Tax Declarations & Taxation


Our tax and advisory services are presented to all types of businesses, corporate, family business & individuals. Our focus is to provide our client with constructive assistance and solutions by understanding their needs and helping them achieve suitable tax strategy and solutions.


Our services include the following:
- Indirect Taxation
- Direct Taxation


A- DIRECT TAXATION
I- Income and salary tax
1- Income Tax (Direct) → Part I Tax
2- Salary Tax (Direct) → Part II Tax
3- Income from movable capital taxation → Part III Tax
Non resident taxation (Direct) → Other Taxes.
II- Built-Property taxation


B- INDIRECT TAXATION
VAT


C- OTHER SERVICES
Reminder of most important deadlines


I- Income and salary tax


1- Income Tax (Part I)
We provide services to the different kinds of companies in Lebanon whether fund companies or Individuals. We follow the procedure from the constitution of the company and prepare the commencement of work plus the Personal Identification of each Partner and then the issue the Financial Registration Certificate according to the legal time limits.
Our taxation department also prepares the financial declaration of companies after tax assessment.

2- Income Tax (Part II)
Our taxation department also provides the salary tax declaration (R10) for employees and managers of companies, the declaration is presented every 3 months during the legal time limits and cover the payroll of the company as presented to the social security department, The tax is calculated and deducted from every employee salary on a monthly basis.
Every employee will be registered at the ministry of finance by preparing the forms R3, R3-1 and R4.
A yearly declaration of total salaries paid will also be prepared by the end of February of the year following (R-5).
If an employee earns income from another job a special declaration will also be prepared at the end of April of the year following (R-8).


3- Income Tax (Part III)
Income on moveable capital is defined as:
 Various income resulting from shares, shares in interest and founders’ share issued by joint stock companies or financial, industrial, commercial, civil And other publicor private bodies;
 Directors’ fees;
 Fees paid to shareholders for attending general assemblies;
 Sum taken out of the reserves or profits for redeeming or depreciating shares, shares in interest and founders’ shares before the suspension of activities;
 Distribution of reserve funds and profits effected in the form of free shares or in any other form
 Interest proceeds and revenues of debentures and loans granted by the state, the municipalities and other public or private bodies and institutions and by companies;
 Premiums paid to creditors and debenture holders;
 Interest on security debts, their proceeds and revenues;
 Interest on preferential and ordinary debts, their revenues and income, unless resulting from commercial operations;
 Interest on deposits and monies in trust, whatever be the trust and whoever may be the owner thereof; and current accounts, the proceeds and revenues thereof.


Rates
- Tax on movable capital: 10%, withheld at source on the gross receipts without any deduction or payable when filling the annual tax return.
- Tax on commercial, industrial profits and professional income: on individuals and partnerships carrying on commercial and industrial activities.
Assessed on real profits for taxpayers that maintain regular accounts, and according to the lump-sum profits or the estimated profits for other taxpayers (small businesses) progressive: 4% to 21% (see profit tax).
- Tax on wages and salaries (in million LBP):
 Up to 6 2%
 6 – 15 4%
 15 – 50 7%
 30 – 60 11%
 60 – 120 15%
 Over 120 20%

Non Resident Taxation: We assist in deducting the payment made to non residents who are subject to 7.5% tax that is individuals who do not have a work place in Lebanon whether Lebanese or foreign. Also a tax of 25% is imposed when the sums paid relate to the business activity.


II- Built-Property taxation
We also assist in the preparation and calculation of built –property tax for different commercial and residential buildings.


B- Indirect taxation
Value Added Tax (VAT)
We assist in the registration of companies and individuals at the VAT department and they reach the necessary turnover limit of 150 million LBP, or if the company voluntarily apply for being taxable. We also assist in repairing the VAT declaration every three months. The tax is due at the date of supply of goods and a service, the tax rate is 10%, and is calculated at a quarterly tax period.
A special report is presented when there is an excess of deductible tax, the exporters have the right to claim at the end of any tax period a refund of the excess deductible tax covering the period, according to criteria to be determined in by a degree issued upon the proposal of the minister of finance, as for the taxable person who cease to be taxable, he has the right to claim a refund of the excess of the input deductible tax upon the approval of his deregistration claim.
The tax shall be paid in a single payment, within the deadline of the periodical tax return i.e. within 20 days from the end of each tax period, covering the taxable transactions fulfilled through the mentioned period, after deducting the amount of the deductible tax. In case the tax authority charged additional or supplementary amounts, the tax shall be paid according to reassessments notes within one month from the date of notification of these assessments notes to the taxable person.
The tax shall be paid to any of the accepted private banks or its operative branches in Lebanon according to rules appointed by the ministry of finance.


C- Other Services
We also prepare and present the following:
- Non practice Declaration
- Cessation of practice Declaration


*Reminder of the most important deadlines.
___________________________________________________________________________________________________________________
-Two months from work commence                     Declaration of commencing work                      Forms M10 & M11
Before February1                                              - Prepayment                                                      Form S1 
                                                                        -Annual Declaration of business activities            Forms F1, F3, R5 & salaries schedules. 
                                                                        -Declaration of cessation of practice                    Form M7
___________________________________________________________________________________________________________________
From 1 to 15 April
From 1 to 15 July                                               Settlement of payroll tax for each                        Forms R10 and S1
From 1 to 15 October                                         quarter of the year
From 1 to 15 January
___________________________________________________________________________________________________________________
Before June 1                                                     Personal declaration of employees                     Forms R8 
                                                                         who work at more than one job.
___________________________________________________________________________________________________________________
Before end of September                                    Settlement of lump-sum tax
___________________________________________________________________________________________________________________
One month from the date                                    Declaration of work cessation                             Form M6
of work cessation
___________________________________________________________________________________________________________________
Before the end of the year                                   Amendment of data/information                          Form M5

LEBANON TAX RATE

Income Tax Rate : Progressive

Corporate Tax Rate : 15%

VAT Rate : 10%



PERSONAL INCOME TAX

Lebanon individual income tax is progressive up to 20%.

Individual income tax rates on wages and salaries are as follows:
Income (LBP) Tax Rate
1 to 6,000,000 2%
6,000,001 to 15,000,000 4%
15,000,001 to 30,000,000 7%
30,000,001 to 60,000,000 11%
60,000,001 to120,000,000 15%
More than 120,000,001 20%
Income tax law imposes a tax on all wages, salaries and other remuneration and consideration of services rendered in Lebanon. The tax is imposed on an income received in a preceding year after deduction of family allowances. The fiscal year is a Gregorian calendar year.


CORPORATE TAX

Lebanese resident companies are subject to Lebanese corporate tax on profits of any business carried on in Lebanon at a tax rate of 15%.
Individuals and Partners in a private company are subject to tax on profits, after deduction of family allowances, on a progressive scale as follows:
4% on income below LBP 9,000,000
7% on income bracket between LBP 9,000,000 and LBP 24,000,000
12% on income bracket between LBP 24,000,000 and LBP 54,000,000
16% on income bracket between LBP 54,000,000 LBP 104,000,000
21% on income bracket above LBP 104,000,000
Business income tax is imposed on net business income earned in the preceding year. Tax Returns of limited liability companies must be filled by 31st of May in the year following the year of income.

CAPITAL GAINS TAX

Gains on the sale of fixed assets are principally taxed at a rate of 10%. However, gains, or a proportionate part thereof, are exempt of tax where the proceeds are invested in the construction of flats for company staff. Both ordinary and capital losses may be used to off-set against capital gains. Taxable losses may be carried forward for 3 years. The carry back of losses is not permitted .

BRANCH PROFITS TAX

Branches of foreign companies are liable to the same income tax as Lebanese companies in respect of their profits realized in Lebanon. Profits earned by branches of foreign companies are deemed to be distributed dividends and are subject to 10% distribution tax on the amount of the profit after deduction of business income tax.


OTHER TAXES

Stamp duty is payable on documents at a rate of 0.3% unless otherwise provided by law. The general rate applies to issue share capital, leases and other agreements, etc. The rate is reduced to 0.15% in respect of commercial bills.
SOCIAL SECURITY TAXES
Contributions to social security fund are as follows:
• Family allowances: 6% of the employee monthly salary with a ceiling of LBP 1,500,000 per month.
• Sickness: 9% of the employee monthly salary with a ceiling of LBP 1,500,000 month out of which the employee pays 2%.
• Termination indemnity: 8.50% of the employee's total monthly salary

DETERMINATION OF TAXABLE INCOME

Stamp duty is payable on documents at a rate of 0.3% unless otherwise provided by law. The general rate applies to issue share capital, leases and other agreements, etc. The rate is reduced to 0.15% in respect of commercial bills. SOCIAL SECURITY TAXES Contributions to social security fund are as follows: • Family allowances: 6% of the employee monthly salary with a ceiling of LBP 1,500,000 per month. • Sickness: 9% of the employee monthly salary with a ceiling of LBP 1,500,000 month out of which the employee pays 2%. • Termination indemnity: 8.50% of the employee's total monthly salary


Taxable profits consist of all revenues earned by the enterprise after deduction of all charges necessary for carrying out the business.


DEPRECIATION


The amount of annual depreciation of fixed assets is fixed by the Ministry of Finance. The taxpayer may choose the rate he or she regards as appropriate, providing it falls within these minimum and maximum depreciation rates. Depreciation rates vary from 2% to 30% depending on the type of assets. Depreciation of land and goodwill is not acceptable for tax purposes.


STOCK / INVENTORY

Inventory of goods is valued at cost for tax purposes.


DIVIDENDS

Income tax law provides tax on distribution of dividends by Lebanese limited liability companies at a rate of 10% of the dividend paid. The distribution tax is payable regardless of whether the paying company is exempt from business income tax. Under certain conditions the rate is reduced to 5%.


INTEREST DEDUCTIONS

Interest on business loans is normally deductible.


LOSSES

Losses can be carried forward for a period of three years following the year in which they were incurred.

FOREIGN SOURCED INCOME

Income tax in Lebanon is territorial in general. Only profits realized in Lebanon and income derived from an activity in Lebanon is subject to Lebanese income tax.


TAX INCENTIVES

The following enterprises are exempt from corporate tax: education institutions, co-operative associations, trade unions, Lebanese maritime and airline companies, public institutions which do not compete with the private sector, holding companies, and offshore companies.

Medium and long-term credit banks are exempted from corporate tax in respect of the first seven years of operation.

Offshore companies are liable to an annual lump sum of LBP 1,000,000 that is to be paid to the income tax department.

HOLDING COMPANIES

The amount of annual depreciation of fixed assets is fixed by the Ministry of Finance. The taxpayer may choose the rate he or she regards as appropriate, providing it falls within these minimum and maximum depreciation rates. Depreciation rates vary from 2% to 30% depending on the type of assets. Depreciation of land and goodwill is not acceptable for tax purposes. Inventory of goods is valued at cost for tax purposes. Income tax law provides tax on distribution of dividends by Lebanese limited liability companies at a rate of 10% of the dividend paid. The distribution tax is payable regardless of whether the paying company is exempt from business income tax. Under certain conditions the rate is reduced to 5%. Interest on business loans is normally deductible. Losses can be carried forward for a period of three years following the year in which they were incurred. Income tax in Lebanon is territorial in general. Only profits realized in Lebanon and income derived from an activity in Lebanon is subject to Lebanese income tax. The following enterprises are exempt from corporate tax: education institutions, co-operative associations, trade unions, Lebanese maritime and airline companies, public institutions which do not compete with the private sector, holding companies, and offshore companies. Medium and long-term credit banks are exempted from corporate tax in respect of the first seven years of operation. Offshore companies are liable to an annual lump sum of LBP 1,000,000 that is to be paid to the income tax department.


Holding companies are exempt from tax on profits and tax on dividend distributions. They are subject to a tax on capital capped at LBP 5, 000, 000 a year. Capital gains derived from the sale of investments in a Lebanese subsidiary or associate are exempt if the investments are held for more than 2 years.

Holding companies are subject to an annual tax computed on its total share capital plus reserves as follows:

6% on the first LBP 50,000,000
4% on the second LBP 30,000,000
2% on amounts exceeding LBP 80,000,000 providing that the total tax amount does not exceed LBP 5,000,000.

In addition, certain industrial activities are exempt when they relate to the economical development of the country and they fulfill certain legal requirements.


TAXATION BASED ON TURNOVER

certain enterprises are not taxed on the actual net profits realized but apply a percentage of the annual turnover to arrive at their taxable profits. This is the case for:
- insurance companies
- contractors, in respect of sums received from work undertaken for the account of governmental institutions.

TAX ON INTERESTS RECEIVED

Interest received from bank deposit accounts, certificates of deposit, Lebanese treasury bills, debentures; etc is subject to a tax of 5%.


Taxable profits consist of all revenues earned by the enterprise after deduction of all charges necessary for carrying out the business.

RELATED PARTY TRANSACTIONS

Any income indirectly transferred abroad to an enterprise established outside Lebanon, which controls or is controlled by the Lebanese corporation, may be added back to taxable income by the tax authorities unless it is at arm's length transaction.

WITHHOLDING TAX

Remuneration paid to non-residents for services rendered in Lebanon are subject to a withholding tax at rate of 7.50%. This tax rate is reduced to 2.25% when the sums paid relate to business activities.
Dividends paid to nonresident are subject to a 10% withholding tax unless the rate is reduced under a tax treaty.
Interest paid to a nonresident is subject to a 5% or 10% withholding tax unless the rate is reduces under a tax treaty .
Branch remittance tax – In addition to being subject to the normal corporate income tax rate, profits generated by a branch of a foreign entity are subject to an additional 10% tax.

ACCOUNTING PRINCIPLES AND FINANCIAL STATEMENT

Holding companies are exempt from tax on profits and tax on dividend distributions. They are subject to a tax on capital capped at LBP 5, 000, 000 a year. Capital gains derived from the sale of investments in a Lebanese subsidiary or associate are exempt if the investments are held for more than 2 years. Holding companies are subject to an annual tax computed on its total share capital plus reserves as follows: 6% on the first LBP 50,000,000 4% on the second LBP 30,000,000 2% on amounts exceeding LBP 80,000,000 providing that the total tax amount does not exceed LBP 5,000,000. In addition, certain industrial activities are exempt when they relate to the economical development of the country and they fulfill certain legal requirements. certain enterprises are not taxed on the actual net profits realized but apply a percentage of the annual turnover to arrive at their taxable profits. This is the case for: - insurance companies - contractors, in respect of sums received from work undertaken for the account of governmental institutions. Interest received from bank deposit accounts, certificates of deposit, Lebanese treasury bills, debentures; etc is subject to a tax of 5%. Taxable profits consist of all revenues earned by the enterprise after deduction of all charges necessary for carrying out the business. Any income indirectly transferred abroad to an enterprise established outside Lebanon, which controls or is controlled by the Lebanese corporation, may be added back to taxable income by the tax authorities unless it is at arm's length transaction. Remuneration paid to non-residents for services rendered in Lebanon are subject to a withholding tax at rate of 7.50%. This tax rate is reduced to 2.25% when the sums paid relate to business activities. Dividends paid to nonresident are subject to a 10% withholding tax unless the rate is reduced under a tax treaty. Interest paid to a nonresident is subject to a 5% or 10% withholding tax unless the rate is reduces under a tax treaty . Branch remittance tax – In addition to being subject to the normal corporate income tax rate, profits generated by a branch of a foreign entity are subject to an additional 10% tax.


IFRS, Financial statements must be prepared annually.


PENALTIES

Penalties range from 10% per month up to 100%.

PERSONAL TAXATION

Resident for more than 183 days in a year and nonresident individuals are taxed only on Lebanese- source income.
Married persons are taxed separately; joint assessment is not permitted.
Taxable income comprises income from employment, income and investments income.
Capital gains -10%
Wages and salaries are taxed at progressive rates up to 20%. The business income of an individual is taxed at progressive rates up to 21%. Dividend income and other income from movable capital are taxed at 10%.

                     
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