixed assets owned by the new institution in Lebanon and allocated to the production of the new goods and materials must not fall below two million Lebanese pounds.
   • The total profits exempt from income tax during all exemption years must not, in any case, exceed the value of the fixed assets employed on the date of commencement of production before depreciation.
2. Industrial institutions wishing to benefit from the above provisions must notify the competent financial department in writing before commencing production, and attach to the notification the detailed documents and statements relating to the value of their fixed assets and the specifications of their production.
3. The exemption is granted by decree based on a proposal by 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 for a period exceeding the period provided for in the Commercial Code.
5. The competent financial department exercises permanent control over the institutions benefiting from the provisions of this law in order to verify that the required conditions continue to be met.

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 five years from their date of establishment, provided that the following conditions are met:
   • At least thirty million Lebanese pounds of the capital must be paid up. Specialized banks registered on the list of banks as of 30/6/1977 are exempt from this condition.
   • The banks’ operations must be limited to the exercise and management of medium- and long-term lending operations, direct investments, shareholdings, purchase and sale of securities for their own account or for the account of others, and the issuance of short- or long-term guarantees against sufficient collateral.
   • They must refrain from accepting deposits or loans for a period of less than six months. However, the bank may grant the depositor the possibility of withdrawal before maturity. If the depositor exercises this right, an interest of 5% is automatically imposed in favor of the bank, calculated on the withdrawn amount and for the remaining period of the deposit.
2. The National Bank for Agricultural Development is exempt, pursuant to Legislative Decree No. 66 dated 25/6/1977, from any tax on its income, including profits earned and interest received, 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 virtue of law, provided that the private institutions benefiting from this exemption are not in competition, and subject to the required conditions.
4. The recognized religious communities must be listed in Annex No. 1 of Resolution No. LR/61 dated 13/3/1936.
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 virtue of law, and must be used or intended for use solely for achieving the specific purposes of the religious community or legal person.

Partial Exemptions

Industrial institutions may deduct a certain part of their annual net profits allocated, as of 1980, to their own investments, subject to the following conditions:

1. The investment must be made for one of the following purposes:
   • Establishing new industrial equipment that increases the productive capacity of the institution in quality or quantity. Temporary investments, such as equipment or installations set up for a specific workshop and removed upon its completion, or materials and supplies imported under the temporary admission regime, are not considered eligible investments.
   • Constructing housing for employees and workers of the institution in accordance with the Housing Law and its implementing 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 purposes other than those for which it was intended.
     • The annual rent collected for one dwelling does not exceed 15% of the total annual salaries, wages and permanent benefits of the employee or worker.
     • The provisions of exceptional rent laws do 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 wish at least one month before commencing the investment, indicating the year in which they wish to begin deducting from their profits, and attaching detailed statements of the investments they intend to make, otherwise they lose the right to benefit from the exemption.
3. The investment amounts, even if financed fully or partially by loans, are considered approved and deductible from profits, taking into account the provisions relating to their actual cost basis and the mechanisms for implementing the investment.
4. If the above conditions are met, the amounts invested in each production operation are deducted successively within the maximum limits from the profits of the year in which the financial investment is made and the following three years. This percentage may reach a maximum of 75% if the investment is made in one of the regions that the Government wishes to develop and that are determined by decree adopted by the Council of Ministers.
5. The percentage deducted from annual net profits and used to cover self-investments remains exempt from income tax under the above provisions, provided that the deduction does not exceed the four-year limit mentioned above for each investment operation.
6. In the event of violation of the provisions of paragraph (5) of item “First” of Article 5 repeated of the Income Tax Law, relating to failure to invest the amounts deducted 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 non-invested deducted amounts is imposed for each month, with any fraction of a month considered a full month, starting from the year following the business year in which those amounts were deducted from profits, in addition to a late payment penalty of one percent (1%) for each month of delay, with any fraction of a month considered a full month.