Tax Calculation

In partnerships, income tax is declared through the personal tax returns of the partners. Each partner must declare his share of the company’s profits or losses using the personal income tax declaration form.

The company itself submits the income tax declaration and the related schedules showing the company’s profits or losses, together with summaries of certain accounts and general information.

Calculation of the company’s profits or losses: Net profit is the total taxable revenues of the taxpayer after deducting all expenses and charges required for carrying out the commercial, industrial or professional activity.

• Deductible expenses and charges
• Non-deductible expenses and charges
• Reconciliation from accounting result to taxable result

Tax calculation for general partners and managing partners

A managing partner in a limited partnership or a general partner in a general partnership calculates his share in the company’s profits or losses according to his share in the company’s capital. He must also add all benefits received, including management fees, salaries and other amounts, and subject them to industrial and commercial profits tax.

Family deduction

The family deduction is the exempt amount granted to the taxpayer during the year:

• LBP 7,500,000 for the taxpayer.
• LBP 2,500,000 for the spouse if she does not work.
• LBP 500,000 for each child, up to a maximum of five children.

The taxpayer must verify the family situation and the conditions for granting the family deduction, within the legal limits.

Tax rates

Tax is calculated on the net profit remaining after the family deduction as follows:

• 4% on the taxable portion not exceeding LBP 9,000,000.
• 7% on the taxable portion exceeding LBP 9,000,000 and not exceeding LBP 24,000,000.
• 12% on the taxable portion exceeding LBP 24,000,000 and not exceeding LBP 54,000,000.
• 16% on the taxable portion exceeding LBP 54,000,000 and not exceeding LBP 104,000,000.
• 21% on the taxable portion exceeding LBP 104,000,000.

Calculation of profits for limited partners

A limited partnership must calculate its taxable result and show the reconciliation from accounting result to taxable result. It must calculate the share of limited partners according to their percentage in the company’s capital.

The profits attributed to limited partners are subject to declaration and tax assessment within the legal deadlines.

Taxpayers subject to the real profit method

Profits of capital companies, joint-stock companies, limited liability companies and partnerships limited by shares are subject to tax at a rate of 15%.

Net taxable profit is the total taxable revenues of the taxpayer after deducting all expenses and charges required for carrying out the commercial, industrial or professional activity.

• Deductible expenses and charges
• Non-deductible expenses and charges
• Reconciliation from accounting result to taxable result

Taxpayers mandatorily subject to the lump-sum profit method

Life insurance and savings institutions, as well as maritime, land and air transport institutions that are taxable and not exempt, are taxed on the lump-sum profit basis and may not request taxation on the real profit basis.

Insurance and savings institutions are taxed on their achieved result and may not reverse the method after using it.

Public works contractors are taxed on a lump-sum profit basis by applying a percentage to the amounts received for the works performed.

Taxable profit is determined by applying the lump-sum rate to revenues, and the tax is due in accordance with the applicable legal provisions.

Lump-sum profit rates

A holding company is subject to an annual lump-sum tax calculated on the total value of its capital plus reserves as follows:

• 6% on capital and reserves from 0 to LBP 50,000,000.
• 4% on capital and reserves from LBP 50,000,000 to LBP 80,000,000.
• 2% on capital and reserves exceeding LBP 80,000,000.

The tax may not exceed LBP 5,000,000 as a maximum.

This tax applies to the holding company starting from its first financial year, regardless of its duration.

Amounts received by a holding company from its subsidiaries in Lebanon for management expenses, services and similar matters are subject to tax at a rate of 5%, provided such expenses do not exceed 2% of the total revenues of the subsidiary operating in Lebanon.

Royalties received by a holding company from licensing patents or protected rights owned by it to institutions located in Lebanon are subject to tax at a rate of 10%.

Interest earned from loans granted to companies operating in Lebanon is subject to income tax on movable capital revenues at a rate of 10% if the loans are for less than three years.

Capital gains resulting from the disposal of shares or interests in Lebanese companies are subject to the tax provided for in Article 45 of the Income Tax Law if such shares or interests were owned by the company for less than two years.

• Profits of a holding company are not subject to profits tax.
• Distributions made by a holding company are not subject to income tax on movable capital revenues.
• Interest paid on loans granted to subsidiaries is exempt, provided that the loan term is three years or more.

The holding company must declare its employees and workers

An offshore company is subject to an annual lump-sum tax starting from the beginning of the financial year, regardless of its duration.

Capital gains tax under Article 45 applies to the fixed assets owned by offshore companies.

Dividends distributed by offshore companies are exempt from income tax on movable capital revenues. Income from deposits and investments of funds outside Lebanon, as well as interest received abroad, is also exempt.

Offshore companies are exempt from tax on amounts paid to legal or natural persons outside Lebanon for services performed abroad.

Salaries and wages of employees working abroad are exempt, while salaries and wages of employees working in Lebanon remain subject to declaration.

Shares of the company and its shareholders are exempt from all inheritance, transfer and related taxes and duties.

If an offshore company violates the provisions of the law, the Income Tax Law provisions applicable to joint-stock companies apply, and all its profits become subject to profits tax at the rate of 15%.