Income Tax

The tax covers the profits of commercial, industrial and craft enterprises and free professions, as well as the profit of any activity yielding income not subject to another income tax. No income is exempt from the tax except by an express provision of law.

The tax is assessed in the name of natural and legal persons, whether resident in Lebanese territory or abroad, on the total profits they realise in Lebanon.

The following are among the persons liable to this tax:

1. 1)Companies, of whatever type and purpose.
2. 2)Natural or legal persons:
3. 3)Those who act as intermediaries in the purchase or sale of real estate and commercial establishments, or who purchase them in their own name for resale.
4. 4)Those who operate a commercial or industrial establishment equipped with furniture or tools necessary for its exploitation, whether the lease covers all or part of the intangible elements of the establishment, or none of them.
5. 5)Those who benefit from the proceeds of the exploitation of underground resources.
6. 6)Brokers, agents, intermediaries and, in general, any natural or legal person who acts as intermediary in the purchase or sale of any type of assets.
7. 7)Any natural or legal person who derives a profit from any income-producing activity not subject to another income tax.

The tax covers salaries, wages, emoluments, allowances, retirement pensions, whether public or private, and life allowances accruing in Lebanese territory on behalf of:

1. 1)A public fund, to any person resident in Lebanon or abroad.
2. 2)A private fund, to any person resident in Lebanon, and also to any person resident abroad in respect of services rendered in Lebanon.

The tax on income from movable capital covers the various revenues, profits, interest and proceeds of such capital, whatever their denomination or the nationality of the institutions that produced them or the place of residence of those to whom they accrue, provided they are received in Lebanon or accrue to a person resident therein. These revenues, profits, interest and proceeds include in particular:

1. 1)Revenues of all types arising from shares, founders' shares and interest shares issued by joint stock companies, or financial, industrial, commercial and civil establishments, and other public and private bodies.
2. 2)Attendance fees and directors' fees drawn from profits.
3. 3)Attendance fees of shareholders at general assemblies.
4. 4)Amounts drawn from reserves or profits for the redemption or amortisation of shares or founders' shares before cessation of activity.
5. 5)Distributions of reserve funds and profits in the form of bonus shares or any other form.
6. 6)Interest, proceeds and revenues from bonds and loans(4) issued by the State, municipalities and other public and private bodies and companies.
7. 7)Lottery prizes and draws paid to creditors and bondholders.
8. 8)Interest, proceeds and revenues from secured debts.
9. 9)Interest, proceeds and revenues from civil loans and from privileged and ordinary debts, unless arising from commercial transactions.
10. 10)Interest, proceeds and revenues from insurances and cash deposits, whatever the deposit and whoever the holder, including current accounts.
11. 11)The tax provided for in this article is imposed even if the company, institution, body or utility was exempt from tax prior to the issuance of this Legislative Decree under an agreement with the State or special statutory provisions.

Interest, proceeds, profits and revenues derived from the exercise of a profession are subject to the Part One tax. In all other cases, the tax on income from movable capital covers every profit, revenue or capital income not subject to another income tax. Only items expressly exempt by law are excluded.(1)

Every taxpayer is entitled to object to the taxes imposed on him pursuant to this Legislative Decree if he considers them erroneous or excessive. Objections to these taxes must be lodged with the competent financial departments within two months:

1. 1)From the date of publication in the Official Gazette announcing that the basic assessment schedules have been placed in collection, where the assessment subject to the objection is included in those schedules.
2. 2)From the date of notification of the personal notice, where there are additional assessments or supplements or deductions independent of the basic schedules.

If the objection filed pursuant to the preceding article satisfies all formal conditions and the grounds contained therein are well-founded in fact and in law, the competent department shall correct the assessment by means of monthly schedules and notify the summary thereof to the person concerned by registered letter with acknowledgement of receipt. If the competent financial department considers the objection unfounded, it notifies the person concerned accordingly and refers the objection, together with its opinion, to the special committee provided for in the following article for examination and decision. In all cases, the head of the competent department must decide on the objection, or refer it with his opinion to the committee, within six months of the date of its filing at the latest.

A decree shall constitute, in each province, one or more primary committees to examine and decide on the objections referred to above, composed of: - A judge appointed on the proposal of the Minister of Justice, as chairman. - A civil servant from the Ministry of Finance belonging to at least the third category, appointed by the Minister of Finance, as member. - A representative of the Chamber of Commerce and Industry, appointed on the proposal of its president, or a representative of the provincial council or the municipal council, appointed by the Governor on the proposal of the Minister of Interior where no Chamber of Commerce exists, as member. - The head of the Income Tax Department or his representative, as rapporteur.

A tax inspector (first grade) from the competent department is placed at the disposal of the committee as secretary; he may stand in for the rapporteur when needed, but neither he nor the rapporteur may participate in the vote. The procedural rules applicable before the administrative courts, relating to the exchange of briefs, time limits and verification, apply before this committee at all stages of proceedings, except with respect to the government commissioner.

The rapporteur must notify the committee's decision to the competent financial department and to the taxpayer within fifteen days of the date of its issuance. Both the financial department and the taxpayer are entitled to appeal this decision before the Council of State within twenty days of the date of notification.

Appeals are lodged directly before the Council of State. Objections may be lodged within two months of the date of notification of the administrative decision. Taxpayers whose objections were rejected for failure to comply with the legal deadline may benefit from the new time limit.

Acceptance of the appeal filed by the taxpayer is conditional on the deposit of a security equal to five percent (5%) of the amount of the tax objected to. Any appeal not accompanied by a receipt proving payment of the security is rejected on formal grounds. The security, together with the court fees, is paid into the fund held at the Council of State within the prescribed appeal period.

If the Council of State's decision is entirely in the taxpayer's favour, he is entitled to recover the security referred to in the preceding article. If the decision is entirely in the Treasury's favour, the security becomes a vested right of the Treasury. If the decision is partially in the taxpayer's favour, the security is returned only in proportion to the tax that the decision orders to be cancelled.

The following are exempt from tax: (2)

1. 1)Educational institutes.
2. 2)Hospitals, morgues and shelters that admit patients free of charge, and similar nursing and first-aid establishments, within the limits of the net profits derived from public or private funds and grants.
3. 3)The following text was added to paragraph 2 of Article 5 by Law No. 85/7 of 10/8/1985 (Budget Law 1985):
4. 4)Hospitals, morgues, shelters, homes for the elderly, dispensaries, sanatoria and similar nursing and first-aid establishments, owned or operated by non-profit institutions, associations or bodies, are fully exempt from tax on their profits.
5. 5)State-owned psychiatric hospitals.
6. 6)Consumer cooperatives, trade unions and agricultural cooperatives with a commercial character.
7. 7)Foreign investors, to the extent that they sell in Lebanon, during the harvest season, the crops and livestock they have raised there, and do not trade in them after the harvest period has ended.
8. 8)National maritime navigation companies, provided that the home country of foreign companies accords the same treatment to Lebanese companies (reciprocity condition).
9. 9)Public utilities that do not compete with private enterprises.(3)
10. 10)Tourist establishments of a craft character. [Text added by Legislative Decree 58/67 of 5/7/1967]
11. 11)Fees that notaries are entitled to collect pursuant to Article 17 of the Notaries Law, the compensation referred to in Article 20 of Law No. 59/146 known as the Transfer and Inheritance Tax Law, and compensation paid by the State to notaries. [Text added by Law 392/2002 of 8/2/2002]

Article 5 bis — Investment of Profits of Industrial Establishments [Added by Law 80/27 of 19/7/1980]

First:

1. 1)Industrial establishments may, at their own discretion and as from 1980, allocate a fixed portion of their annual net profits to investment in their fixed assets, subject to the following conditions:
2. 2)The investment must be aimed at creating new industrial fixed assets that will increase the productive capacity of the enterprise in a lasting and quantifiable manner. The following are not considered as such: investment in temporary equipment used for a specific workshop activity and ceasing when that activity ends; nor investment in provisional stores used under a temporary admission system.
3. 3)Construction of housing exclusively for the use of workers and salaried employees of the enterprise, subject to the provisions of the Housing Law and its implementing regulations, provided:
4. 4)- The housing is owned by the enterprise for at least 12 years.
5. 5)- It is used only for the stated purpose.
6. 6)- The total amount invested does not exceed 15% of the aggregate annual wages and salaries effectively paid to salaried employees.
7. 7)These provisions do not apply to exceptional wages paid for such housing.
8. 8)Industrial establishments wishing to benefit from the above provisions must notify the competent financial departments of their intention before the start of the investment year, and must submit to the competent financial department the records and data relating to the investments they intend to carry out, failing which they forfeit the right to benefit from the exemption.
9. 9)The investment record is the record maintained by the enterprise of any financial transaction resulting from a definitive commitment with a third party for investment purposes.
10. 10)Where the above conditions are met and the invested amounts cover the investment, a deduction of up to fifty percent (50%) of the profits of the year in which the financial investment is made and the three following years is granted. This percentage is raised to 75% where the investment is made in one of the regions that the government wishes to develop, as specified by decree adopted by the Council of Ministers.
11. 11)The portion deducted from annual net profits and used to cover fixed investments, in accordance with the conditions set out above, is exempt from income tax, provided the deduction does not exceed the limits of the four years referred to above for each investment transaction.
12. 12)The competent financial departments must permanently verify that the establishments benefiting from the provisions of this law comply with the prescribed conditions. Any amounts deducted for investment purposes that are not used for the stated purpose must be added to the profits of a subsequent year and subjected to tax, plus a penalty of 3% per month of delay, counting any fraction of a month as a full month.

Second:

1. 1)The following industrial establishments, set up in Lebanon as from 1980, are exempt from income tax for ten consecutive years from the date production commences, provided they simultaneously satisfy all of the following conditions:
2. 2)The factory is established in one of the regions that the government wishes to develop, as specified by decree adopted by the Council of Ministers.(1)
3. 3)The enterprise produces new goods not previously manufactured in Lebanon before 1 January 1980. 'New goods' means goods not previously manufactured in Lebanon at all, including goods derived from the processing or packaging of local or imported semi-finished goods, as well as goods manufactured from imported semi-finished goods through an assembly, completion or transformation process.
4. 4)The value of the fixed assets owned by the new enterprise in Lebanon and used for the production of the said new goods must not be less than five hundred million Lebanese pounds.
5. 5)The aggregate profits exempt from income tax during the said period must not, in any case, exceed the value of the fixed assets as at the date production commences.
6. 6)Industrial establishments wishing to benefit from the above provisions must notify the competent financial departments before production commences and must submit certified records and data relating to the value of their fixed assets and production specifications.
7. 7)The exemption is granted by decree adopted by the Council of Ministers on the proposal of the Minister of Finance.
8. 8)Establishments benefiting from the above exemptions must submit to the competent financial departments, within the time limit prescribed for filing annual accounts, the accounts and certified records required by income tax law. All records and certified documents relating to the accounting of their fixed assets must comply with the provisions of commercial law.
9. 9)The competent financial departments shall permanently monitor establishments benefiting from the provisions of this law to verify compliance with the prescribed conditions.

Third: [Added by Law 248 of 15/4/2014]

1. 1)Fifty percent (50%) of the tax due on Lebanese industrial exports is exempt from income tax.
2. 2)Only the certificate of origin issued by a competent body is accepted as primary evidence to qualify as Lebanese industrial exports.
3. 3)Customs data are accepted as evidence of the value of industrial exports qualifying for the certificate of origin, as well as data drawn up by the Ministry of Finance for that purpose.
4. 4)Establishments benefiting from this exemption must file accounts of their profits with the competent financial departments, within the time limit prescribed for filing annual accounts, together with the data referred to above.
5. 5)Excluded from this exemption are companies and establishments exploiting underground resources and any others that must be excluded by decrees adopted by the Council of Ministers on the proposal of the Minister of Finance.
6. 6)The implementing regulations of this article are determined by decision of the Minister of Finance.

The following are exempt from tax:

1. 1)Allowances received by clergy for performing religious services.
2. 2)Salaries and salary supplements received by ambassadors of foreign states and their diplomatic representatives, consuls and consular representatives, and the foreign national employees among their staff, subject to the condition of reciprocity.
3. 3)Salaries and salary supplements received by military personnel of any rank belonging to the armed forces of allied states.
4. 4)Retirement pensions of retired persons, and pensions of the survivors of martyrs of the armed and security forces and of wounded members of the armed forces, as defined by Article 85 of the National Defence Law.(2)
5. 5)Life allowances and temporary compensation paid to victims of work accidents.
6. 6)Wages of agricultural workers.
7. 7)Wages of domestic servants in private households.
8. 8)Wages of nurses and nursing staff in hospitals, morgues, shelters and similar nursing and first-aid establishments.
9. 9)Dismissal compensation paid in accordance with the laws in force in Lebanon.
10. 10)Family allowances paid in accordance with applicable laws.
11. 11)Wages of licensed midwives working in hospitals.

The following are exempt from the tax:

1. 1)[Repealed by Law 80/27 of 19/7/1980.]
2. 2)Amounts paid to reimburse creditors' or shareholders' funds, if not drawn from the profit and loss account or reserves.
3. 3)Repayments of shareholders' and creditors' funds in concession companies, even if drawn from reserves or the profit and loss account, where the reason for repayment arises from the obligation to hand over the installations to the authority at the end of the concession period without consideration.
4. 4)Interest on amounts deposited in savings accounts, provided the interest does not exceed one thousand Lebanese pounds per year.
5. 5)[As amended by Law 282 of 30/12/1993]: Interest and proceeds on all current accounts held with banks.
6. 6)Revenues from Lebanese Treasury bonds.

Income tax inspectors(1) are entitled to inspect, at the taxpayer's premises or at the premises of persons liable to pay the tax, all registers and documents, and anything else that may assist in the imposition of the tax.(2)

No natural or legal person, not even official departments, may invoke professional secrecy when the competent Ministry of Finance officials request to inspect documents and records relating to the imposition of income tax.

The financial departments may request the Public Prosecution to gain access to any proceedings pending before the courts. The judicial authority may inform the departments, through the Public Prosecution, of any information suggesting that a taxpayer has defrauded or attempted to defraud the financial departments with respect to income tax, whether the proceedings are civil, commercial or criminal, and even if they have ended by a final judgment.

Every natural or legal person in Lebanon is required to make available to the competent Ministry of Finance officials, upon request, all registers, documents and information in his possession that assist in determining the tax bases that may be due from him or from other taxpayers. [Added by the Law of 20/6/1961]: Notwithstanding any other provision, senior tax inspectors, principal tax and audit inspectors, and verification inspectors enjoy the right of access ordinarily conferred on tax inspectors under the various tax and fee laws, within the limits of their territorial jurisdiction and in accordance with procedures agreed with the Director General of Finance, and are subject to the same professional secrecy obligations. Authorised inspectors and members of the Financial Audit Office may also exercise this right within their mandate and in accordance with those procedures.

Professional secrecy is binding, and any person whose duties, powers or jurisdiction require involvement in the assessment, collection or examination of objections relating to income tax is subject to the provisions of Article 579 of the Penal Code. However, professional secrecy may not be invoked in proceedings affecting the interests of the administration, or in the exercise of audit, verification, fiscal and administrative inspection activities. Income tax inspectors and audit and collection inspectors must take an oath before the competent judicial authority prior to taking up their duties.

Taxpayers and their representatives may not request information or extracts from assessment files, except with regard to declarations and documents previously submitted by them.

All data and correspondence relating to income tax exchanged between administration officials or sent by them to taxpayers are placed in sealed envelopes.

The tax is imposed on the net profit realised during the year preceding the assessment year, even if the source of profit ceases during the assessment year or before it.

The net profit is the aggregate taxable income of the taxpayer, after deducting all expenses and charges required for the exercise of commerce, industry or the profession. These expenses and charges include in particular:

1. 1)The cost of purchasing goods or merchandise sold, and the cost of services paid during the year.
2. 2)The rent of the premises in which the profession is exercised, or its rental value if the taxpayer is the owner.
3. 3)Interest on loans contracted with third parties for business purposes.
4. 4)Salaries and wages, and all amounts paid to employees and workers as remuneration for their services or as severance pay in accordance with the applicable special conditions.
5. 5)Ordinary general expenses, including the cost of insuring employees.
6. 6)Taxes and fees paid or due in the year on the enterprise or profession, other than the taxes specified in this Legislative Decree.
7. 7)Depreciation calculated on the original cost of the tangible fixed assets of the enterprise. The Minister of Finance, on the proposal of the Director General of Finance, shall issue a decision setting the rates of such depreciation within minimum and maximum limits. The taxpayer may choose the rate or rates appropriate to the circumstances of his enterprise, provided he notifies the competent financial departments in advance of his depreciation schedule. The rates chosen are binding and fixed for the duration required for accumulated depreciation to equal the original cost.
8. 8)For intangible fixed assets, no depreciation may be carried out unless they are subject to extinction due to an agreed or compulsory lapse of a period; in that case, their cost is deducted in equal annual instalments over the applicable period of the licence or lease.
9. 9)Provisions set aside to meet losses from bad debts likely to materialise or become final, from redundancy payments, retirement pensions, or accident compensation in accordance with applicable law.
10. 10)Additional provision for banks [added by Legislative Decree 81/83 of 27/6/1977]: Banks may, as from 1977, set aside provisions to cover losses on debts declared irrecoverable for which bankruptcy proceedings have been initiated, after approval by the Banking Control Committee at Banque du Liban, upon the creditor bank's request.
11. 11)Additional provision for financial institutions [added by Law 583/2004 of 23/4/2004]: Financial institutions may, as from 2004, set aside provisions of the same nature, also after approval by the Banking Control Committee at Banque du Liban.
12. 12)Provisions set aside that are not used for the purpose for which they were established, or whose continued maintenance in the following year is not justified, are added to the profits of the year in question.
13. 13)Amounts proven to have been paid by way of aid, assistance or charity to officially recognised religious, social, cultural or sports establishments, within the general limits set by decree adopted by the Council of Ministers.
14. 14)[Added by Decree 15735 of 11/3/1964 as amended by Law 67/26 of 8/5/1967]: Donations made in 1964, 1965, 1966, 1967 and 1968 to the Lebanese Cultural Society for the construction of the House of Culture are deductible from the profits of those years.
15. 15)[Added by Law 286/1994 of 12/2/1994]: Donations paid to the Lebanese State, and those to be paid in subsequent years, are also deductible from the profits of the year in which they are paid.
16. 16)Proven debts established by a court or arbitration award.
17. 17)Legal and commercial advertising expenses proven by regular invoices, within the limits set by decree adopted by the Council of Ministers. [Added by Legislative Decree 39 of 23/2/1977]
18. 18)Charges levied on real-property revenues on behalf of municipalities pursuant to Article 57 of the Law of 17/9/1962, borne by capital companies. [Added by Law 80/27 of 19/7/1980]

The following are not deductible:

1. 1)Capital expenditure and expenditure exceeding its maintenance value, other than ordinary maintenance expenses.
2. 2)Taxes and fees paid or due to a foreign state on income earned in Lebanon, without other justification.
3. 3)Losses incurred by the taxpayer from the activities of establishments, branches, agencies or representative offices, whether inside or outside Lebanon, whether wholly owned or in which the taxpayer participates.
4. 4)Actual expenses that the taxpayer cannot prove were incurred in connection with the activities of establishments, branches, agencies or representative offices inside or outside Lebanon.
5. 5)Personal expenses, including amounts that the employer or partner deducts for himself for managing the enterprise or for his personal expenses.
6. 6)Representation allowances exceeding 10% of the basic salary of the employed director, as well as any excess beyond the customary limits in salaries, wages and other expenses required for the exercise of commerce, industry or the profession.
7. 7)Exceptional taxes and penal fines.

The revenues from movable capital and from built and unbuilt real estate that form part of the assets of a profession or enterprise are included in the income covered by the tax. If such revenues are in principle subject to one of the other specific income taxes and have been added to the profits at the time they were realised, they may be deducted in full from those profits and not added to the tax provided for in this Part. [Note: A new paragraph was added to Article 8 by Law 80/27 of 19/7/1980, then repealed by Law 282 of 30/12/1993.]

The proportion of profits received by Lebanese capital companies as a result of their shareholding in other Lebanese capital companies is deducted in full from their income subject to the tax provided for in this Part; it remains, however, subject when redistributed to the tax provided for in Article 72 bis of the Income Tax Law.

For the purpose of determining the net profit subject to tax, every taxpayer required to keep commercial accounts pursuant to the Commercial Code must file a declaration of his actual profit or of his total income. In the latter case, the administration determines the net profit subject to tax on a flat-rate basis by applying a prescribed rate to total income. Taxpayers not required to keep commercial accounts have their taxable profits estimated in accordance with the provisions of sub-section (c) of Chapter Three of this Part. If the taxpayer is a holder of a non-commercial, non-industrial profession, he must file a declaration of his total income, unless he requests to be taxed on the basis of actual profit pursuant to sub-section (a) of Chapter Three of this Part. The partner with full legal capacity in general or limited partnerships, and each partner lacking such capacity when the partnership arises from the application of Article 66 of the Commercial Code, is personally responsible for filing the declaration relating to his share. The limited partnership is responsible for filing a global declaration for all the shares of the limited partners in the profits and losses.

Declaration of actual profit is mandatory for the following categories of taxpayers:

1. 1)General partnerships, capital companies, as well as consumer cooperatives, trade unions and agricultural cooperatives with a commercial character.
2. 2)Branches of the establishments mentioned in the preceding paragraph when their head office is abroad.
3. 3)[As amended by Law 326 of 28/6/2001 (Budget 2001)]: Factories, workshops and all other industrial establishments employing more than four persons on a permanent basis, except those that are craft enterprises.
4. 4)Banks, money-changers, and persons engaged in banking activities.
5. 5)Importers, exporters, wholesale merchants, brokers and commission agents.
6. 6)Merchants employing more than four persons.
7. 7)Owners of stores selling chemical and food products.
8. 8)Operators of riding, hunting or shooting establishments.
9. 9)Operators of first- and second-category hotels according to the official classification.
10. 10)Operators of first- and second-category theatres and cinemas according to the official classification.
11. 11)[As amended by Law 326 of 28/6/2001]: Publishing houses and printing presses employing more than four persons on a permanent basis.
12. 12)[As amended by Law 326 of 28/6/2001]: Mills operating for third parties as well as those employing more than four persons on a permanent basis.
13. 13)Lessors of furnished establishments.

Categories not mentioned in the preceding article are taxed on the basis of flat-rate or estimated profit; however, any person may request to be taxed on the basis of actual profit, provided he submits a request to that effect before the end of January of the assessment year. A person who has chosen the method of taxation on the basis of actual profit may not in subsequent years request to revert to the flat-rate or estimated profit method.

a — Taxation on the basis of actual profit

The declaration of actual profit is submitted to the competent financial departments before 1 April of each year, and before 1 June with respect to capital companies, together with a copy of the balance sheet, a summary of the profit and loss account, and a statement of the expenses and charges to be deducted pursuant to Article 7. As for the auditors' report and the explanatory statements relating to companies subject to the auditing regime provided for in the Commercial Code, these are submitted before 1 January of each year. The administration may extend the time limit by one month in duly justified exceptional circumstances. Taxpayers other than holders of commercial and industrial professions who are not required to file a balance sheet shall file a declaration indicating the total of their gross income and the total of the deductible expenses and charges, as well as the net profit for the preceding year. Enterprises whose financial year does not coincide with the calendar year may, with the agreement of the competent financial departments, take the date of closing of that financial year as the starting point for the three- or five-month periods provided for in this article.

The profit to be declared is the actual profit realised during the preceding year, or during the twelve-month period whose results form the basis of the latest balance sheet (if that period differs from the calendar year). In the case of the commencement of a new activity, the profit realised between the date of commencement of activity(1) and the last day of December of the year preceding the assessment year must be declared.

If it appears that establishments affiliated with establishments located outside Lebanon, or supervised by establishments located abroad, transfer part of their profits to abroad, whether by inflating purchase or sale prices, or by reducing them, or by any other means, the profits so transferred must be added, when the tax is imposed, to the profits stated in the accounts. Where sufficient evidence is not available to determine the actual profit, the profits of comparable establishments are taken as the basis of comparison and for determining the profit, in addition to external evidence and information available to the competent financial departments.

If a deficit occurs in a given year, that deficit is treated as a charge of the following year and is deducted from the actual profit realised during that year. If that profit is insufficient to absorb the entire deficit, the remaining balance is deducted from the profits of the second year, and if any balance remains, from the profits of the third year. The deficit may not be carried forward beyond the third year following the year of its occurrence. The deficit must be declared within the time limit prescribed for the declaration of actual profit, in the same manner.

[Added by Legislative Decree 81 of 27/6/1977]: By way of exception, the deficit incurred during either of the years 1975 and 1976 may be carried forward for up to eight consecutive years instead of three, to be absorbed successively during that period as follows: - By applying the full profits of the first four years. - Then by deducting up to fifty percent (50%) of the taxpayer's annual profits during each of the last four years. The balance of the deficit may not be carried forward beyond the eighth year following the year of its occurrence. The balance of profits realised during the last four years referred to above remains subject to the ordinary legal provisions.

[Added by Laws 79/2 of 22/3/1979 and 79/6 of 21/12/1979]: When carrying forward the deficit incurred during 1975 and 1976 to the results of subsequent years, the year 1978 is not counted if its result was a deficit, in the calculation of the eight years provided for in Legislative Decree 81 of 27/6/1977. In that case, the taxpayer benefits from an additional ninth year to carry forward the deficit. The carry-forward of the deficit incurred by taxpayers subject to income tax for 1978 is also governed by the provisions of Legislative Decree 81 of 27/6/1977 relating to the deficit incurred during 1975 and 1976.

[Added by Legislative Decree 59 of 9/9/1983]: By way of exception, the deficit incurred during either of the years 1981 and 1982 may be carried forward for up to eight consecutive years instead of three, to be absorbed in the same manner. The balance may not be carried forward beyond the eighth year. The balance of profits from the last four years remains subject to the ordinary legal provisions.

[Added by Law 85/7 of 10/8/1985]: By way of exception, the deficit incurred during either of the years 1983 and 1984 may be carried forward for up to eight consecutive years instead of three, in the same manner and subject to the same conditions.

[Added by Law 14 of 20/8/1990]: By way of exception, the deficit incurred during either of the years 1989 and 1990 may be carried forward for up to eight consecutive years instead of three, in the same manner and subject to the same conditions.

[Added by Law 273 of 15/4/2014]:

1. 1)By way of exception, the deficit incurred during 2003 and 2004 may be carried forward for one additional year for each of those two years. The deficit incurred during any of the years 2005, 2006, 2007 and 2008 may be carried forward as follows:
2. 2)For up to seven additional years, i.e. ten years following the year the deficit occurred, for enterprises and companies destroyed as a result of the Israeli aggressions against Lebanon during the period from 12 July to 14 August 2006 inclusive.
3. 3)For four additional years, i.e. up to seven years following the year the deficit occurred, for all other taxpayers.
4. 4)The deficit balances referred to above may not be carried forward beyond the prescribed periods.
5. 5)As for losses resulting from direct damage to tangible fixed assets caused by terrorist acts or Israeli aggressions occurring during 2005, 2006, 2007 and 2008, these are treated as deductible charges from profits and may be carried forward to subsequent years in accordance with point 1 above. The book value as recorded in the taxpayer's accounts and declarations, or in the reconstructed records, is used to calculate those losses, after verification by the competent financial department.(1)

b — Taxation on the basis of flat-rate profit

Taxpayers not subject to the actual or estimated profit method of taxation must submit to the financial departments, before 1 February of each year, a declaration of their total income realised during the preceding year.

Income to be declared for taxation on the basis of flat-rate net profit means the taxpayer's receipts from all transactions carried out in any form, definitively and actually, during the year preceding the assessment year, and in particular the total collected by the taxpayer as the price of goods, merchandise, tools or supplies sold, as rent for items leased, and also as commissions, brokerage fees, proceeds or interest arising directly from commercial transactions, exchange differences or professional fees, etc. Income that is in principle subject to other specific income taxes (bank interest, loan interest, real-property revenues, etc.) remains subject to the specific tax applicable to it and is deducted in full from the income subject to the Part One tax, together with the corresponding charges directly related to that income.

Total income to be used as the basis for determining the flat-rate net profit is extracted from the daily register provided for in the Commercial Code, for taxpayers required to keep commercial accounts, or from the register provided for in the following Article 20, for taxpayers who are holders of non-commercial, non-industrial professions.

Every taxpayer who is a holder of a non-commercial, non-industrial profession must keep the daily register provided for in the Commercial Code and enter in it his daily income as referred to in the preceding Article 18. Those in professions required to maintain professional secrecy may confine themselves to recording the breakdown of amounts collected, together with the date of receipt, without stating the names of the payers. The clerks of the competent courts endorse and number the registers of all taxpayers subject to tax on commercial and industrial profits, regardless of the method of taxation to which they are subject. Notaries endorse and number the registers of all other taxpayers.(1)

A committee seated at the Ministry of Finance is responsible for determining the ratios to be applied to total income in order to calculate the flat-rate net profit.(2)

The committee referred to in the preceding article is composed of: - The Director General of Finance or his representative, as chairman. - A representative of the Ministry of Economy and Trade, appointed by the Minister of Economy and Trade, as member. - A representative of the Chamber of Commerce and Industry in Beirut, proposed by the president of that Chamber, as member. - An expert representing, as appropriate, merchants, industrialists or holders of non-commercial professions, appointed by the Minister of Finance, as member. - A civil servant from the Ministry of Finance (Income Tax Department), as rapporteur. This committee is appointed by the Minister of Finance, meets upon the chairman's invitation, and takes its decisions by majority vote; in case of a tie, the chairman's vote is decisive.

The committee sets, for each type of trade, industry, profession or activity, an average annual rate. These rates are compiled in a global table approved by decision of the Minister of Finance and published in the Official Gazette. The Minister of Finance shall determine each year the professions for which the committee may revise the established rates. The rates for other professions remain in force.

c — Taxation on the basis of estimated profit

The tax is imposed on taxpayers not subject to the actual or flat-rate profit method, on the basis of estimated profit.

A special committee responsible for estimating the annual profit subject to tax is constituted in each province, composed of: - The head of the Income Tax Department, or the head of the provincial finance office, or a senior tax inspector, as chairman. - A representative of the Ministry of Economy and Trade, appointed by the Minister of Economy and Trade, as member. - A representative of the provincial Chamber of Commerce and Industry, proposed by the president of that Chamber, or a member of the provincial council where no Chamber of Commerce exists, appointed by the Governor, as member. - A civil servant from the Ministry of Finance (Income Tax Department) or from the competent financial unit or department in the province, as member. - The competent Income Tax inspector, as rapporteur. These committees are appointed by decision of the Minister of Finance on the proposal of the Director General of Finance. They meet upon the chairman's invitation and take their decisions by majority vote; in case of a tie, the chairman's vote is decisive.

For the purpose of estimating the net profit, the committee uses all information obtained about the taxpayer and may rely on external signs of his standard of living, and may summon him if it considers this necessary. The committee draws up nominal lists of estimated profits, duly certified, which serve as the basis for tax assessment.

The estimation takes effect for a period of three consecutive years. The Minister of Finance may, by decision, order a review of the committee's estimates where justified economic circumstances arise.

d — Common provisions

The financial departments are responsible for imposing the tax on actual, flat-rate or estimated profits derived from declarations or estimated, by means of basic assessment schedules. If upon scrutiny of the accuracy of the declaration they find grounds for amendment, they notify the taxpayer of the amount of the amendment and its reasons, together with notice of the additional tax or supplementary assessment, by registered letter with acknowledgement of receipt.

If the taxpayer ceases activity, the tax is imposed on his industrial, commercial and non-commercial profits not yet assessed. The assessment covers the actual or flat-rate profit realised during the period between the last day of the period covered by the previous assessment and the day on which the taxpayer ceased activity. With respect to estimated profit, the tax is imposed on the profit calculated proportionally to the period of activity during the year in which the cessation occurred. A taxpayer who ceases activity and is subject to the actual or flat-rate profit method must file a declaration to that effect with the financial departments within one month of the date of cessation, together with all information and documents necessary to determine the taxable profit. If the taxpayer is engaged in another activity, or owns an establishment other than the one he has sold or ceased during the year, he must notify the financial departments accordingly within one month of the date of cessation or sale, and include in his annual general declaration the results of the activities of the establishment in which he has ceased operations. In all cases, all categories of taxpayers must state the buyer's name, address and particulars. The provisions of this article apply to court-appointed receivers and liquidation agencies upon the occurrence of bankruptcy,(2) at which point the one-month filing period begins from the date of the decision appointing them.

If the taxpayer fails to file the legal declaration within the prescribed time limit, a penalty(4) of ten percent (10%) per month of delay on the amount of tax due is imposed, counting any fraction of a month as a full month, up to a maximum of one hundred percent (100%) of the tax, until the end of the first year of the prescribed filing period. If no declaration is filed, the competent financial administration proceeds with a direct assessment on the basis of the profit it determines and imposes a penalty equal to the amount of the tax assessed. If the taxpayer does not keep the legally required accounts, or refuses to produce them or to show them to the competent tax inspectors, or refuses to provide the documents necessary to verify the accuracy of the declaration and the accounts, or to cooperate with the inspectors, a direct assessment is made on the basis of the profit estimated by the financial departments, and a penalty equal to the amount of the tax assessed is imposed.(1) If the accounts are regular but one of the legal conditions is not met, the penalty is reduced to 10% and no direct assessment is made. In all cases, even if the results of the activity are negative, the penalty payable by the taxpayer must not be less than five hundred thousand Lebanese pounds if subject to actual profit taxation, or one hundred thousand Lebanese pounds if subject to flat-rate profit taxation. Upon repetition of the violation within three years, the penalty is doubled; no settlement procedure may be applied to such penalties. The profits and income forming the basis of the assessment may not be less than the profits and income realised by the taxpayer in any of the three preceding years. In cases where there are grounds to believe that the profits and income to be adopted by the financial departments for direct assessment exceed the minimum referred to above, the estimation committee provided for in Article 25 of this Part determines the additional profit and income to be added to that minimum. The taxpayer may object to the direct assessment within the legal time limits, whether the assessment is based on the minimum referred to above or on the committee's determination, provided the objection is substantiated. [Added by Law 80/27 of 19/7/1980]: The basic rules to which income taxpayers are subject are determined by unified basic regulations enacted by decree adopted by the Council of Ministers on the proposal of the Minister of Finance.(2)

The tax is imposed on the net income received by the taxpayer during the year preceding the assessment year, even if the source of income ceases during the assessment year or before it.(2)

Gross income means the aggregate of salaries, wages, emoluments, compensation, bonuses, gratuities and cash and in-kind benefits.(3)

For the purpose of determining net income, the following are deducted from gross income:

1. 1)Amounts deducted and paid for retirement in accordance with applicable laws and regulations.
2. 2)Compensation for office expenses, representation,(4) travel and transport,(5) cashier's responsibility, fodder allowance, uniform allowance, and in general all compensation granted to cover expenses reasonably incurred in the performance of duties required by the service.
3. 3)[Added by Law 80/27 of 19/7/1980]: Fifty percent (50%) of amounts paid as a genuine flight allowance to pilots and other crew members subject to tax in Lebanon.
4. 4)[Added by Law 85/7 of 10/8/1985]: Education grants, nursery grants, and grants given by the relevant establishment to the employee or a member of his immediate family, within the conditions and limits of the amounts prescribed in the civil service employees' cooperative, provided these grants are given on a permanent basis under a comprehensive scheme covering all employees and duly approved by the Ministry of Labour.

Taxpayers subject to the actual profit method of taxation, and those referred to in Article 44, must keep for their employees a register in which they record, without omission, erasure or alteration, the names of employees, officers, workers, assistants and other members of the payroll, their salaries and wages, the nature of their work, the date they began work, and, upon termination, the date they ceased work or were dismissed. This obligation also applies to individuals, institutions, companies and associations paying retirement pensions or life allowances. [As amended by Laws 85/7 of 10/8/1985 and 89 of 7/9/1991, penalty updated by Law 282 of 30/12/1993]: Any person who fails to keep this register, or refuses to show it to the competent Ministry of Finance officials, is subject to a fine of LBP 50,000, independently of any other penalties prescribed therefor.(1)

All taxpayers,(3) whatever their method of taxation, as well as establishments exempt from the tax on profits, must submit before 1 March of each year a declaration of the aggregate salaries and wages of all their employees subject to tax or exempt therefrom, regardless of the amount, together with an annual individual statement of the total income of each employee or worker, the tax withheld, the amount of the basic salary, and the date of commencement of employment. This obligation also applies to employers personally liable for paying and declaring the tax on salaries and wages. The declaration submitted by the employer and the individual statement are complementary documents submitted to the competent tax administration on the prescribed forms. The declaration submitted by the employer must be fully consistent, as regards the names of employees, the aggregate salaries, wages and emoluments paid to them, with the declaration submitted to the National Social Security Fund. A fine of between LBP 200,000 and LBP 500,000 is imposed for violation of this paragraph.(4) The implementing regulations are determined by decisions of the Minister of Finance.

In addition to the declaration required of the employer pursuant to the preceding article, every employee, worker or wage earner holding simultaneously a position or employment in more than one establishment or enterprise must personally submit to the regional finance office, before 1 May of each year, a declaration stating the names and addresses of the various employers with whom he was employed during the preceding year, and the amounts he received from or which accrued to him from each of them during that year. This obligation also applies to every employee or worker who simultaneously exercises a profession subject to the tax provided for in Part One of this Legislative Decree and receives from another source a pension or life allowances.(1)

If the employer fails to submit within the prescribed period the declarations provided for in Part Two, the competent financial departments directly impose a penalty of ten percent (10%) per month of delay, counting any fraction of a month as a full month, up to the amount of the tax. For employees, workers and wage earners referred to in the preceding article, as well as employers personally liable for paying and declaring the tax on salaries and wages, and institutions, associations and bodies that do not seek to make a profit and whose number of employees does not exceed five, who fail to file the annual declaration, the competent financial departments impose the tax directly, together with a flat-rate penalty of LBP 50,000. Upon repetition of the violation within three years, the penalty is doubled and may not be settled by any procedure. If an employer does not keep the employees' register referred to in Article 51, or refuses to produce it or to show the competent inspectors the necessary documents to determine the actual taxable income, and refuses to cooperate with the competent inspectors, a direct assessment is made together with a penalty equal to the tax assessed on the basis of the income estimated by the competent financial departments. The minimum penalty imposed on employers referred to in this article, excluding the taxpayers referred to in the second paragraph, is LBP 200,000. Upon repetition within three years, the penalty is doubled and may not be settled by any procedure. Objections to direct assessments may be lodged within the time limits provided for in Chapter One of Part Four, subject to the submission of the necessary documents to verify the actual taxable income.(2)

Every employer required to keep the employees' register referred to in Article 51 who ceases activity, transfers his enterprise or establishment, or leaves before the end of the year, must file the declaration provided for in Article 52 within one month of the date of cessation, transfer or departure, failing which the penalty provided for in Article 54 is imposed. The same provisions apply to court-appointed receivers and liquidation agencies(1) in the event of bankruptcy,(2) at which point the one-month period begins from the date of the decision appointing them. Taxes imposed pursuant to the provisions of this article are immediately due.

The tax rate on income from movable capital is set at ten percent (10%) of gross income; no surcharge is added to the principal of the tax. [Added by Law 85/7 of 10/8/1985]: Notwithstanding any other provision, the tax on income from movable capital is paid upon filing the declaration of the income subject thereto. This tax is imposed by a payment order which may be organised on a settlement basis. The implementing regulations are determined by decisions of the Minister of Finance.

Article 72 bis — Tax Rate on Distributions of Capital Companies [Added by Law 80/27 of 19/7/1980] Distributions by Lebanese capital companies are subject to a flat-rate tax of ten percent (10%) in all cases, even if the company is exempt from the Part One tax pursuant to Articles 5 and 5 bis; no surcharge is added thereto. Exempt from the distribution tax is any increase in capital drawn from profits that have already been subject to the Part One tax or that are exempt therefrom pursuant to Articles 5 and 5 bis. Also exempt from the distribution tax are profits realised before 1980 that were subject to the progressive tax(1) provided for in Part One of the Income Tax Law or in the Real Property Tax Law. [As amended by Law 85/7 of 10/8/1985]: Foreign capital companies operating in Lebanon are deemed to have distributed all their profits, which are subject to the tax provided for in this article after deducting: - The Part One tax due on the profits. - The 10% reserve required by Article 133 of the Money and Credit Law enacted by Decree 13513 of 1/8/1963. [Note: The paragraph added to Article 72 bis by Law 173 of 14/2/2000 as amended was repealed by Law 64 of 20/10/2017.] The distribution tax on any given company must not fall below five percent (5%) even if all the conditions set out above are cumulatively met.

Any person who obstructs the exercise of the right of access provided for in Chapter Two of Part Four, or refuses to provide the administration with the information it requests, is liable to a penalty of between one million and five million Lebanese pounds. The penalty is imposed by the competent financial departments. Payment of the penalty does not relieve the taxpayer of his primary obligations, nor does it preclude prosecution pursuant to applicable law for failure to fulfil those obligations.

Any violation of the provisions of this Legislative Decree or of the regulations implementing it, not expressly provided for therein, is punishable by a fine of between two hundred thousand and five hundred thousand Lebanese pounds. [See Article 67 of Law 144 of 31/7/2019 (Budget 2019) regarding the exemption of arbitrators from paying financial penalties.]

The competent financial departments are responsible for imposing the penalties prescribed pursuant to this Legislative Decree. These penalties are collected in accordance with the principles governing the collection of direct taxes and comparable fees. Penal sanctions and fines provided for in Article 108 are imposed by the competent courts at the request of the Ministry of Finance, without the need to first notify the taxpayer to correct his declaration.

The tax is imposed on the actual or declared flat-rate profit, after deducting from each natural person taxpayer a family allowance of LBP 7,500,000 (seven million five hundred thousand Lebanese pounds). An additional deduction of LBP 2,500,000 (two million five hundred thousand) is available to the married taxpayer, and LBP 500,000 (five hundred thousand) for each dependent child, subject to the following conditions: - Children who have not yet reached the age of eighteen, or who are up to twenty-five years old and still in university. - Children with a permanent disability who are not employed, subject to certification of the disability by the permanent medical committee at the Ministry of Health. - For the widow, divorcee or legally separated woman, provided the number of dependent children does not exceed five. Where both spouses each exercise a profession or hold a position from which each benefits, they share equally the deduction granted for each dependent in accordance with this article. In the event of legal separation (judicial, civil or religious divorce) between the spouses, the spouse paying alimony is the one who benefits. - If the husband is not employed, or if his wife independently exercises a profession or holds a position subject to tax, the wife also benefits from the deduction granted for the dependent, in addition to the deduction for children, in accordance with the first paragraph of this article. If the father or mother has died or has a permanent proven disability and does not receive an employment salary, the child also benefits from the additional family deduction. These deductions apply as from the fiscal year 1999. [As amended by Law 14 of 20/8/1990]: Each Lebanese actual company is entitled to only one deduction. As for the tax on estimated profit, it is imposed after deducting an amount equivalent to the legal minimum wage for a married person without children, per year, per taxpayer. This provision applies as from the fiscal year following the year in which the last final estimation was made.(1)

The tax rate on profits from commercial, industrial and non-commercial professions is set as follows: - 4% on the portion of taxable profit not exceeding LBP 9,000,000 (nine million Lebanese pounds). - 7% on the portion exceeding LBP 9,000,000 but not exceeding LBP 24,000,000 (twenty-four million Lebanese pounds). - 12% on the portion exceeding LBP 24,000,000 but not exceeding LBP 54,000,000 (fifty-four million Lebanese pounds). - 16% on the portion exceeding LBP 54,000,000 but not exceeding LBP 104,000,000 (one hundred and four million Lebanese pounds). - 21% on the portion exceeding LBP 104,000,000 but not exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). - 25% on the portion exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). The profits of capital companies (joint stock companies, limited liability companies, and limited partnerships by shares in respect of the limited partners' share) are subject to a flat-rate tax of 17% (seventeen percent). In calculating the tax, any fraction of one Lebanese pound in the taxable profit is disregarded. No surcharge is added to the principal of the tax. This provision applies as from the fiscal year 2019. [As amended by Law 144 of 31/7/2019 (Budget 2019)]

The tax is imposed on the net annual income determined pursuant to Articles 48, 49 and 50 of the Income Tax Law, after deducting from each natural person taxpayer the family allowance pursuant to Article 31 of the Income Tax Law, subject to the applicable conditions, in addition to a deduction of twelve million Lebanese pounds from the pension base for retired persons. [As amended by Law 144 of 31/7/2019 (Budget 2019)]

If one of the taxpayers subject to the tax provided for in this Part simultaneously exercises a profession subject to the Part One tax, he may benefit only from the deduction provided for in Part One.(3)

The tax rates on salaries, wages and retirement pensions are as follows: - 2% on the portion of taxable net income not exceeding LBP 6,000,000 (six million Lebanese pounds). This rate applies proportionally to the corresponding portion of retirement pension bases. - 4% on the portion of taxable net income exceeding LBP 6,000,000 but not exceeding LBP 15,000,000 (fifteen million Lebanese pounds). Same note for retirement pension bases. - 7% on the portion exceeding LBP 15,000,000 but not exceeding LBP 30,000,000 (thirty million Lebanese pounds). Same note. - 11% on the portion exceeding LBP 30,000,000 but not exceeding LBP 60,000,000 (sixty million Lebanese pounds). Same note. - 15% on the portion exceeding LBP 60,000,000 but not exceeding LBP 120,000,000 (one hundred and twenty million Lebanese pounds). Same note. - 20% on the portion exceeding LBP 120,000,000 but not exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). Same note. - 25% on the portion exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). Same note. This provision applies as from 1 August 2019. [As amended by Law 144 of 31/7/2019 (Budget 2019)]

The portions of income subject to tax and the deductions from the base are apportioned according to the period of employment for which the wages were paid, counting thirty days per month. [As amended by Law 282 of 30/12/1993 and Law 326 of 28/6/2001 (Budget 2001)]: The deduction from the base is the amount equivalent to LBP 25,000 (twenty-five thousand Lebanese pounds) per month of the year for daily wage earners and workers paid on a piece-work or quantity basis, regardless of their family situation.(1) Piece-work wages are taxed at a flat rate of 3%, whatever their amount, without any deduction from the base. Piece-work wages means wages paid to daily workers employed on a temporary basis on a piece-work or quantity basis.

The taxable income or profit from Lebanese shares and bonds is determined as follows:

1. 1)With respect to shares of all types and founders' and interest shares, and amounts withheld by Lebanese joint stock companies from profits or distributed from reserves: the income is determined by reference to the auditors' statements, the resolutions of general shareholders' meetings, boards of directors, and similar documents.
2. 2)With respect to bonds: the income is determined by reference to the interest or income distributed during the year.
3. 3)With respect to lottery prizes: the income is determined by reference to the prize amount itself expressed in Lebanese pounds.
4. 4)With respect to redemption prizes: the income is determined by the difference between the amount redeemed and the original issue value of the bond.
5. 5)[Note: A new paragraph 5 was added by Law 88/3 of 20/1/1988, then repealed by Law 282 of 30/12/1993, except for gains from the disposal of shares, which remain exempt from income tax.]

The tax falls due within the month following the decision to pay the profits, interest, proceeds or other revenues from shares and founders' shares. The tax on interest from bonds falls due within one month of the due date of such interest.

Every company, institution or public or private body must pay the tax to the Treasury within the period set out in the preceding article, and may then recover it from the holders of shares or bonds. The following documents must be submitted at the time of payment:

1. 1)For shares: extracts from auditors' statements, resolutions of general shareholders' meetings or boards of directors, and in general any resolution concerning the distribution of profits or reserves.
2. 2)For bonds: a table showing the number of bonds, the nominal value of each bond, the interest rate, and the due date.
3. 3)For lottery prizes and redemption prizes: a certified copy of the original lottery record and a table showing the number of bonds drawn in each lottery, the issue value, the amount of prizes due, and the amount subject to tax.

Natural and legal persons who fail to pay the tax within the legal period pursuant to the preceding article, or who pay it inadequately, are directly liable for the unpaid amounts, plus a penalty of three percent (3%) per month of delay, counting any fraction of a month as a full month.

The Treasury's rights to assessments may be reinstated by additional schedules or supplementary assessments up to the third year following the year in which the concealed or unknown income should have been assessed, without prejudice to any penalties to which the taxpayer or person liable for the tax may be subject. Assessments cancelled in whole or in part for formal defects not affecting their substance, or because of an error in the type of tax or in the name of the taxpayer, may also be reinstated. The tax may be imposed on any profit or income proven by a judicial decision, arbitration award or inventory report, up to the last day of the civil year following the year of the judgment, award or report, in addition to the time limit provided for in the preceding paragraph.

Any person wishing to leave Lebanese territory permanently must obtain, prior to departure, a certificate from the Ministry of Finance proving that he has paid the income tax due. The competent departments are prohibited from endorsing the passport(1) of any person wishing to leave Lebanese territory permanently before he presents the certificate referred to in the preceding paragraph. The certificate is not, however, required of non-residents who wish to leave the country even temporarily.

Declarations, objections, statements and other documents and instruments submitted to the Ministry of Finance in connection with income tax are exempt from stamp duty.

Persons who provide information relating to concealed income are granted a reward of between 10% and 30% of the value of the penalties collected as a result of the information provided.

a. Every taxpayer who commences a new activity must notify the financial departments within two months of the date of commencement; failure to do so results in the following penalties: - LBP 3,000,000 for joint stock companies. - LBP 1,000,000 for limited liability companies and limited partnerships by shares. - LBP 1,000,000 for general partnerships and taxpayers mandatorily assessed on actual profit. - LBP 500,000 for all other taxpayers. The procedures for proving the date of commencement of activity are determined by decision of the Minister of Finance. b. Taxpayers who have not declared the commencement of activity within the prescribed period and who file declarations within a period determined by the Minister of Finance, not exceeding 31/12/1997, are exempt from the non-declaration penalty.

All natural and legal persons enjoying permanent exemptions or special exemptions from income tax, as well as all commercial companies enjoying a permanent exemption pursuant to Article 5 of this Legislative Decree, must file annual declarations and statements with the competent financial departments and make available to the competent officials, upon request, all documents and accounts reflecting the activity, profits, losses and transactions conducted with third parties. For late filing or refusal, a penalty of between two hundred thousand and five hundred thousand Lebanese pounds is imposed.

Taxes, penalties and other amounts due to the State pursuant to this Legislative Decree enjoy a general first-ranking privilege over all assets of the taxpayers liable for them or responsible for paying them to the Treasury. This privilege applies even in the case of voluntary arrangement, judicial liquidation or bankruptcy.

Notwithstanding the provisions of the Commercial Code, and for the purpose of applying the provisions of the income tax, registers and documents necessary to prove the validity of entries and declarations must be kept for five years following the basic assessment year.

For the purposes of this Legislative Decree, the following words and expressions have the meanings assigned to them: - Tax on industrial, commercial and non-commercial profits: Part One tax. - Tax on salaries, wages and retirement pensions: Part Two tax. - Tax on income from movable capital: Part Three tax. - Income: profit — revenues. - (Taxpayer — employer): any natural or legal person subject to the tax. - Establishment: commercial establishment — industrial establishment — non-industrial establishment — public and private establishments — profession of any kind — craft — work. - Proceeds: income from movable capital whatever its denomination — interest — proceeds — revenues.

The terms and expressions contained in this Legislative Decree are interpreted in a manner consistent with the public interest and the protection of the rights of the Treasury. The implementing regulations are determined by decree(1) adopted by the Council of Ministers.

This Legislative Decree shall enter into force as from 1 January 1960, and all laws, legislative decrees, ordinary decrees and regulations contrary thereto or inconsistent with its content are repealed as from that date, whether general or special.

This Legislative Decree shall be published and communicated wherever necessary. Signed on 29 June 1959. Signatory: Fouad Chehab Published in Official Gazette No. 35, dated 4 July 1959.

The tax is imposed in the name of each taxpayer at his domicile or at the place where he exercises his trade, industry or profession as at 1 January of the assessment year. If the taxpayer owns more than one establishment or exercises multiple activities, the tax is imposed on the aggregate profits realised in Lebanon, and his principal establishment serves as the centre of assessment. [Added by Law 497 of 30/1/2003]: Notwithstanding any other provision, with a view to facilitating the handling of transactions and ensuring effective oversight, the Minister of Finance may establish centralised assessment centres for income tax administration, according to criteria set for that purpose.

In Lebanese general partnerships(1) and limited partnerships, each partner with full legal capacity is personally assessed on his share of the profits, as is each partner lacking such capacity when the partnership arises from the application of Article 66 of the Commercial Code. The balance of profits is assessed in the name of the company. However, the tax imposed in the name of each partner is in all cases a liability of the company.

The tax is imposed by means of annual assessment schedules and is collected in accordance with the principles governing the collection of direct taxes and similar fees. The placing of the basic assessment schedules in collection must be announced in the Official Gazette, on the radio and in the press. Each taxpayer also receives a personal notice of the tax imposed on him. Other assessment schedules are not published; the person concerned is notified of the tax arising therefrom by registered letter with acknowledgement of receipt.

In the event of a transfer of the enterprise to a third party, whether gratuitously or for consideration, and whether the sale is compulsory or voluntary, the seller and the buyer are jointly and severally liable for the payment of taxes due from the seller for the current year and the two preceding years not yet extinguished by the legal period of limitation. This obligation does not, however, extend to assessments imposed in the name of the seller after the expiry of one year from the date of the sale as registered with the competent financial departments. The provisions of this article, and those of Article 29, also apply in the event of the taxpayer's death; the heirs must then provide the necessary information for the imposition of the tax within two months of the date of death.

The representatives of natural and legal persons subject to the tax are considered liable for its payment.

A person who is liable for the payment of tax on behalf of the original taxpayer is entitled to recover what he has paid from the principal amounts that he receives or collects on that taxpayer's account, on the same terms as the privilege enjoyed by the Treasury.

The basic tax is imposed in the name of each taxpayer on the basis of declarations filed in accordance with the provisions of Chapter Three of this Part. If upon scrutiny of the accuracy of the declarations the financial departments find grounds for amendment, they notify the taxpayer of the amendment and its reasons, together with notice of the additional tax or supplementary assessment, by registered letter with acknowledgement of receipt.

The tax is imposed by means of annual assessment schedules and is collected in accordance with the principles governing the collection of direct taxes and similar fees, subject to the provisions of the following Article 62. The placing of the basic assessment schedules in collection must be announced in the Official Gazette, on the radio and in the press.

A personal notice of the tax imposed on each taxpayer is sent to him through the employer or the institution paying the retirement pension or life allowances, with the possibility of substituting individual notices with summaries from the assessment schedules drawn up for each employer separately.

The employer must withhold the tax from the salaries and wages paid to employees and pay the withheld amounts to the Treasury each quarter, no later than the fifteenth of the month following the quarter in question. This obligation also applies to individuals, institutions, companies and associations paying retirement pensions or life allowances; those who fail to pay to the Treasury within the prescribed period the amounts they should have paid are personally and additionally liable for the unpaid amounts, plus a penalty of three percent (3%) per month of delay, counting any fraction of a month as a full month. If an employer proves that he paid additional amounts to employees (such as a year-end bonus) before 15 January of the current or preceding fiscal year, such amounts are exempt from the late-payment penalty, provided the tax thereon is paid within the legal deadline prescribed for the annual declaration. This provision applies as from the fiscal year 2003. Its implementing regulations are determined by decree adopted by the Council of Ministers on the proposal of the Minister of Finance. [Added by Law 583 of 23/4/2004]: All employers, whatever their method of income taxation, are required to draw up a quarterly statement of salaries and wages for each employee, whatever the amount and whether or not any tax is due thereon, and to submit it together with the advance payment notice when any tax or penalty is due, to the competent financial department within the legal time limit set for each instalment payment.(1) A penalty of five percent (5%) of the amount of tax due is imposed for violation of this paragraph, which may not exceed LBP 1,000,000 (one million) and may not be less than LBP 200,000 (two hundred thousand) per employee for whom the quarterly statement has not been filed.(2) For employers personally liable for paying and declaring the tax on salaries and wages, and for institutions, associations and bodies that do not seek to make a profit and whose number of employees does not exceed five, a flat-rate penalty of LBP 50,000 (fifty thousand Lebanese pounds) is imposed in case of violation.

The provisions of this Part relating to the keeping of the employees' register, the declaration of their income, the withholding of the tax therefrom, and its payment to the Treasury, apply to public administrations, public establishments, major municipalities and other municipalities and bodies determined by decree adopted by the Council of Ministers.

The tax due on civil servants, officers, employees and workers, and other wage earners and retirees of all sectors, who receive their salaries, wages and allowances from the State, is deducted monthly from the taxpayer's income during the month in which it falls due. The provisions of this Part relating to the obligations of employers and the method of organising assessment schedules and paying the tax do not apply to the State.

A person who is liable for the payment of tax on behalf of the original taxpayer is entitled to recover what he has paid from the principal amounts that he receives or collects on that taxpayer's account, on the same terms as the privilege enjoyed by the Treasury.

All correspondence between the financial departments and taxpayers subject to this tax is conducted through the employer or the institution paying retirement pensions or life allowances.

All rights and obligations of the non-resident employer, as provided for in this Part, are transferred to the resident taxpayer, in particular with regard to the filing of declarations and the payment of tax.

All foreign shares and foreign public and private bonds held by natural or legal persons resident in Lebanon, whether foreigners or Lebanese nationals, are subject to tax. Any natural or legal person in Lebanese territory who pays the proceeds of the said shares and bonds withholds the tax for the benefit of the Treasury.

Every person engaged in the profession of collecting, paying or purchasing coupons or other financial instruments for the purpose of paying profits, interest, proceeds, lottery prizes, redemption prizes and other income from bonds and financial instruments referred to in the preceding article, must file a declaration to that effect with the competent financial departments within one month of the date of commencement of activity, failing which a penalty of between LBP 200,000 and LBP 500,000 is imposed. It is prohibited for all the persons referred to above to pay, collect or purchase coupons and other financial instruments without withholding the tax, unless they can prove that another intermediary has already withheld it.

The persons referred to in the preceding article must, for each payment they make, draw up a schedule in duplicate containing the following information:

1. 1)The name of the payer, his commercial address, profession or trade.
2. 2)The type of coupons or other financial instruments presented for collection, their number and their individual value in Lebanese pounds at the time of payment.
3. 3)The total gross amount in Lebanese pounds.
4. 4)The amount of tax due.
5. 5)The registration number in the register referred to below, the date, the payer's signature, and the name and address of the collector together with his signature.
6. 6)One copy of the schedule is given to the collector as a receipt. The second copy is kept by the payer; a penalty ranging from LBP 200,000 to LBP 500,000 is imposed for failure to prepare such schedules.

The same persons must keep two numbered registers, endorsed by the financial departments, in which they record day by day, without omission or alteration, the transactions of payment, sale or purchase of coupons or other financial instruments from which the tax must be withheld. These registers contain the information set out in the tables referred to in the preceding article. Register No. 1 is reserved for payment transactions that required direct withholding of the tax by the responsible person. Register No. 2 is reserved for sale and purchase transactions for which no withholding was required because another intermediary had already withheld it. A penalty ranging from LBP 200,000 to LBP 500,000 is imposed for failure to keep these registers.(2)

The withholding agent must, at the end of each half-year, prepare a summary from Register No. 1, and send it together with the withheld tax to the financial authorities. The tax must be paid within the month following the half-year; the provisions of Article 76 apply to violations.(1)

Owners of foreign shares and bonds, or persons who collect their proceeds, resident in Lebanon, who transfer their profits, interest, proceeds or other income abroad, or collect them abroad, whether directly or through intermediaries, must submit to the financial departments before 1 March of each year a statement indicating the total of those profits, interest, proceeds and income collected during the preceding year. Failure to file this statement results in a penalty of ten percent (10%) of the amount of tax imposed for each month of delay, counting any fraction of a month as a full month, up to a maximum of fifty percent (50%) of the tax assessed. Upon repetition, the penalty is doubled to the equivalent of the tax; no settlement procedure may apply to such penalties. This tax must be paid before 1 April of each year; in case of late payment, a penalty of three percent (3%) per month of delay is added to the unpaid amounts, counting any fraction of a month as a full month.

Amounts collected in Lebanon by persons, companies or establishments having no professional establishment there, in respect of activities subject to this tax, as well as the profits, revenues and proceeds they earn in Lebanon, are assessed in accordance with the provisions of the following two articles.

The net amount subject to tax is fixed at fifteen percent (15%) of the original income referred to in the preceding article, on a flat-rate basis; fifty percent (50%) thereof is deducted if it has the character of compensation for services rendered. The tax is withheld and collected at a rate of fifteen percent (15%). No surcharge is added to the principal of the tax.

Any person who pays amounts subject to taxation pursuant to Article 41 must declare those amounts within the time limit prescribed for the declaration of his own profits, after having withheld the tax calculated on the basis of the preceding Article 42. The withheld tax must be paid to the Treasury together with the declaration.

Insurance and savings institutions of all kinds, as well as sea, land and air navigation companies that are subject to tax, and oil refineries, are taxed solely on the basis of flat-rate profit in accordance with the provisions of sub-section (b) of Chapter Three of this Part, and may not request to be taxed on the basis of actual profit pursuant to Article 12. Insurance and savings institutions are personally liable for the tax due on them and may not pass it on to depositors, subscribers or beneficiaries, notwithstanding any prior contrary condition or agreement. Public works contractors are assessed on the flat-rate profit method based on the amounts they actually receive from public contracts during the civil year for the works they carry out. They may not avail themselves of the right of election provided for in Article 12.

First: Establishments subject to the actual profit method of taxation may, every five years, carry out a revaluation of their fixed assets in accordance with the procedures laid down in the Commercial Code for the valuation of contributions in kind to capital companies. The revaluation report is submitted to the competent financial department, which may object to it before the Income Tax Objection Committee within three months of the date of notification. The said committee must issue its decision on the objection and determine the final revaluation within a maximum of six months from the date on which the establishment submits its observations on the rapporteur's report. If no decision is issued within that period, the revaluation report is deemed approved.

Second: If fixed assets are revalued at a price higher than their original cost or the balance remaining after depreciation, the difference is treated as a capital gain. This gain is not subject to income tax in the following cases:

1. 1)If it is maintained separately in a special account on both sides of the balance sheet.
2. 2)If it is used to cover losses still appearing and identified in the balance sheet, within the limits of the amounts so used.
3. 3)In all other cases, this gain is subject to income tax at the rate of 10%. Depreciation may then be calculated on the new value resulting from the revaluation.

Third: The capital gain arising from a total or partial disposal is subject to income tax at the rate of 15%. However, a taxpayer who reinvests all or part of this gain within two years following the year of its realisation may request that the tax imposed be deducted from the amounts reinvested in the construction of permanent housing for the use of employees and wage earners working in the enterprise. In that case, the conditions and requirements of Article 5 bis of the Income Tax Law apply. The capital gain from a disposal is also exempt to the extent that it is used to offset subsequent losses of the enterprise. Capital companies taxed on the flat-rate profit basis may also carry out a revaluation of their fixed assets every five years, in accordance with the same procedures.

b — The following are subject to tax at the rate of fifteen percent (15%): gains from the disposal of fixed assets, including real estate, belonging to natural or legal persons subject to income tax on the actual, flat-rate or estimated profit basis.

c(1) — The following are subject to tax at the rate of fifteen percent (15%): gains from the disposal of real estate belonging to natural or legal persons not subject to income tax, or who are permanently, specially or exceptionally exempt from that tax, or belonging to natural persons subject to income tax where such real estate does not form part of the assets of a professional activity, as follows: - Exempt from the above tax are gains from the disposal of the primary residence of the natural person, provided the residences do not exceed two. - For the purpose of calculating the taxable gain from disposal, eight percent (8%) of the value of the gain is deducted for each complete year elapsed between the date of acquisition of the real estate and the date of disposal. The gain from disposal is exempt from tax if the transferor has held the property for twelve or more complete years, provided any balance due is paid in the year of disposal. - Persons referred to above must, upon carrying out a taxable disposal transaction, declare the disposal and pay the tax due within two months of the date of disposal. - Violations of this article are subject to the penalties provided for in Law 44 of 11/11/2008 (Tax Procedures Law). - The implementing regulations of this article are determined by decision of the Minister of Finance.

Article 45 bis — Exceptional Revaluation of Assets, Real Estate and Fixed Assets [Added by Law 282 of 30/12/1993] Natural and legal persons required to keep regular accounts under statutory or regulatory provisions may, on a one-time basis, carry out an exceptional revaluation of fixed assets (including shares, bonds and company participations) as well as real estate and fixed assets, whether held as fixed assets or for trading purposes, to correct for the effects of inflation caused by the depreciation of the Lebanese pound exchange rate against foreign currencies and by changes in the value of such real estate and fixed assets, retroactively as from the fiscal year 1975. The exceptional revaluation covers all fixed assets, real estate and fixed assets referred to above that are recorded in the enterprise's books at a date prior to 1 January 1994, provided that the value does not exceed the market price. [As amended by Law 301 of 21/3/1995]: The positive differences resulting from the exceptional revaluation are subject to a new proportional tax at the rate of 1.5% (one and a half percent) of the value of those differences. These differences are exempt from any other income tax, regardless of their subsequent use. The tax on the differences is paid in cash within one month of the date of the revaluation. Taxpayers assessed on the flat-rate or estimated profit basis may also benefit from this revaluation if the existence of documents allowing the revaluation of fixed assets, real estate and fixed assets is established. In no case shall these provisions, with respect to banks, conflict with the Money and Credit Law and the other regulatory and implementing provisions issued by Banque du Liban. The implementing procedures for this article are determined by decree adopted by the Council of Ministers on the proposal of the Minister of Finance.

The tax is imposed on interest, proceeds, commissions, reinvestment compensation, early payment compensation and any other income from secured debts, whatever their denomination and method of payment. All such income is referred to in this Chapter as 'interest'. 'Secured debt' means any debt (loan, bond, etc.) for which security has been registered in Lebanon, whatever the type or form of that security (mortgage, pledge, sale with right of redemption, sale with right of recovery, leasehold sale, etc.), or for which the law prescribes the registration of security, such as motor vehicles, ships and the like.

The tax is imposed on all gross interest arising from the security, whether nominal or actual, whatever the date of its creation. The rate stated in the security deed is used to calculate the interest, provided it is not below the customary level; otherwise the legal rate applies. In all cases, the competent financial departments may recover concealed Treasury rights up to the third year following the year in which the security was discharged, and the creditor is liable for a penalty equal to three times the recovered tax. The tax and penalty are collected in accordance with the direct tax collection law.

If the principal of the debt or part thereof is collected before the interest, the tax is calculated as if the payment had been applied first to the interest. The tax is reduced in proportion to the loss suffered on the original capital if the creditor has exhausted all legal enforcement measures and the subject matter of the security has in no case accrued to him.

If the debtor, or any rights-holder succeeding him, has paid the tax due on the interest, he benefits by operation of law from a set-off by deducting the amount paid from the interest due to the creditor, or failing that from the principal of the debt.

No person may obtain total or partial release of a pledge or security registered as guarantee for an interest-bearing debt without first proving that the tax due on such interest has been paid. Where the pledge or security is enforced through enforcement proceedings, the enforcement departments withhold the tax from the amounts collected and pay it to the Treasury.

The tax on interest from secured debts is collected by means of payment orders issued by the competent department at the request of the party concerned, whether the creditor, the debtor or their respective representatives.

The tax covers the profits of commercial, industrial and craft enterprises and free professions, as well as the profit of any activity yielding income not subject to another income tax. No income is exempt from the tax except by an express provision of law.

The tax is assessed in the name of natural and legal persons, whether resident in Lebanese territory or abroad, on the total profits they realise in Lebanon.

The following are among the persons liable to this tax:

1. 1)Companies, of whatever type and purpose.
2. 2)Natural or legal persons:
3. 3)Those who act as intermediaries in the purchase or sale of real estate and commercial establishments, or who purchase them in their own name for resale.
4. 4)Those who operate a commercial or industrial establishment equipped with furniture or tools necessary for its exploitation, whether the lease covers all or part of the intangible elements of the establishment, or none of them.
5. 5)Those who benefit from the proceeds of the exploitation of underground resources.
6. 6)Brokers, agents, intermediaries and, in general, any natural or legal person who acts as intermediary in the purchase or sale of any type of assets.
7. 7)Any natural or legal person who derives a profit from any income-producing activity not subject to another income tax.

The tax covers salaries, wages, emoluments, allowances, retirement pensions, whether public or private, and life allowances accruing in Lebanese territory on behalf of:

1. 1)A public fund, to any person resident in Lebanon or abroad.
2. 2)A private fund, to any person resident in Lebanon, and also to any person resident abroad in respect of services rendered in Lebanon.

The tax on income from movable capital covers the various revenues, profits, interest and proceeds of such capital, whatever their denomination or the nationality of the institutions that produced them or the place of residence of those to whom they accrue, provided they are received in Lebanon or accrue to a person resident therein. These revenues, profits, interest and proceeds include in particular:

1. 1)Revenues of all types arising from shares, founders' shares and interest shares issued by joint stock companies, or financial, industrial, commercial and civil establishments, and other public and private bodies.
2. 2)Attendance fees and directors' fees drawn from profits.
3. 3)Attendance fees of shareholders at general assemblies.
4. 4)Amounts drawn from reserves or profits for the redemption or amortisation of shares or founders' shares before cessation of activity.
5. 5)Distributions of reserve funds and profits in the form of bonus shares or any other form.
6. 6)Interest, proceeds and revenues from bonds and loans(4) issued by the State, municipalities and other public and private bodies and companies.
7. 7)Lottery prizes and draws paid to creditors and bondholders.
8. 8)Interest, proceeds and revenues from secured debts.
9. 9)Interest, proceeds and revenues from civil loans and from privileged and ordinary debts, unless arising from commercial transactions.
10. 10)Interest, proceeds and revenues from insurances and cash deposits, whatever the deposit and whoever the holder, including current accounts.
11. 11)The tax provided for in this article is imposed even if the company, institution, body or utility was exempt from tax prior to the issuance of this Legislative Decree under an agreement with the State or special statutory provisions.

Interest, proceeds, profits and revenues derived from the exercise of a profession are subject to the Part One tax. In all other cases, the tax on income from movable capital covers every profit, revenue or capital income not subject to another income tax. Only items expressly exempt by law are excluded.(1)

Every taxpayer is entitled to object to the taxes imposed on him pursuant to this Legislative Decree if he considers them erroneous or excessive. Objections to these taxes must be lodged with the competent financial departments within two months:

1. 1)From the date of publication in the Official Gazette announcing that the basic assessment schedules have been placed in collection, where the assessment subject to the objection is included in those schedules.
2. 2)From the date of notification of the personal notice, where there are additional assessments or supplements or deductions independent of the basic schedules.

If the objection filed pursuant to the preceding article satisfies all formal conditions and the grounds contained therein are well-founded in fact and in law, the competent department shall correct the assessment by means of monthly schedules and notify the summary thereof to the person concerned by registered letter with acknowledgement of receipt. If the competent financial department considers the objection unfounded, it notifies the person concerned accordingly and refers the objection, together with its opinion, to the special committee provided for in the following article for examination and decision. In all cases, the head of the competent department must decide on the objection, or refer it with his opinion to the committee, within six months of the date of its filing at the latest.

A decree shall constitute, in each province, one or more primary committees to examine and decide on the objections referred to above, composed of: - A judge appointed on the proposal of the Minister of Justice, as chairman. - A civil servant from the Ministry of Finance belonging to at least the third category, appointed by the Minister of Finance, as member. - A representative of the Chamber of Commerce and Industry, appointed on the proposal of its president, or a representative of the provincial council or the municipal council, appointed by the Governor on the proposal of the Minister of Interior where no Chamber of Commerce exists, as member. - The head of the Income Tax Department or his representative, as rapporteur.

A tax inspector (first grade) from the competent department is placed at the disposal of the committee as secretary; he may stand in for the rapporteur when needed, but neither he nor the rapporteur may participate in the vote. The procedural rules applicable before the administrative courts, relating to the exchange of briefs, time limits and verification, apply before this committee at all stages of proceedings, except with respect to the government commissioner.

The rapporteur must notify the committee's decision to the competent financial department and to the taxpayer within fifteen days of the date of its issuance. Both the financial department and the taxpayer are entitled to appeal this decision before the Council of State within twenty days of the date of notification.

Appeals are lodged directly before the Council of State. Objections may be lodged within two months of the date of notification of the administrative decision. Taxpayers whose objections were rejected for failure to comply with the legal deadline may benefit from the new time limit.

Acceptance of the appeal filed by the taxpayer is conditional on the deposit of a security equal to five percent (5%) of the amount of the tax objected to. Any appeal not accompanied by a receipt proving payment of the security is rejected on formal grounds. The security, together with the court fees, is paid into the fund held at the Council of State within the prescribed appeal period.

If the Council of State's decision is entirely in the taxpayer's favour, he is entitled to recover the security referred to in the preceding article. If the decision is entirely in the Treasury's favour, the security becomes a vested right of the Treasury. If the decision is partially in the taxpayer's favour, the security is returned only in proportion to the tax that the decision orders to be cancelled.

The following are exempt from tax: (2)

1. 1)Educational institutes.
2. 2)Hospitals, morgues and shelters that admit patients free of charge, and similar nursing and first-aid establishments, within the limits of the net profits derived from public or private funds and grants.
3. 3)The following text was added to paragraph 2 of Article 5 by Law No. 85/7 of 10/8/1985 (Budget Law 1985):
4. 4)Hospitals, morgues, shelters, homes for the elderly, dispensaries, sanatoria and similar nursing and first-aid establishments, owned or operated by non-profit institutions, associations or bodies, are fully exempt from tax on their profits.
5. 5)State-owned psychiatric hospitals.
6. 6)Consumer cooperatives, trade unions and agricultural cooperatives with a commercial character.
7. 7)Foreign investors, to the extent that they sell in Lebanon, during the harvest season, the crops and livestock they have raised there, and do not trade in them after the harvest period has ended.
8. 8)National maritime navigation companies, provided that the home country of foreign companies accords the same treatment to Lebanese companies (reciprocity condition).
9. 9)Public utilities that do not compete with private enterprises.(3)
10. 10)Tourist establishments of a craft character. [Text added by Legislative Decree 58/67 of 5/7/1967]
11. 11)Fees that notaries are entitled to collect pursuant to Article 17 of the Notaries Law, the compensation referred to in Article 20 of Law No. 59/146 known as the Transfer and Inheritance Tax Law, and compensation paid by the State to notaries. [Text added by Law 392/2002 of 8/2/2002]

Article 5 bis — Investment of Profits of Industrial Establishments [Added by Law 80/27 of 19/7/1980]

First:

1. 1)Industrial establishments may, at their own discretion and as from 1980, allocate a fixed portion of their annual net profits to investment in their fixed assets, subject to the following conditions:
2. 2)The investment must be aimed at creating new industrial fixed assets that will increase the productive capacity of the enterprise in a lasting and quantifiable manner. The following are not considered as such: investment in temporary equipment used for a specific workshop activity and ceasing when that activity ends; nor investment in provisional stores used under a temporary admission system.
3. 3)Construction of housing exclusively for the use of workers and salaried employees of the enterprise, subject to the provisions of the Housing Law and its implementing regulations, provided:
4. 4)- The housing is owned by the enterprise for at least 12 years.
5. 5)- It is used only for the stated purpose.
6. 6)- The total amount invested does not exceed 15% of the aggregate annual wages and salaries effectively paid to salaried employees.
7. 7)These provisions do not apply to exceptional wages paid for such housing.
8. 8)Industrial establishments wishing to benefit from the above provisions must notify the competent financial departments of their intention before the start of the investment year, and must submit to the competent financial department the records and data relating to the investments they intend to carry out, failing which they forfeit the right to benefit from the exemption.
9. 9)The investment record is the record maintained by the enterprise of any financial transaction resulting from a definitive commitment with a third party for investment purposes.
10. 10)Where the above conditions are met and the invested amounts cover the investment, a deduction of up to fifty percent (50%) of the profits of the year in which the financial investment is made and the three following years is granted. This percentage is raised to 75% where the investment is made in one of the regions that the government wishes to develop, as specified by decree adopted by the Council of Ministers.
11. 11)The portion deducted from annual net profits and used to cover fixed investments, in accordance with the conditions set out above, is exempt from income tax, provided the deduction does not exceed the limits of the four years referred to above for each investment transaction.
12. 12)The competent financial departments must permanently verify that the establishments benefiting from the provisions of this law comply with the prescribed conditions. Any amounts deducted for investment purposes that are not used for the stated purpose must be added to the profits of a subsequent year and subjected to tax, plus a penalty of 3% per month of delay, counting any fraction of a month as a full month.

Second:

1. 1)The following industrial establishments, set up in Lebanon as from 1980, are exempt from income tax for ten consecutive years from the date production commences, provided they simultaneously satisfy all of the following conditions:
2. 2)The factory is established in one of the regions that the government wishes to develop, as specified by decree adopted by the Council of Ministers.(1)
3. 3)The enterprise produces new goods not previously manufactured in Lebanon before 1 January 1980. 'New goods' means goods not previously manufactured in Lebanon at all, including goods derived from the processing or packaging of local or imported semi-finished goods, as well as goods manufactured from imported semi-finished goods through an assembly, completion or transformation process.
4. 4)The value of the fixed assets owned by the new enterprise in Lebanon and used for the production of the said new goods must not be less than five hundred million Lebanese pounds.
5. 5)The aggregate profits exempt from income tax during the said period must not, in any case, exceed the value of the fixed assets as at the date production commences.
6. 6)Industrial establishments wishing to benefit from the above provisions must notify the competent financial departments before production commences and must submit certified records and data relating to the value of their fixed assets and production specifications.
7. 7)The exemption is granted by decree adopted by the Council of Ministers on the proposal of the Minister of Finance.
8. 8)Establishments benefiting from the above exemptions must submit to the competent financial departments, within the time limit prescribed for filing annual accounts, the accounts and certified records required by income tax law. All records and certified documents relating to the accounting of their fixed assets must comply with the provisions of commercial law.
9. 9)The competent financial departments shall permanently monitor establishments benefiting from the provisions of this law to verify compliance with the prescribed conditions.

Third: [Added by Law 248 of 15/4/2014]

1. 1)Fifty percent (50%) of the tax due on Lebanese industrial exports is exempt from income tax.
2. 2)Only the certificate of origin issued by a competent body is accepted as primary evidence to qualify as Lebanese industrial exports.
3. 3)Customs data are accepted as evidence of the value of industrial exports qualifying for the certificate of origin, as well as data drawn up by the Ministry of Finance for that purpose.
4. 4)Establishments benefiting from this exemption must file accounts of their profits with the competent financial departments, within the time limit prescribed for filing annual accounts, together with the data referred to above.
5. 5)Excluded from this exemption are companies and establishments exploiting underground resources and any others that must be excluded by decrees adopted by the Council of Ministers on the proposal of the Minister of Finance.
6. 6)The implementing regulations of this article are determined by decision of the Minister of Finance.

The following are exempt from tax:

1. 1)Allowances received by clergy for performing religious services.
2. 2)Salaries and salary supplements received by ambassadors of foreign states and their diplomatic representatives, consuls and consular representatives, and the foreign national employees among their staff, subject to the condition of reciprocity.
3. 3)Salaries and salary supplements received by military personnel of any rank belonging to the armed forces of allied states.
4. 4)Retirement pensions of retired persons, and pensions of the survivors of martyrs of the armed and security forces and of wounded members of the armed forces, as defined by Article 85 of the National Defence Law.(2)
5. 5)Life allowances and temporary compensation paid to victims of work accidents.
6. 6)Wages of agricultural workers.
7. 7)Wages of domestic servants in private households.
8. 8)Wages of nurses and nursing staff in hospitals, morgues, shelters and similar nursing and first-aid establishments.
9. 9)Dismissal compensation paid in accordance with the laws in force in Lebanon.
10. 10)Family allowances paid in accordance with applicable laws.
11. 11)Wages of licensed midwives working in hospitals.

The following are exempt from the tax:

1. 1)[Repealed by Law 80/27 of 19/7/1980.]
2. 2)Amounts paid to reimburse creditors' or shareholders' funds, if not drawn from the profit and loss account or reserves.
3. 3)Repayments of shareholders' and creditors' funds in concession companies, even if drawn from reserves or the profit and loss account, where the reason for repayment arises from the obligation to hand over the installations to the authority at the end of the concession period without consideration.
4. 4)Interest on amounts deposited in savings accounts, provided the interest does not exceed one thousand Lebanese pounds per year.
5. 5)[As amended by Law 282 of 30/12/1993]: Interest and proceeds on all current accounts held with banks.
6. 6)Revenues from Lebanese Treasury bonds.

Income tax inspectors(1) are entitled to inspect, at the taxpayer's premises or at the premises of persons liable to pay the tax, all registers and documents, and anything else that may assist in the imposition of the tax.(2)

No natural or legal person, not even official departments, may invoke professional secrecy when the competent Ministry of Finance officials request to inspect documents and records relating to the imposition of income tax.

The financial departments may request the Public Prosecution to gain access to any proceedings pending before the courts. The judicial authority may inform the departments, through the Public Prosecution, of any information suggesting that a taxpayer has defrauded or attempted to defraud the financial departments with respect to income tax, whether the proceedings are civil, commercial or criminal, and even if they have ended by a final judgment.

Every natural or legal person in Lebanon is required to make available to the competent Ministry of Finance officials, upon request, all registers, documents and information in his possession that assist in determining the tax bases that may be due from him or from other taxpayers. [Added by the Law of 20/6/1961]: Notwithstanding any other provision, senior tax inspectors, principal tax and audit inspectors, and verification inspectors enjoy the right of access ordinarily conferred on tax inspectors under the various tax and fee laws, within the limits of their territorial jurisdiction and in accordance with procedures agreed with the Director General of Finance, and are subject to the same professional secrecy obligations. Authorised inspectors and members of the Financial Audit Office may also exercise this right within their mandate and in accordance with those procedures.

Professional secrecy is binding, and any person whose duties, powers or jurisdiction require involvement in the assessment, collection or examination of objections relating to income tax is subject to the provisions of Article 579 of the Penal Code. However, professional secrecy may not be invoked in proceedings affecting the interests of the administration, or in the exercise of audit, verification, fiscal and administrative inspection activities. Income tax inspectors and audit and collection inspectors must take an oath before the competent judicial authority prior to taking up their duties.

Taxpayers and their representatives may not request information or extracts from assessment files, except with regard to declarations and documents previously submitted by them.

All data and correspondence relating to income tax exchanged between administration officials or sent by them to taxpayers are placed in sealed envelopes.

The tax is imposed on the net profit realised during the year preceding the assessment year, even if the source of profit ceases during the assessment year or before it.

The net profit is the aggregate taxable income of the taxpayer, after deducting all expenses and charges required for the exercise of commerce, industry or the profession. These expenses and charges include in particular:

1. 1)The cost of purchasing goods or merchandise sold, and the cost of services paid during the year.
2. 2)The rent of the premises in which the profession is exercised, or its rental value if the taxpayer is the owner.
3. 3)Interest on loans contracted with third parties for business purposes.
4. 4)Salaries and wages, and all amounts paid to employees and workers as remuneration for their services or as severance pay in accordance with the applicable special conditions.
5. 5)Ordinary general expenses, including the cost of insuring employees.
6. 6)Taxes and fees paid or due in the year on the enterprise or profession, other than the taxes specified in this Legislative Decree.
7. 7)Depreciation calculated on the original cost of the tangible fixed assets of the enterprise. The Minister of Finance, on the proposal of the Director General of Finance, shall issue a decision setting the rates of such depreciation within minimum and maximum limits. The taxpayer may choose the rate or rates appropriate to the circumstances of his enterprise, provided he notifies the competent financial departments in advance of his depreciation schedule. The rates chosen are binding and fixed for the duration required for accumulated depreciation to equal the original cost.
8. 8)For intangible fixed assets, no depreciation may be carried out unless they are subject to extinction due to an agreed or compulsory lapse of a period; in that case, their cost is deducted in equal annual instalments over the applicable period of the licence or lease.
9. 9)Provisions set aside to meet losses from bad debts likely to materialise or become final, from redundancy payments, retirement pensions, or accident compensation in accordance with applicable law.
10. 10)Additional provision for banks [added by Legislative Decree 81/83 of 27/6/1977]: Banks may, as from 1977, set aside provisions to cover losses on debts declared irrecoverable for which bankruptcy proceedings have been initiated, after approval by the Banking Control Committee at Banque du Liban, upon the creditor bank's request.
11. 11)Additional provision for financial institutions [added by Law 583/2004 of 23/4/2004]: Financial institutions may, as from 2004, set aside provisions of the same nature, also after approval by the Banking Control Committee at Banque du Liban.
12. 12)Provisions set aside that are not used for the purpose for which they were established, or whose continued maintenance in the following year is not justified, are added to the profits of the year in question.
13. 13)Amounts proven to have been paid by way of aid, assistance or charity to officially recognised religious, social, cultural or sports establishments, within the general limits set by decree adopted by the Council of Ministers.
14. 14)[Added by Decree 15735 of 11/3/1964 as amended by Law 67/26 of 8/5/1967]: Donations made in 1964, 1965, 1966, 1967 and 1968 to the Lebanese Cultural Society for the construction of the House of Culture are deductible from the profits of those years.
15. 15)[Added by Law 286/1994 of 12/2/1994]: Donations paid to the Lebanese State, and those to be paid in subsequent years, are also deductible from the profits of the year in which they are paid.
16. 16)Proven debts established by a court or arbitration award.
17. 17)Legal and commercial advertising expenses proven by regular invoices, within the limits set by decree adopted by the Council of Ministers. [Added by Legislative Decree 39 of 23/2/1977]
18. 18)Charges levied on real-property revenues on behalf of municipalities pursuant to Article 57 of the Law of 17/9/1962, borne by capital companies. [Added by Law 80/27 of 19/7/1980]

The following are not deductible:

1. 1)Capital expenditure and expenditure exceeding its maintenance value, other than ordinary maintenance expenses.
2. 2)Taxes and fees paid or due to a foreign state on income earned in Lebanon, without other justification.
3. 3)Losses incurred by the taxpayer from the activities of establishments, branches, agencies or representative offices, whether inside or outside Lebanon, whether wholly owned or in which the taxpayer participates.
4. 4)Actual expenses that the taxpayer cannot prove were incurred in connection with the activities of establishments, branches, agencies or representative offices inside or outside Lebanon.
5. 5)Personal expenses, including amounts that the employer or partner deducts for himself for managing the enterprise or for his personal expenses.
6. 6)Representation allowances exceeding 10% of the basic salary of the employed director, as well as any excess beyond the customary limits in salaries, wages and other expenses required for the exercise of commerce, industry or the profession.
7. 7)Exceptional taxes and penal fines.

The revenues from movable capital and from built and unbuilt real estate that form part of the assets of a profession or enterprise are included in the income covered by the tax. If such revenues are in principle subject to one of the other specific income taxes and have been added to the profits at the time they were realised, they may be deducted in full from those profits and not added to the tax provided for in this Part. [Note: A new paragraph was added to Article 8 by Law 80/27 of 19/7/1980, then repealed by Law 282 of 30/12/1993.]

The proportion of profits received by Lebanese capital companies as a result of their shareholding in other Lebanese capital companies is deducted in full from their income subject to the tax provided for in this Part; it remains, however, subject when redistributed to the tax provided for in Article 72 bis of the Income Tax Law.

For the purpose of determining the net profit subject to tax, every taxpayer required to keep commercial accounts pursuant to the Commercial Code must file a declaration of his actual profit or of his total income. In the latter case, the administration determines the net profit subject to tax on a flat-rate basis by applying a prescribed rate to total income. Taxpayers not required to keep commercial accounts have their taxable profits estimated in accordance with the provisions of sub-section (c) of Chapter Three of this Part. If the taxpayer is a holder of a non-commercial, non-industrial profession, he must file a declaration of his total income, unless he requests to be taxed on the basis of actual profit pursuant to sub-section (a) of Chapter Three of this Part. The partner with full legal capacity in general or limited partnerships, and each partner lacking such capacity when the partnership arises from the application of Article 66 of the Commercial Code, is personally responsible for filing the declaration relating to his share. The limited partnership is responsible for filing a global declaration for all the shares of the limited partners in the profits and losses.

Declaration of actual profit is mandatory for the following categories of taxpayers:

1. 1)General partnerships, capital companies, as well as consumer cooperatives, trade unions and agricultural cooperatives with a commercial character.
2. 2)Branches of the establishments mentioned in the preceding paragraph when their head office is abroad.
3. 3)[As amended by Law 326 of 28/6/2001 (Budget 2001)]: Factories, workshops and all other industrial establishments employing more than four persons on a permanent basis, except those that are craft enterprises.
4. 4)Banks, money-changers, and persons engaged in banking activities.
5. 5)Importers, exporters, wholesale merchants, brokers and commission agents.
6. 6)Merchants employing more than four persons.
7. 7)Owners of stores selling chemical and food products.
8. 8)Operators of riding, hunting or shooting establishments.
9. 9)Operators of first- and second-category hotels according to the official classification.
10. 10)Operators of first- and second-category theatres and cinemas according to the official classification.
11. 11)[As amended by Law 326 of 28/6/2001]: Publishing houses and printing presses employing more than four persons on a permanent basis.
12. 12)[As amended by Law 326 of 28/6/2001]: Mills operating for third parties as well as those employing more than four persons on a permanent basis.
13. 13)Lessors of furnished establishments.

Categories not mentioned in the preceding article are taxed on the basis of flat-rate or estimated profit; however, any person may request to be taxed on the basis of actual profit, provided he submits a request to that effect before the end of January of the assessment year. A person who has chosen the method of taxation on the basis of actual profit may not in subsequent years request to revert to the flat-rate or estimated profit method.

a — Taxation on the basis of actual profit

The declaration of actual profit is submitted to the competent financial departments before 1 April of each year, and before 1 June with respect to capital companies, together with a copy of the balance sheet, a summary of the profit and loss account, and a statement of the expenses and charges to be deducted pursuant to Article 7. As for the auditors' report and the explanatory statements relating to companies subject to the auditing regime provided for in the Commercial Code, these are submitted before 1 January of each year. The administration may extend the time limit by one month in duly justified exceptional circumstances. Taxpayers other than holders of commercial and industrial professions who are not required to file a balance sheet shall file a declaration indicating the total of their gross income and the total of the deductible expenses and charges, as well as the net profit for the preceding year. Enterprises whose financial year does not coincide with the calendar year may, with the agreement of the competent financial departments, take the date of closing of that financial year as the starting point for the three- or five-month periods provided for in this article.

The profit to be declared is the actual profit realised during the preceding year, or during the twelve-month period whose results form the basis of the latest balance sheet (if that period differs from the calendar year). In the case of the commencement of a new activity, the profit realised between the date of commencement of activity(1) and the last day of December of the year preceding the assessment year must be declared.

If it appears that establishments affiliated with establishments located outside Lebanon, or supervised by establishments located abroad, transfer part of their profits to abroad, whether by inflating purchase or sale prices, or by reducing them, or by any other means, the profits so transferred must be added, when the tax is imposed, to the profits stated in the accounts. Where sufficient evidence is not available to determine the actual profit, the profits of comparable establishments are taken as the basis of comparison and for determining the profit, in addition to external evidence and information available to the competent financial departments.

If a deficit occurs in a given year, that deficit is treated as a charge of the following year and is deducted from the actual profit realised during that year. If that profit is insufficient to absorb the entire deficit, the remaining balance is deducted from the profits of the second year, and if any balance remains, from the profits of the third year. The deficit may not be carried forward beyond the third year following the year of its occurrence. The deficit must be declared within the time limit prescribed for the declaration of actual profit, in the same manner.

[Added by Legislative Decree 81 of 27/6/1977]: By way of exception, the deficit incurred during either of the years 1975 and 1976 may be carried forward for up to eight consecutive years instead of three, to be absorbed successively during that period as follows: - By applying the full profits of the first four years. - Then by deducting up to fifty percent (50%) of the taxpayer's annual profits during each of the last four years. The balance of the deficit may not be carried forward beyond the eighth year following the year of its occurrence. The balance of profits realised during the last four years referred to above remains subject to the ordinary legal provisions.

[Added by Laws 79/2 of 22/3/1979 and 79/6 of 21/12/1979]: When carrying forward the deficit incurred during 1975 and 1976 to the results of subsequent years, the year 1978 is not counted if its result was a deficit, in the calculation of the eight years provided for in Legislative Decree 81 of 27/6/1977. In that case, the taxpayer benefits from an additional ninth year to carry forward the deficit. The carry-forward of the deficit incurred by taxpayers subject to income tax for 1978 is also governed by the provisions of Legislative Decree 81 of 27/6/1977 relating to the deficit incurred during 1975 and 1976.

[Added by Legislative Decree 59 of 9/9/1983]: By way of exception, the deficit incurred during either of the years 1981 and 1982 may be carried forward for up to eight consecutive years instead of three, to be absorbed in the same manner. The balance may not be carried forward beyond the eighth year. The balance of profits from the last four years remains subject to the ordinary legal provisions.

[Added by Law 85/7 of 10/8/1985]: By way of exception, the deficit incurred during either of the years 1983 and 1984 may be carried forward for up to eight consecutive years instead of three, in the same manner and subject to the same conditions.

[Added by Law 14 of 20/8/1990]: By way of exception, the deficit incurred during either of the years 1989 and 1990 may be carried forward for up to eight consecutive years instead of three, in the same manner and subject to the same conditions.

[Added by Law 273 of 15/4/2014]:

1. 1)By way of exception, the deficit incurred during 2003 and 2004 may be carried forward for one additional year for each of those two years. The deficit incurred during any of the years 2005, 2006, 2007 and 2008 may be carried forward as follows:
2. 2)For up to seven additional years, i.e. ten years following the year the deficit occurred, for enterprises and companies destroyed as a result of the Israeli aggressions against Lebanon during the period from 12 July to 14 August 2006 inclusive.
3. 3)For four additional years, i.e. up to seven years following the year the deficit occurred, for all other taxpayers.
4. 4)The deficit balances referred to above may not be carried forward beyond the prescribed periods.
5. 5)As for losses resulting from direct damage to tangible fixed assets caused by terrorist acts or Israeli aggressions occurring during 2005, 2006, 2007 and 2008, these are treated as deductible charges from profits and may be carried forward to subsequent years in accordance with point 1 above. The book value as recorded in the taxpayer's accounts and declarations, or in the reconstructed records, is used to calculate those losses, after verification by the competent financial department.(1)

b — Taxation on the basis of flat-rate profit

Taxpayers not subject to the actual or estimated profit method of taxation must submit to the financial departments, before 1 February of each year, a declaration of their total income realised during the preceding year.

Income to be declared for taxation on the basis of flat-rate net profit means the taxpayer's receipts from all transactions carried out in any form, definitively and actually, during the year preceding the assessment year, and in particular the total collected by the taxpayer as the price of goods, merchandise, tools or supplies sold, as rent for items leased, and also as commissions, brokerage fees, proceeds or interest arising directly from commercial transactions, exchange differences or professional fees, etc. Income that is in principle subject to other specific income taxes (bank interest, loan interest, real-property revenues, etc.) remains subject to the specific tax applicable to it and is deducted in full from the income subject to the Part One tax, together with the corresponding charges directly related to that income.

Total income to be used as the basis for determining the flat-rate net profit is extracted from the daily register provided for in the Commercial Code, for taxpayers required to keep commercial accounts, or from the register provided for in the following Article 20, for taxpayers who are holders of non-commercial, non-industrial professions.

Every taxpayer who is a holder of a non-commercial, non-industrial profession must keep the daily register provided for in the Commercial Code and enter in it his daily income as referred to in the preceding Article 18. Those in professions required to maintain professional secrecy may confine themselves to recording the breakdown of amounts collected, together with the date of receipt, without stating the names of the payers. The clerks of the competent courts endorse and number the registers of all taxpayers subject to tax on commercial and industrial profits, regardless of the method of taxation to which they are subject. Notaries endorse and number the registers of all other taxpayers.(1)

A committee seated at the Ministry of Finance is responsible for determining the ratios to be applied to total income in order to calculate the flat-rate net profit.(2)

The committee referred to in the preceding article is composed of: - The Director General of Finance or his representative, as chairman. - A representative of the Ministry of Economy and Trade, appointed by the Minister of Economy and Trade, as member. - A representative of the Chamber of Commerce and Industry in Beirut, proposed by the president of that Chamber, as member. - An expert representing, as appropriate, merchants, industrialists or holders of non-commercial professions, appointed by the Minister of Finance, as member. - A civil servant from the Ministry of Finance (Income Tax Department), as rapporteur. This committee is appointed by the Minister of Finance, meets upon the chairman's invitation, and takes its decisions by majority vote; in case of a tie, the chairman's vote is decisive.

The committee sets, for each type of trade, industry, profession or activity, an average annual rate. These rates are compiled in a global table approved by decision of the Minister of Finance and published in the Official Gazette. The Minister of Finance shall determine each year the professions for which the committee may revise the established rates. The rates for other professions remain in force.

c — Taxation on the basis of estimated profit

The tax is imposed on taxpayers not subject to the actual or flat-rate profit method, on the basis of estimated profit.

A special committee responsible for estimating the annual profit subject to tax is constituted in each province, composed of: - The head of the Income Tax Department, or the head of the provincial finance office, or a senior tax inspector, as chairman. - A representative of the Ministry of Economy and Trade, appointed by the Minister of Economy and Trade, as member. - A representative of the provincial Chamber of Commerce and Industry, proposed by the president of that Chamber, or a member of the provincial council where no Chamber of Commerce exists, appointed by the Governor, as member. - A civil servant from the Ministry of Finance (Income Tax Department) or from the competent financial unit or department in the province, as member. - The competent Income Tax inspector, as rapporteur. These committees are appointed by decision of the Minister of Finance on the proposal of the Director General of Finance. They meet upon the chairman's invitation and take their decisions by majority vote; in case of a tie, the chairman's vote is decisive.

For the purpose of estimating the net profit, the committee uses all information obtained about the taxpayer and may rely on external signs of his standard of living, and may summon him if it considers this necessary. The committee draws up nominal lists of estimated profits, duly certified, which serve as the basis for tax assessment.

The estimation takes effect for a period of three consecutive years. The Minister of Finance may, by decision, order a review of the committee's estimates where justified economic circumstances arise.

d — Common provisions

The financial departments are responsible for imposing the tax on actual, flat-rate or estimated profits derived from declarations or estimated, by means of basic assessment schedules. If upon scrutiny of the accuracy of the declaration they find grounds for amendment, they notify the taxpayer of the amount of the amendment and its reasons, together with notice of the additional tax or supplementary assessment, by registered letter with acknowledgement of receipt.

If the taxpayer ceases activity, the tax is imposed on his industrial, commercial and non-commercial profits not yet assessed. The assessment covers the actual or flat-rate profit realised during the period between the last day of the period covered by the previous assessment and the day on which the taxpayer ceased activity. With respect to estimated profit, the tax is imposed on the profit calculated proportionally to the period of activity during the year in which the cessation occurred. A taxpayer who ceases activity and is subject to the actual or flat-rate profit method must file a declaration to that effect with the financial departments within one month of the date of cessation, together with all information and documents necessary to determine the taxable profit. If the taxpayer is engaged in another activity, or owns an establishment other than the one he has sold or ceased during the year, he must notify the financial departments accordingly within one month of the date of cessation or sale, and include in his annual general declaration the results of the activities of the establishment in which he has ceased operations. In all cases, all categories of taxpayers must state the buyer's name, address and particulars. The provisions of this article apply to court-appointed receivers and liquidation agencies upon the occurrence of bankruptcy,(2) at which point the one-month filing period begins from the date of the decision appointing them.

If the taxpayer fails to file the legal declaration within the prescribed time limit, a penalty(4) of ten percent (10%) per month of delay on the amount of tax due is imposed, counting any fraction of a month as a full month, up to a maximum of one hundred percent (100%) of the tax, until the end of the first year of the prescribed filing period. If no declaration is filed, the competent financial administration proceeds with a direct assessment on the basis of the profit it determines and imposes a penalty equal to the amount of the tax assessed. If the taxpayer does not keep the legally required accounts, or refuses to produce them or to show them to the competent tax inspectors, or refuses to provide the documents necessary to verify the accuracy of the declaration and the accounts, or to cooperate with the inspectors, a direct assessment is made on the basis of the profit estimated by the financial departments, and a penalty equal to the amount of the tax assessed is imposed.(1) If the accounts are regular but one of the legal conditions is not met, the penalty is reduced to 10% and no direct assessment is made. In all cases, even if the results of the activity are negative, the penalty payable by the taxpayer must not be less than five hundred thousand Lebanese pounds if subject to actual profit taxation, or one hundred thousand Lebanese pounds if subject to flat-rate profit taxation. Upon repetition of the violation within three years, the penalty is doubled; no settlement procedure may be applied to such penalties. The profits and income forming the basis of the assessment may not be less than the profits and income realised by the taxpayer in any of the three preceding years. In cases where there are grounds to believe that the profits and income to be adopted by the financial departments for direct assessment exceed the minimum referred to above, the estimation committee provided for in Article 25 of this Part determines the additional profit and income to be added to that minimum. The taxpayer may object to the direct assessment within the legal time limits, whether the assessment is based on the minimum referred to above or on the committee's determination, provided the objection is substantiated. [Added by Law 80/27 of 19/7/1980]: The basic rules to which income taxpayers are subject are determined by unified basic regulations enacted by decree adopted by the Council of Ministers on the proposal of the Minister of Finance.(2)

The tax is imposed on the net income received by the taxpayer during the year preceding the assessment year, even if the source of income ceases during the assessment year or before it.(2)

Gross income means the aggregate of salaries, wages, emoluments, compensation, bonuses, gratuities and cash and in-kind benefits.(3)

For the purpose of determining net income, the following are deducted from gross income:

1. 1)Amounts deducted and paid for retirement in accordance with applicable laws and regulations.
2. 2)Compensation for office expenses, representation,(4) travel and transport,(5) cashier's responsibility, fodder allowance, uniform allowance, and in general all compensation granted to cover expenses reasonably incurred in the performance of duties required by the service.
3. 3)[Added by Law 80/27 of 19/7/1980]: Fifty percent (50%) of amounts paid as a genuine flight allowance to pilots and other crew members subject to tax in Lebanon.
4. 4)[Added by Law 85/7 of 10/8/1985]: Education grants, nursery grants, and grants given by the relevant establishment to the employee or a member of his immediate family, within the conditions and limits of the amounts prescribed in the civil service employees' cooperative, provided these grants are given on a permanent basis under a comprehensive scheme covering all employees and duly approved by the Ministry of Labour.

Taxpayers subject to the actual profit method of taxation, and those referred to in Article 44, must keep for their employees a register in which they record, without omission, erasure or alteration, the names of employees, officers, workers, assistants and other members of the payroll, their salaries and wages, the nature of their work, the date they began work, and, upon termination, the date they ceased work or were dismissed. This obligation also applies to individuals, institutions, companies and associations paying retirement pensions or life allowances. [As amended by Laws 85/7 of 10/8/1985 and 89 of 7/9/1991, penalty updated by Law 282 of 30/12/1993]: Any person who fails to keep this register, or refuses to show it to the competent Ministry of Finance officials, is subject to a fine of LBP 50,000, independently of any other penalties prescribed therefor.(1)

All taxpayers,(3) whatever their method of taxation, as well as establishments exempt from the tax on profits, must submit before 1 March of each year a declaration of the aggregate salaries and wages of all their employees subject to tax or exempt therefrom, regardless of the amount, together with an annual individual statement of the total income of each employee or worker, the tax withheld, the amount of the basic salary, and the date of commencement of employment. This obligation also applies to employers personally liable for paying and declaring the tax on salaries and wages. The declaration submitted by the employer and the individual statement are complementary documents submitted to the competent tax administration on the prescribed forms. The declaration submitted by the employer must be fully consistent, as regards the names of employees, the aggregate salaries, wages and emoluments paid to them, with the declaration submitted to the National Social Security Fund. A fine of between LBP 200,000 and LBP 500,000 is imposed for violation of this paragraph.(4) The implementing regulations are determined by decisions of the Minister of Finance.

In addition to the declaration required of the employer pursuant to the preceding article, every employee, worker or wage earner holding simultaneously a position or employment in more than one establishment or enterprise must personally submit to the regional finance office, before 1 May of each year, a declaration stating the names and addresses of the various employers with whom he was employed during the preceding year, and the amounts he received from or which accrued to him from each of them during that year. This obligation also applies to every employee or worker who simultaneously exercises a profession subject to the tax provided for in Part One of this Legislative Decree and receives from another source a pension or life allowances.(1)

If the employer fails to submit within the prescribed period the declarations provided for in Part Two, the competent financial departments directly impose a penalty of ten percent (10%) per month of delay, counting any fraction of a month as a full month, up to the amount of the tax. For employees, workers and wage earners referred to in the preceding article, as well as employers personally liable for paying and declaring the tax on salaries and wages, and institutions, associations and bodies that do not seek to make a profit and whose number of employees does not exceed five, who fail to file the annual declaration, the competent financial departments impose the tax directly, together with a flat-rate penalty of LBP 50,000. Upon repetition of the violation within three years, the penalty is doubled and may not be settled by any procedure. If an employer does not keep the employees' register referred to in Article 51, or refuses to produce it or to show the competent inspectors the necessary documents to determine the actual taxable income, and refuses to cooperate with the competent inspectors, a direct assessment is made together with a penalty equal to the tax assessed on the basis of the income estimated by the competent financial departments. The minimum penalty imposed on employers referred to in this article, excluding the taxpayers referred to in the second paragraph, is LBP 200,000. Upon repetition within three years, the penalty is doubled and may not be settled by any procedure. Objections to direct assessments may be lodged within the time limits provided for in Chapter One of Part Four, subject to the submission of the necessary documents to verify the actual taxable income.(2)

Every employer required to keep the employees' register referred to in Article 51 who ceases activity, transfers his enterprise or establishment, or leaves before the end of the year, must file the declaration provided for in Article 52 within one month of the date of cessation, transfer or departure, failing which the penalty provided for in Article 54 is imposed. The same provisions apply to court-appointed receivers and liquidation agencies(1) in the event of bankruptcy,(2) at which point the one-month period begins from the date of the decision appointing them. Taxes imposed pursuant to the provisions of this article are immediately due.

The tax rate on income from movable capital is set at ten percent (10%) of gross income; no surcharge is added to the principal of the tax. [Added by Law 85/7 of 10/8/1985]: Notwithstanding any other provision, the tax on income from movable capital is paid upon filing the declaration of the income subject thereto. This tax is imposed by a payment order which may be organised on a settlement basis. The implementing regulations are determined by decisions of the Minister of Finance.

Article 72 bis — Tax Rate on Distributions of Capital Companies [Added by Law 80/27 of 19/7/1980] Distributions by Lebanese capital companies are subject to a flat-rate tax of ten percent (10%) in all cases, even if the company is exempt from the Part One tax pursuant to Articles 5 and 5 bis; no surcharge is added thereto. Exempt from the distribution tax is any increase in capital drawn from profits that have already been subject to the Part One tax or that are exempt therefrom pursuant to Articles 5 and 5 bis. Also exempt from the distribution tax are profits realised before 1980 that were subject to the progressive tax(1) provided for in Part One of the Income Tax Law or in the Real Property Tax Law. [As amended by Law 85/7 of 10/8/1985]: Foreign capital companies operating in Lebanon are deemed to have distributed all their profits, which are subject to the tax provided for in this article after deducting: - The Part One tax due on the profits. - The 10% reserve required by Article 133 of the Money and Credit Law enacted by Decree 13513 of 1/8/1963. [Note: The paragraph added to Article 72 bis by Law 173 of 14/2/2000 as amended was repealed by Law 64 of 20/10/2017.] The distribution tax on any given company must not fall below five percent (5%) even if all the conditions set out above are cumulatively met.

Any person who obstructs the exercise of the right of access provided for in Chapter Two of Part Four, or refuses to provide the administration with the information it requests, is liable to a penalty of between one million and five million Lebanese pounds. The penalty is imposed by the competent financial departments. Payment of the penalty does not relieve the taxpayer of his primary obligations, nor does it preclude prosecution pursuant to applicable law for failure to fulfil those obligations.

Any violation of the provisions of this Legislative Decree or of the regulations implementing it, not expressly provided for therein, is punishable by a fine of between two hundred thousand and five hundred thousand Lebanese pounds. [See Article 67 of Law 144 of 31/7/2019 (Budget 2019) regarding the exemption of arbitrators from paying financial penalties.]

The competent financial departments are responsible for imposing the penalties prescribed pursuant to this Legislative Decree. These penalties are collected in accordance with the principles governing the collection of direct taxes and comparable fees. Penal sanctions and fines provided for in Article 108 are imposed by the competent courts at the request of the Ministry of Finance, without the need to first notify the taxpayer to correct his declaration.

The tax is imposed on the actual or declared flat-rate profit, after deducting from each natural person taxpayer a family allowance of LBP 7,500,000 (seven million five hundred thousand Lebanese pounds). An additional deduction of LBP 2,500,000 (two million five hundred thousand) is available to the married taxpayer, and LBP 500,000 (five hundred thousand) for each dependent child, subject to the following conditions: - Children who have not yet reached the age of eighteen, or who are up to twenty-five years old and still in university. - Children with a permanent disability who are not employed, subject to certification of the disability by the permanent medical committee at the Ministry of Health. - For the widow, divorcee or legally separated woman, provided the number of dependent children does not exceed five. Where both spouses each exercise a profession or hold a position from which each benefits, they share equally the deduction granted for each dependent in accordance with this article. In the event of legal separation (judicial, civil or religious divorce) between the spouses, the spouse paying alimony is the one who benefits. - If the husband is not employed, or if his wife independently exercises a profession or holds a position subject to tax, the wife also benefits from the deduction granted for the dependent, in addition to the deduction for children, in accordance with the first paragraph of this article. If the father or mother has died or has a permanent proven disability and does not receive an employment salary, the child also benefits from the additional family deduction. These deductions apply as from the fiscal year 1999. [As amended by Law 14 of 20/8/1990]: Each Lebanese actual company is entitled to only one deduction. As for the tax on estimated profit, it is imposed after deducting an amount equivalent to the legal minimum wage for a married person without children, per year, per taxpayer. This provision applies as from the fiscal year following the year in which the last final estimation was made.(1)

The tax rate on profits from commercial, industrial and non-commercial professions is set as follows: - 4% on the portion of taxable profit not exceeding LBP 9,000,000 (nine million Lebanese pounds). - 7% on the portion exceeding LBP 9,000,000 but not exceeding LBP 24,000,000 (twenty-four million Lebanese pounds). - 12% on the portion exceeding LBP 24,000,000 but not exceeding LBP 54,000,000 (fifty-four million Lebanese pounds). - 16% on the portion exceeding LBP 54,000,000 but not exceeding LBP 104,000,000 (one hundred and four million Lebanese pounds). - 21% on the portion exceeding LBP 104,000,000 but not exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). - 25% on the portion exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). The profits of capital companies (joint stock companies, limited liability companies, and limited partnerships by shares in respect of the limited partners' share) are subject to a flat-rate tax of 17% (seventeen percent). In calculating the tax, any fraction of one Lebanese pound in the taxable profit is disregarded. No surcharge is added to the principal of the tax. This provision applies as from the fiscal year 2019. [As amended by Law 144 of 31/7/2019 (Budget 2019)]

The tax is imposed on the net annual income determined pursuant to Articles 48, 49 and 50 of the Income Tax Law, after deducting from each natural person taxpayer the family allowance pursuant to Article 31 of the Income Tax Law, subject to the applicable conditions, in addition to a deduction of twelve million Lebanese pounds from the pension base for retired persons. [As amended by Law 144 of 31/7/2019 (Budget 2019)]

If one of the taxpayers subject to the tax provided for in this Part simultaneously exercises a profession subject to the Part One tax, he may benefit only from the deduction provided for in Part One.(3)

The tax rates on salaries, wages and retirement pensions are as follows: - 2% on the portion of taxable net income not exceeding LBP 6,000,000 (six million Lebanese pounds). This rate applies proportionally to the corresponding portion of retirement pension bases. - 4% on the portion of taxable net income exceeding LBP 6,000,000 but not exceeding LBP 15,000,000 (fifteen million Lebanese pounds). Same note for retirement pension bases. - 7% on the portion exceeding LBP 15,000,000 but not exceeding LBP 30,000,000 (thirty million Lebanese pounds). Same note. - 11% on the portion exceeding LBP 30,000,000 but not exceeding LBP 60,000,000 (sixty million Lebanese pounds). Same note. - 15% on the portion exceeding LBP 60,000,000 but not exceeding LBP 120,000,000 (one hundred and twenty million Lebanese pounds). Same note. - 20% on the portion exceeding LBP 120,000,000 but not exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). Same note. - 25% on the portion exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). Same note. This provision applies as from 1 August 2019. [As amended by Law 144 of 31/7/2019 (Budget 2019)]

The portions of income subject to tax and the deductions from the base are apportioned according to the period of employment for which the wages were paid, counting thirty days per month. [As amended by Law 282 of 30/12/1993 and Law 326 of 28/6/2001 (Budget 2001)]: The deduction from the base is the amount equivalent to LBP 25,000 (twenty-five thousand Lebanese pounds) per month of the year for daily wage earners and workers paid on a piece-work or quantity basis, regardless of their family situation.(1) Piece-work wages are taxed at a flat rate of 3%, whatever their amount, without any deduction from the base. Piece-work wages means wages paid to daily workers employed on a temporary basis on a piece-work or quantity basis.

The taxable income or profit from Lebanese shares and bonds is determined as follows:

1. 1)With respect to shares of all types and founders' and interest shares, and amounts withheld by Lebanese joint stock companies from profits or distributed from reserves: the income is determined by reference to the auditors' statements, the resolutions of general shareholders' meetings, boards of directors, and similar documents.
2. 2)With respect to bonds: the income is determined by reference to the interest or income distributed during the year.
3. 3)With respect to lottery prizes: the income is determined by reference to the prize amount itself expressed in Lebanese pounds.
4. 4)With respect to redemption prizes: the income is determined by the difference between the amount redeemed and the original issue value of the bond.
5. 5)[Note: A new paragraph 5 was added by Law 88/3 of 20/1/1988, then repealed by Law 282 of 30/12/1993, except for gains from the disposal of shares, which remain exempt from income tax.]

The tax falls due within the month following the decision to pay the profits, interest, proceeds or other revenues from shares and founders' shares. The tax on interest from bonds falls due within one month of the due date of such interest.

Every company, institution or public or private body must pay the tax to the Treasury within the period set out in the preceding article, and may then recover it from the holders of shares or bonds. The following documents must be submitted at the time of payment:

1. 1)For shares: extracts from auditors' statements, resolutions of general shareholders' meetings or boards of directors, and in general any resolution concerning the distribution of profits or reserves.
2. 2)For bonds: a table showing the number of bonds, the nominal value of each bond, the interest rate, and the due date.
3. 3)For lottery prizes and redemption prizes: a certified copy of the original lottery record and a table showing the number of bonds drawn in each lottery, the issue value, the amount of prizes due, and the amount subject to tax.

Natural and legal persons who fail to pay the tax within the legal period pursuant to the preceding article, or who pay it inadequately, are directly liable for the unpaid amounts, plus a penalty of three percent (3%) per month of delay, counting any fraction of a month as a full month.

The Treasury's rights to assessments may be reinstated by additional schedules or supplementary assessments up to the third year following the year in which the concealed or unknown income should have been assessed, without prejudice to any penalties to which the taxpayer or person liable for the tax may be subject. Assessments cancelled in whole or in part for formal defects not affecting their substance, or because of an error in the type of tax or in the name of the taxpayer, may also be reinstated. The tax may be imposed on any profit or income proven by a judicial decision, arbitration award or inventory report, up to the last day of the civil year following the year of the judgment, award or report, in addition to the time limit provided for in the preceding paragraph.

Any person wishing to leave Lebanese territory permanently must obtain, prior to departure, a certificate from the Ministry of Finance proving that he has paid the income tax due. The competent departments are prohibited from endorsing the passport(1) of any person wishing to leave Lebanese territory permanently before he presents the certificate referred to in the preceding paragraph. The certificate is not, however, required of non-residents who wish to leave the country even temporarily.

Declarations, objections, statements and other documents and instruments submitted to the Ministry of Finance in connection with income tax are exempt from stamp duty.

Persons who provide information relating to concealed income are granted a reward of between 10% and 30% of the value of the penalties collected as a result of the information provided.

a. Every taxpayer who commences a new activity must notify the financial departments within two months of the date of commencement; failure to do so results in the following penalties: - LBP 3,000,000 for joint stock companies. - LBP 1,000,000 for limited liability companies and limited partnerships by shares. - LBP 1,000,000 for general partnerships and taxpayers mandatorily assessed on actual profit. - LBP 500,000 for all other taxpayers. The procedures for proving the date of commencement of activity are determined by decision of the Minister of Finance. b. Taxpayers who have not declared the commencement of activity within the prescribed period and who file declarations within a period determined by the Minister of Finance, not exceeding 31/12/1997, are exempt from the non-declaration penalty.

All natural and legal persons enjoying permanent exemptions or special exemptions from income tax, as well as all commercial companies enjoying a permanent exemption pursuant to Article 5 of this Legislative Decree, must file annual declarations and statements with the competent financial departments and make available to the competent officials, upon request, all documents and accounts reflecting the activity, profits, losses and transactions conducted with third parties. For late filing or refusal, a penalty of between two hundred thousand and five hundred thousand Lebanese pounds is imposed.

Taxes, penalties and other amounts due to the State pursuant to this Legislative Decree enjoy a general first-ranking privilege over all assets of the taxpayers liable for them or responsible for paying them to the Treasury. This privilege applies even in the case of voluntary arrangement, judicial liquidation or bankruptcy.

Notwithstanding the provisions of the Commercial Code, and for the purpose of applying the provisions of the income tax, registers and documents necessary to prove the validity of entries and declarations must be kept for five years following the basic assessment year.

For the purposes of this Legislative Decree, the following words and expressions have the meanings assigned to them: - Tax on industrial, commercial and non-commercial profits: Part One tax. - Tax on salaries, wages and retirement pensions: Part Two tax. - Tax on income from movable capital: Part Three tax. - Income: profit — revenues. - (Taxpayer — employer): any natural or legal person subject to the tax. - Establishment: commercial establishment — industrial establishment — non-industrial establishment — public and private establishments — profession of any kind — craft — work. - Proceeds: income from movable capital whatever its denomination — interest — proceeds — revenues.

The terms and expressions contained in this Legislative Decree are interpreted in a manner consistent with the public interest and the protection of the rights of the Treasury. The implementing regulations are determined by decree(1) adopted by the Council of Ministers.

This Legislative Decree shall enter into force as from 1 January 1960, and all laws, legislative decrees, ordinary decrees and regulations contrary thereto or inconsistent with its content are repealed as from that date, whether general or special.

This Legislative Decree shall be published and communicated wherever necessary. Signed on 29 June 1959. Signatory: Fouad Chehab Published in Official Gazette No. 35, dated 4 July 1959.

The tax is imposed in the name of each taxpayer at his domicile or at the place where he exercises his trade, industry or profession as at 1 January of the assessment year. If the taxpayer owns more than one establishment or exercises multiple activities, the tax is imposed on the aggregate profits realised in Lebanon, and his principal establishment serves as the centre of assessment. [Added by Law 497 of 30/1/2003]: Notwithstanding any other provision, with a view to facilitating the handling of transactions and ensuring effective oversight, the Minister of Finance may establish centralised assessment centres for income tax administration, according to criteria set for that purpose.

In Lebanese general partnerships(1) and limited partnerships, each partner with full legal capacity is personally assessed on his share of the profits, as is each partner lacking such capacity when the partnership arises from the application of Article 66 of the Commercial Code. The balance of profits is assessed in the name of the company. However, the tax imposed in the name of each partner is in all cases a liability of the company.

The tax is imposed by means of annual assessment schedules and is collected in accordance with the principles governing the collection of direct taxes and similar fees. The placing of the basic assessment schedules in collection must be announced in the Official Gazette, on the radio and in the press. Each taxpayer also receives a personal notice of the tax imposed on him. Other assessment schedules are not published; the person concerned is notified of the tax arising therefrom by registered letter with acknowledgement of receipt.

In the event of a transfer of the enterprise to a third party, whether gratuitously or for consideration, and whether the sale is compulsory or voluntary, the seller and the buyer are jointly and severally liable for the payment of taxes due from the seller for the current year and the two preceding years not yet extinguished by the legal period of limitation. This obligation does not, however, extend to assessments imposed in the name of the seller after the expiry of one year from the date of the sale as registered with the competent financial departments. The provisions of this article, and those of Article 29, also apply in the event of the taxpayer's death; the heirs must then provide the necessary information for the imposition of the tax within two months of the date of death.

The representatives of natural and legal persons subject to the tax are considered liable for its payment.

A person who is liable for the payment of tax on behalf of the original taxpayer is entitled to recover what he has paid from the principal amounts that he receives or collects on that taxpayer's account, on the same terms as the privilege enjoyed by the Treasury.

The basic tax is imposed in the name of each taxpayer on the basis of declarations filed in accordance with the provisions of Chapter Three of this Part. If upon scrutiny of the accuracy of the declarations the financial departments find grounds for amendment, they notify the taxpayer of the amendment and its reasons, together with notice of the additional tax or supplementary assessment, by registered letter with acknowledgement of receipt.

The tax is imposed by means of annual assessment schedules and is collected in accordance with the principles governing the collection of direct taxes and similar fees, subject to the provisions of the following Article 62. The placing of the basic assessment schedules in collection must be announced in the Official Gazette, on the radio and in the press.

A personal notice of the tax imposed on each taxpayer is sent to him through the employer or the institution paying the retirement pension or life allowances, with the possibility of substituting individual notices with summaries from the assessment schedules drawn up for each employer separately.

The employer must withhold the tax from the salaries and wages paid to employees and pay the withheld amounts to the Treasury each quarter, no later than the fifteenth of the month following the quarter in question. This obligation also applies to individuals, institutions, companies and associations paying retirement pensions or life allowances; those who fail to pay to the Treasury within the prescribed period the amounts they should have paid are personally and additionally liable for the unpaid amounts, plus a penalty of three percent (3%) per month of delay, counting any fraction of a month as a full month. If an employer proves that he paid additional amounts to employees (such as a year-end bonus) before 15 January of the current or preceding fiscal year, such amounts are exempt from the late-payment penalty, provided the tax thereon is paid within the legal deadline prescribed for the annual declaration. This provision applies as from the fiscal year 2003. Its implementing regulations are determined by decree adopted by the Council of Ministers on the proposal of the Minister of Finance. [Added by Law 583 of 23/4/2004]: All employers, whatever their method of income taxation, are required to draw up a quarterly statement of salaries and wages for each employee, whatever the amount and whether or not any tax is due thereon, and to submit it together with the advance payment notice when any tax or penalty is due, to the competent financial department within the legal time limit set for each instalment payment.(1) A penalty of five percent (5%) of the amount of tax due is imposed for violation of this paragraph, which may not exceed LBP 1,000,000 (one million) and may not be less than LBP 200,000 (two hundred thousand) per employee for whom the quarterly statement has not been filed.(2) For employers personally liable for paying and declaring the tax on salaries and wages, and for institutions, associations and bodies that do not seek to make a profit and whose number of employees does not exceed five, a flat-rate penalty of LBP 50,000 (fifty thousand Lebanese pounds) is imposed in case of violation.

The provisions of this Part relating to the keeping of the employees' register, the declaration of their income, the withholding of the tax therefrom, and its payment to the Treasury, apply to public administrations, public establishments, major municipalities and other municipalities and bodies determined by decree adopted by the Council of Ministers.

The tax due on civil servants, officers, employees and workers, and other wage earners and retirees of all sectors, who receive their salaries, wages and allowances from the State, is deducted monthly from the taxpayer's income during the month in which it falls due. The provisions of this Part relating to the obligations of employers and the method of organising assessment schedules and paying the tax do not apply to the State.

A person who is liable for the payment of tax on behalf of the original taxpayer is entitled to recover what he has paid from the principal amounts that he receives or collects on that taxpayer's account, on the same terms as the privilege enjoyed by the Treasury.

All correspondence between the financial departments and taxpayers subject to this tax is conducted through the employer or the institution paying retirement pensions or life allowances.

All rights and obligations of the non-resident employer, as provided for in this Part, are transferred to the resident taxpayer, in particular with regard to the filing of declarations and the payment of tax.

All foreign shares and foreign public and private bonds held by natural or legal persons resident in Lebanon, whether foreigners or Lebanese nationals, are subject to tax. Any natural or legal person in Lebanese territory who pays the proceeds of the said shares and bonds withholds the tax for the benefit of the Treasury.

Every person engaged in the profession of collecting, paying or purchasing coupons or other financial instruments for the purpose of paying profits, interest, proceeds, lottery prizes, redemption prizes and other income from bonds and financial instruments referred to in the preceding article, must file a declaration to that effect with the competent financial departments within one month of the date of commencement of activity, failing which a penalty of between LBP 200,000 and LBP 500,000 is imposed. It is prohibited for all the persons referred to above to pay, collect or purchase coupons and other financial instruments without withholding the tax, unless they can prove that another intermediary has already withheld it.

The persons referred to in the preceding article must, for each payment they make, draw up a schedule in duplicate containing the following information:

1. 1)The name of the payer, his commercial address, profession or trade.
2. 2)The type of coupons or other financial instruments presented for collection, their number and their individual value in Lebanese pounds at the time of payment.
3. 3)The total gross amount in Lebanese pounds.
4. 4)The amount of tax due.
5. 5)The registration number in the register referred to below, the date, the payer's signature, and the name and address of the collector together with his signature.
6. 6)One copy of the schedule is given to the collector as a receipt. The second copy is kept by the payer; a penalty ranging from LBP 200,000 to LBP 500,000 is imposed for failure to prepare such schedules.

The same persons must keep two numbered registers, endorsed by the financial departments, in which they record day by day, without omission or alteration, the transactions of payment, sale or purchase of coupons or other financial instruments from which the tax must be withheld. These registers contain the information set out in the tables referred to in the preceding article. Register No. 1 is reserved for payment transactions that required direct withholding of the tax by the responsible person. Register No. 2 is reserved for sale and purchase transactions for which no withholding was required because another intermediary had already withheld it. A penalty ranging from LBP 200,000 to LBP 500,000 is imposed for failure to keep these registers.(2)

The withholding agent must, at the end of each half-year, prepare a summary from Register No. 1, and send it together with the withheld tax to the financial authorities. The tax must be paid within the month following the half-year; the provisions of Article 76 apply to violations.(1)

Owners of foreign shares and bonds, or persons who collect their proceeds, resident in Lebanon, who transfer their profits, interest, proceeds or other income abroad, or collect them abroad, whether directly or through intermediaries, must submit to the financial departments before 1 March of each year a statement indicating the total of those profits, interest, proceeds and income collected during the preceding year. Failure to file this statement results in a penalty of ten percent (10%) of the amount of tax imposed for each month of delay, counting any fraction of a month as a full month, up to a maximum of fifty percent (50%) of the tax assessed. Upon repetition, the penalty is doubled to the equivalent of the tax; no settlement procedure may apply to such penalties. This tax must be paid before 1 April of each year; in case of late payment, a penalty of three percent (3%) per month of delay is added to the unpaid amounts, counting any fraction of a month as a full month.

The tax covers the profits of commercial, industrial and craft enterprises and free professions, as well as the profit of any activity yielding income not subject to another income tax. No income is exempt from the tax except by an express provision of law.

The tax is assessed in the name of natural and legal persons, whether resident in Lebanese territory or abroad, on the total profits they realise in Lebanon.

The following are among the persons liable to this tax:

1. 1)Companies, of whatever type and purpose.
2. 2)Natural or legal persons:
3. 3)Those who act as intermediaries in the purchase or sale of real estate and commercial establishments, or who purchase them in their own name for resale.
4. 4)Those who operate a commercial or industrial establishment equipped with furniture or tools necessary for its exploitation, whether the lease covers all or part of the intangible elements of the establishment, or none of them.
5. 5)Those who benefit from the proceeds of the exploitation of underground resources.
6. 6)Brokers, agents, intermediaries and, in general, any natural or legal person who acts as intermediary in the purchase or sale of any type of assets.
7. 7)Any natural or legal person who derives a profit from any income-producing activity not subject to another income tax.

The tax covers salaries, wages, emoluments, allowances, retirement pensions, whether public or private, and life allowances accruing in Lebanese territory on behalf of:

1. 1)A public fund, to any person resident in Lebanon or abroad.
2. 2)A private fund, to any person resident in Lebanon, and also to any person resident abroad in respect of services rendered in Lebanon.

The tax on income from movable capital covers the various revenues, profits, interest and proceeds of such capital, whatever their denomination or the nationality of the institutions that produced them or the place of residence of those to whom they accrue, provided they are received in Lebanon or accrue to a person resident therein. These revenues, profits, interest and proceeds include in particular:

1. 1)Revenues of all types arising from shares, founders' shares and interest shares issued by joint stock companies, or financial, industrial, commercial and civil establishments, and other public and private bodies.
2. 2)Attendance fees and directors' fees drawn from profits.
3. 3)Attendance fees of shareholders at general assemblies.
4. 4)Amounts drawn from reserves or profits for the redemption or amortisation of shares or founders' shares before cessation of activity.
5. 5)Distributions of reserve funds and profits in the form of bonus shares or any other form.
6. 6)Interest, proceeds and revenues from bonds and loans(4) issued by the State, municipalities and other public and private bodies and companies.
7. 7)Lottery prizes and draws paid to creditors and bondholders.
8. 8)Interest, proceeds and revenues from secured debts.
9. 9)Interest, proceeds and revenues from civil loans and from privileged and ordinary debts, unless arising from commercial transactions.
10. 10)Interest, proceeds and revenues from insurances and cash deposits, whatever the deposit and whoever the holder, including current accounts.
11. 11)The tax provided for in this article is imposed even if the company, institution, body or utility was exempt from tax prior to the issuance of this Legislative Decree under an agreement with the State or special statutory provisions.

Interest, proceeds, profits and revenues derived from the exercise of a profession are subject to the Part One tax. In all other cases, the tax on income from movable capital covers every profit, revenue or capital income not subject to another income tax. Only items expressly exempt by law are excluded.(1)

Every taxpayer is entitled to object to the taxes imposed on him pursuant to this Legislative Decree if he considers them erroneous or excessive. Objections to these taxes must be lodged with the competent financial departments within two months:

1. 1)From the date of publication in the Official Gazette announcing that the basic assessment schedules have been placed in collection, where the assessment subject to the objection is included in those schedules.
2. 2)From the date of notification of the personal notice, where there are additional assessments or supplements or deductions independent of the basic schedules.

If the objection filed pursuant to the preceding article satisfies all formal conditions and the grounds contained therein are well-founded in fact and in law, the competent department shall correct the assessment by means of monthly schedules and notify the summary thereof to the person concerned by registered letter with acknowledgement of receipt. If the competent financial department considers the objection unfounded, it notifies the person concerned accordingly and refers the objection, together with its opinion, to the special committee provided for in the following article for examination and decision. In all cases, the head of the competent department must decide on the objection, or refer it with his opinion to the committee, within six months of the date of its filing at the latest.

A decree shall constitute, in each province, one or more primary committees to examine and decide on the objections referred to above, composed of: - A judge appointed on the proposal of the Minister of Justice, as chairman. - A civil servant from the Ministry of Finance belonging to at least the third category, appointed by the Minister of Finance, as member. - A representative of the Chamber of Commerce and Industry, appointed on the proposal of its president, or a representative of the provincial council or the municipal council, appointed by the Governor on the proposal of the Minister of Interior where no Chamber of Commerce exists, as member. - The head of the Income Tax Department or his representative, as rapporteur.

A tax inspector (first grade) from the competent department is placed at the disposal of the committee as secretary; he may stand in for the rapporteur when needed, but neither he nor the rapporteur may participate in the vote. The procedural rules applicable before the administrative courts, relating to the exchange of briefs, time limits and verification, apply before this committee at all stages of proceedings, except with respect to the government commissioner.

The rapporteur must notify the committee's decision to the competent financial department and to the taxpayer within fifteen days of the date of its issuance. Both the financial department and the taxpayer are entitled to appeal this decision before the Council of State within twenty days of the date of notification.

Appeals are lodged directly before the Council of State. Objections may be lodged within two months of the date of notification of the administrative decision. Taxpayers whose objections were rejected for failure to comply with the legal deadline may benefit from the new time limit.

Acceptance of the appeal filed by the taxpayer is conditional on the deposit of a security equal to five percent (5%) of the amount of the tax objected to. Any appeal not accompanied by a receipt proving payment of the security is rejected on formal grounds. The security, together with the court fees, is paid into the fund held at the Council of State within the prescribed appeal period.

If the Council of State's decision is entirely in the taxpayer's favour, he is entitled to recover the security referred to in the preceding article. If the decision is entirely in the Treasury's favour, the security becomes a vested right of the Treasury. If the decision is partially in the taxpayer's favour, the security is returned only in proportion to the tax that the decision orders to be cancelled.

The following are exempt from tax: (2)

1. 1)Educational institutes.
2. 2)Hospitals, morgues and shelters that admit patients free of charge, and similar nursing and first-aid establishments, within the limits of the net profits derived from public or private funds and grants.
3. 3)The following text was added to paragraph 2 of Article 5 by Law No. 85/7 of 10/8/1985 (Budget Law 1985):
4. 4)Hospitals, morgues, shelters, homes for the elderly, dispensaries, sanatoria and similar nursing and first-aid establishments, owned or operated by non-profit institutions, associations or bodies, are fully exempt from tax on their profits.
5. 5)State-owned psychiatric hospitals.
6. 6)Consumer cooperatives, trade unions and agricultural cooperatives with a commercial character.
7. 7)Foreign investors, to the extent that they sell in Lebanon, during the harvest season, the crops and livestock they have raised there, and do not trade in them after the harvest period has ended.
8. 8)National maritime navigation companies, provided that the home country of foreign companies accords the same treatment to Lebanese companies (reciprocity condition).
9. 9)Public utilities that do not compete with private enterprises.(3)
10. 10)Tourist establishments of a craft character. [Text added by Legislative Decree 58/67 of 5/7/1967]
11. 11)Fees that notaries are entitled to collect pursuant to Article 17 of the Notaries Law, the compensation referred to in Article 20 of Law No. 59/146 known as the Transfer and Inheritance Tax Law, and compensation paid by the State to notaries. [Text added by Law 392/2002 of 8/2/2002]

Article 5 bis — Investment of Profits of Industrial Establishments [Added by Law 80/27 of 19/7/1980]

First:

1. 1)Industrial establishments may, at their own discretion and as from 1980, allocate a fixed portion of their annual net profits to investment in their fixed assets, subject to the following conditions:
2. 2)The investment must be aimed at creating new industrial fixed assets that will increase the productive capacity of the enterprise in a lasting and quantifiable manner. The following are not considered as such: investment in temporary equipment used for a specific workshop activity and ceasing when that activity ends; nor investment in provisional stores used under a temporary admission system.
3. 3)Construction of housing exclusively for the use of workers and salaried employees of the enterprise, subject to the provisions of the Housing Law and its implementing regulations, provided:
4. 4)- The housing is owned by the enterprise for at least 12 years.
5. 5)- It is used only for the stated purpose.
6. 6)- The total amount invested does not exceed 15% of the aggregate annual wages and salaries effectively paid to salaried employees.
7. 7)These provisions do not apply to exceptional wages paid for such housing.
8. 8)Industrial establishments wishing to benefit from the above provisions must notify the competent financial departments of their intention before the start of the investment year, and must submit to the competent financial department the records and data relating to the investments they intend to carry out, failing which they forfeit the right to benefit from the exemption.
9. 9)The investment record is the record maintained by the enterprise of any financial transaction resulting from a definitive commitment with a third party for investment purposes.
10. 10)Where the above conditions are met and the invested amounts cover the investment, a deduction of up to fifty percent (50%) of the profits of the year in which the financial investment is made and the three following years is granted. This percentage is raised to 75% where the investment is made in one of the regions that the government wishes to develop, as specified by decree adopted by the Council of Ministers.
11. 11)The portion deducted from annual net profits and used to cover fixed investments, in accordance with the conditions set out above, is exempt from income tax, provided the deduction does not exceed the limits of the four years referred to above for each investment transaction.
12. 12)The competent financial departments must permanently verify that the establishments benefiting from the provisions of this law comply with the prescribed conditions. Any amounts deducted for investment purposes that are not used for the stated purpose must be added to the profits of a subsequent year and subjected to tax, plus a penalty of 3% per month of delay, counting any fraction of a month as a full month.

Second:

1. 1)The following industrial establishments, set up in Lebanon as from 1980, are exempt from income tax for ten consecutive years from the date production commences, provided they simultaneously satisfy all of the following conditions:
2. 2)The factory is established in one of the regions that the government wishes to develop, as specified by decree adopted by the Council of Ministers.(1)
3. 3)The enterprise produces new goods not previously manufactured in Lebanon before 1 January 1980. 'New goods' means goods not previously manufactured in Lebanon at all, including goods derived from the processing or packaging of local or imported semi-finished goods, as well as goods manufactured from imported semi-finished goods through an assembly, completion or transformation process.
4. 4)The value of the fixed assets owned by the new enterprise in Lebanon and used for the production of the said new goods must not be less than five hundred million Lebanese pounds.
5. 5)The aggregate profits exempt from income tax during the said period must not, in any case, exceed the value of the fixed assets as at the date production commences.
6. 6)Industrial establishments wishing to benefit from the above provisions must notify the competent financial departments before production commences and must submit certified records and data relating to the value of their fixed assets and production specifications.
7. 7)The exemption is granted by decree adopted by the Council of Ministers on the proposal of the Minister of Finance.
8. 8)Establishments benefiting from the above exemptions must submit to the competent financial departments, within the time limit prescribed for filing annual accounts, the accounts and certified records required by income tax law. All records and certified documents relating to the accounting of their fixed assets must comply with the provisions of commercial law.
9. 9)The competent financial departments shall permanently monitor establishments benefiting from the provisions of this law to verify compliance with the prescribed conditions.

Third: [Added by Law 248 of 15/4/2014]

1. 1)Fifty percent (50%) of the tax due on Lebanese industrial exports is exempt from income tax.
2. 2)Only the certificate of origin issued by a competent body is accepted as primary evidence to qualify as Lebanese industrial exports.
3. 3)Customs data are accepted as evidence of the value of industrial exports qualifying for the certificate of origin, as well as data drawn up by the Ministry of Finance for that purpose.
4. 4)Establishments benefiting from this exemption must file accounts of their profits with the competent financial departments, within the time limit prescribed for filing annual accounts, together with the data referred to above.
5. 5)Excluded from this exemption are companies and establishments exploiting underground resources and any others that must be excluded by decrees adopted by the Council of Ministers on the proposal of the Minister of Finance.
6. 6)The implementing regulations of this article are determined by decision of the Minister of Finance.

The following are exempt from tax:

1. 1)Allowances received by clergy for performing religious services.
2. 2)Salaries and salary supplements received by ambassadors of foreign states and their diplomatic representatives, consuls and consular representatives, and the foreign national employees among their staff, subject to the condition of reciprocity.
3. 3)Salaries and salary supplements received by military personnel of any rank belonging to the armed forces of allied states.
4. 4)Retirement pensions of retired persons, and pensions of the survivors of martyrs of the armed and security forces and of wounded members of the armed forces, as defined by Article 85 of the National Defence Law.(2)
5. 5)Life allowances and temporary compensation paid to victims of work accidents.
6. 6)Wages of agricultural workers.
7. 7)Wages of domestic servants in private households.
8. 8)Wages of nurses and nursing staff in hospitals, morgues, shelters and similar nursing and first-aid establishments.
9. 9)Dismissal compensation paid in accordance with the laws in force in Lebanon.
10. 10)Family allowances paid in accordance with applicable laws.
11. 11)Wages of licensed midwives working in hospitals.

The following are exempt from the tax:

1. 1)[Repealed by Law 80/27 of 19/7/1980.]
2. 2)Amounts paid to reimburse creditors' or shareholders' funds, if not drawn from the profit and loss account or reserves.
3. 3)Repayments of shareholders' and creditors' funds in concession companies, even if drawn from reserves or the profit and loss account, where the reason for repayment arises from the obligation to hand over the installations to the authority at the end of the concession period without consideration.
4. 4)Interest on amounts deposited in savings accounts, provided the interest does not exceed one thousand Lebanese pounds per year.
5. 5)[As amended by Law 282 of 30/12/1993]: Interest and proceeds on all current accounts held with banks.
6. 6)Revenues from Lebanese Treasury bonds.

Income tax inspectors(1) are entitled to inspect, at the taxpayer's premises or at the premises of persons liable to pay the tax, all registers and documents, and anything else that may assist in the imposition of the tax.(2)

No natural or legal person, not even official departments, may invoke professional secrecy when the competent Ministry of Finance officials request to inspect documents and records relating to the imposition of income tax.

The financial departments may request the Public Prosecution to gain access to any proceedings pending before the courts. The judicial authority may inform the departments, through the Public Prosecution, of any information suggesting that a taxpayer has defrauded or attempted to defraud the financial departments with respect to income tax, whether the proceedings are civil, commercial or criminal, and even if they have ended by a final judgment.

Every natural or legal person in Lebanon is required to make available to the competent Ministry of Finance officials, upon request, all registers, documents and information in his possession that assist in determining the tax bases that may be due from him or from other taxpayers. [Added by the Law of 20/6/1961]: Notwithstanding any other provision, senior tax inspectors, principal tax and audit inspectors, and verification inspectors enjoy the right of access ordinarily conferred on tax inspectors under the various tax and fee laws, within the limits of their territorial jurisdiction and in accordance with procedures agreed with the Director General of Finance, and are subject to the same professional secrecy obligations. Authorised inspectors and members of the Financial Audit Office may also exercise this right within their mandate and in accordance with those procedures.

Professional secrecy is binding, and any person whose duties, powers or jurisdiction require involvement in the assessment, collection or examination of objections relating to income tax is subject to the provisions of Article 579 of the Penal Code. However, professional secrecy may not be invoked in proceedings affecting the interests of the administration, or in the exercise of audit, verification, fiscal and administrative inspection activities. Income tax inspectors and audit and collection inspectors must take an oath before the competent judicial authority prior to taking up their duties.

Taxpayers and their representatives may not request information or extracts from assessment files, except with regard to declarations and documents previously submitted by them.

All data and correspondence relating to income tax exchanged between administration officials or sent by them to taxpayers are placed in sealed envelopes.

The tax is imposed on the net profit realised during the year preceding the assessment year, even if the source of profit ceases during the assessment year or before it.

The net profit is the aggregate taxable income of the taxpayer, after deducting all expenses and charges required for the exercise of commerce, industry or the profession. These expenses and charges include in particular:

1. 1)The cost of purchasing goods or merchandise sold, and the cost of services paid during the year.
2. 2)The rent of the premises in which the profession is exercised, or its rental value if the taxpayer is the owner.
3. 3)Interest on loans contracted with third parties for business purposes.
4. 4)Salaries and wages, and all amounts paid to employees and workers as remuneration for their services or as severance pay in accordance with the applicable special conditions.
5. 5)Ordinary general expenses, including the cost of insuring employees.
6. 6)Taxes and fees paid or due in the year on the enterprise or profession, other than the taxes specified in this Legislative Decree.
7. 7)Depreciation calculated on the original cost of the tangible fixed assets of the enterprise. The Minister of Finance, on the proposal of the Director General of Finance, shall issue a decision setting the rates of such depreciation within minimum and maximum limits. The taxpayer may choose the rate or rates appropriate to the circumstances of his enterprise, provided he notifies the competent financial departments in advance of his depreciation schedule. The rates chosen are binding and fixed for the duration required for accumulated depreciation to equal the original cost.
8. 8)For intangible fixed assets, no depreciation may be carried out unless they are subject to extinction due to an agreed or compulsory lapse of a period; in that case, their cost is deducted in equal annual instalments over the applicable period of the licence or lease.
9. 9)Provisions set aside to meet losses from bad debts likely to materialise or become final, from redundancy payments, retirement pensions, or accident compensation in accordance with applicable law.
10. 10)Additional provision for banks [added by Legislative Decree 81/83 of 27/6/1977]: Banks may, as from 1977, set aside provisions to cover losses on debts declared irrecoverable for which bankruptcy proceedings have been initiated, after approval by the Banking Control Committee at Banque du Liban, upon the creditor bank's request.
11. 11)Additional provision for financial institutions [added by Law 583/2004 of 23/4/2004]: Financial institutions may, as from 2004, set aside provisions of the same nature, also after approval by the Banking Control Committee at Banque du Liban.
12. 12)Provisions set aside that are not used for the purpose for which they were established, or whose continued maintenance in the following year is not justified, are added to the profits of the year in question.
13. 13)Amounts proven to have been paid by way of aid, assistance or charity to officially recognised religious, social, cultural or sports establishments, within the general limits set by decree adopted by the Council of Ministers.
14. 14)[Added by Decree 15735 of 11/3/1964 as amended by Law 67/26 of 8/5/1967]: Donations made in 1964, 1965, 1966, 1967 and 1968 to the Lebanese Cultural Society for the construction of the House of Culture are deductible from the profits of those years.
15. 15)[Added by Law 286/1994 of 12/2/1994]: Donations paid to the Lebanese State, and those to be paid in subsequent years, are also deductible from the profits of the year in which they are paid.
16. 16)Proven debts established by a court or arbitration award.
17. 17)Legal and commercial advertising expenses proven by regular invoices, within the limits set by decree adopted by the Council of Ministers. [Added by Legislative Decree 39 of 23/2/1977]
18. 18)Charges levied on real-property revenues on behalf of municipalities pursuant to Article 57 of the Law of 17/9/1962, borne by capital companies. [Added by Law 80/27 of 19/7/1980]

The following are not deductible:

1. 1)Capital expenditure and expenditure exceeding its maintenance value, other than ordinary maintenance expenses.
2. 2)Taxes and fees paid or due to a foreign state on income earned in Lebanon, without other justification.
3. 3)Losses incurred by the taxpayer from the activities of establishments, branches, agencies or representative offices, whether inside or outside Lebanon, whether wholly owned or in which the taxpayer participates.
4. 4)Actual expenses that the taxpayer cannot prove were incurred in connection with the activities of establishments, branches, agencies or representative offices inside or outside Lebanon.
5. 5)Personal expenses, including amounts that the employer or partner deducts for himself for managing the enterprise or for his personal expenses.
6. 6)Representation allowances exceeding 10% of the basic salary of the employed director, as well as any excess beyond the customary limits in salaries, wages and other expenses required for the exercise of commerce, industry or the profession.
7. 7)Exceptional taxes and penal fines.

The revenues from movable capital and from built and unbuilt real estate that form part of the assets of a profession or enterprise are included in the income covered by the tax. If such revenues are in principle subject to one of the other specific income taxes and have been added to the profits at the time they were realised, they may be deducted in full from those profits and not added to the tax provided for in this Part. [Note: A new paragraph was added to Article 8 by Law 80/27 of 19/7/1980, then repealed by Law 282 of 30/12/1993.]

The proportion of profits received by Lebanese capital companies as a result of their shareholding in other Lebanese capital companies is deducted in full from their income subject to the tax provided for in this Part; it remains, however, subject when redistributed to the tax provided for in Article 72 bis of the Income Tax Law.

For the purpose of determining the net profit subject to tax, every taxpayer required to keep commercial accounts pursuant to the Commercial Code must file a declaration of his actual profit or of his total income. In the latter case, the administration determines the net profit subject to tax on a flat-rate basis by applying a prescribed rate to total income. Taxpayers not required to keep commercial accounts have their taxable profits estimated in accordance with the provisions of sub-section (c) of Chapter Three of this Part. If the taxpayer is a holder of a non-commercial, non-industrial profession, he must file a declaration of his total income, unless he requests to be taxed on the basis of actual profit pursuant to sub-section (a) of Chapter Three of this Part. The partner with full legal capacity in general or limited partnerships, and each partner lacking such capacity when the partnership arises from the application of Article 66 of the Commercial Code, is personally responsible for filing the declaration relating to his share. The limited partnership is responsible for filing a global declaration for all the shares of the limited partners in the profits and losses.

Declaration of actual profit is mandatory for the following categories of taxpayers:

1. 1)General partnerships, capital companies, as well as consumer cooperatives, trade unions and agricultural cooperatives with a commercial character.
2. 2)Branches of the establishments mentioned in the preceding paragraph when their head office is abroad.
3. 3)[As amended by Law 326 of 28/6/2001 (Budget 2001)]: Factories, workshops and all other industrial establishments employing more than four persons on a permanent basis, except those that are craft enterprises.
4. 4)Banks, money-changers, and persons engaged in banking activities.
5. 5)Importers, exporters, wholesale merchants, brokers and commission agents.
6. 6)Merchants employing more than four persons.
7. 7)Owners of stores selling chemical and food products.
8. 8)Operators of riding, hunting or shooting establishments.
9. 9)Operators of first- and second-category hotels according to the official classification.
10. 10)Operators of first- and second-category theatres and cinemas according to the official classification.
11. 11)[As amended by Law 326 of 28/6/2001]: Publishing houses and printing presses employing more than four persons on a permanent basis.
12. 12)[As amended by Law 326 of 28/6/2001]: Mills operating for third parties as well as those employing more than four persons on a permanent basis.
13. 13)Lessors of furnished establishments.

Categories not mentioned in the preceding article are taxed on the basis of flat-rate or estimated profit; however, any person may request to be taxed on the basis of actual profit, provided he submits a request to that effect before the end of January of the assessment year. A person who has chosen the method of taxation on the basis of actual profit may not in subsequent years request to revert to the flat-rate or estimated profit method.

a — Taxation on the basis of actual profit

The declaration of actual profit is submitted to the competent financial departments before 1 April of each year, and before 1 June with respect to capital companies, together with a copy of the balance sheet, a summary of the profit and loss account, and a statement of the expenses and charges to be deducted pursuant to Article 7. As for the auditors' report and the explanatory statements relating to companies subject to the auditing regime provided for in the Commercial Code, these are submitted before 1 January of each year. The administration may extend the time limit by one month in duly justified exceptional circumstances. Taxpayers other than holders of commercial and industrial professions who are not required to file a balance sheet shall file a declaration indicating the total of their gross income and the total of the deductible expenses and charges, as well as the net profit for the preceding year. Enterprises whose financial year does not coincide with the calendar year may, with the agreement of the competent financial departments, take the date of closing of that financial year as the starting point for the three- or five-month periods provided for in this article.

The profit to be declared is the actual profit realised during the preceding year, or during the twelve-month period whose results form the basis of the latest balance sheet (if that period differs from the calendar year). In the case of the commencement of a new activity, the profit realised between the date of commencement of activity(1) and the last day of December of the year preceding the assessment year must be declared.

If it appears that establishments affiliated with establishments located outside Lebanon, or supervised by establishments located abroad, transfer part of their profits to abroad, whether by inflating purchase or sale prices, or by reducing them, or by any other means, the profits so transferred must be added, when the tax is imposed, to the profits stated in the accounts. Where sufficient evidence is not available to determine the actual profit, the profits of comparable establishments are taken as the basis of comparison and for determining the profit, in addition to external evidence and information available to the competent financial departments.

If a deficit occurs in a given year, that deficit is treated as a charge of the following year and is deducted from the actual profit realised during that year. If that profit is insufficient to absorb the entire deficit, the remaining balance is deducted from the profits of the second year, and if any balance remains, from the profits of the third year. The deficit may not be carried forward beyond the third year following the year of its occurrence. The deficit must be declared within the time limit prescribed for the declaration of actual profit, in the same manner.

[Added by Legislative Decree 81 of 27/6/1977]: By way of exception, the deficit incurred during either of the years 1975 and 1976 may be carried forward for up to eight consecutive years instead of three, to be absorbed successively during that period as follows: - By applying the full profits of the first four years. - Then by deducting up to fifty percent (50%) of the taxpayer's annual profits during each of the last four years. The balance of the deficit may not be carried forward beyond the eighth year following the year of its occurrence. The balance of profits realised during the last four years referred to above remains subject to the ordinary legal provisions.

[Added by Laws 79/2 of 22/3/1979 and 79/6 of 21/12/1979]: When carrying forward the deficit incurred during 1975 and 1976 to the results of subsequent years, the year 1978 is not counted if its result was a deficit, in the calculation of the eight years provided for in Legislative Decree 81 of 27/6/1977. In that case, the taxpayer benefits from an additional ninth year to carry forward the deficit. The carry-forward of the deficit incurred by taxpayers subject to income tax for 1978 is also governed by the provisions of Legislative Decree 81 of 27/6/1977 relating to the deficit incurred during 1975 and 1976.

[Added by Legislative Decree 59 of 9/9/1983]: By way of exception, the deficit incurred during either of the years 1981 and 1982 may be carried forward for up to eight consecutive years instead of three, to be absorbed in the same manner. The balance may not be carried forward beyond the eighth year. The balance of profits from the last four years remains subject to the ordinary legal provisions.

[Added by Law 85/7 of 10/8/1985]: By way of exception, the deficit incurred during either of the years 1983 and 1984 may be carried forward for up to eight consecutive years instead of three, in the same manner and subject to the same conditions.

[Added by Law 14 of 20/8/1990]: By way of exception, the deficit incurred during either of the years 1989 and 1990 may be carried forward for up to eight consecutive years instead of three, in the same manner and subject to the same conditions.

[Added by Law 273 of 15/4/2014]:

1. 1)By way of exception, the deficit incurred during 2003 and 2004 may be carried forward for one additional year for each of those two years. The deficit incurred during any of the years 2005, 2006, 2007 and 2008 may be carried forward as follows:
2. 2)For up to seven additional years, i.e. ten years following the year the deficit occurred, for enterprises and companies destroyed as a result of the Israeli aggressions against Lebanon during the period from 12 July to 14 August 2006 inclusive.
3. 3)For four additional years, i.e. up to seven years following the year the deficit occurred, for all other taxpayers.
4. 4)The deficit balances referred to above may not be carried forward beyond the prescribed periods.
5. 5)As for losses resulting from direct damage to tangible fixed assets caused by terrorist acts or Israeli aggressions occurring during 2005, 2006, 2007 and 2008, these are treated as deductible charges from profits and may be carried forward to subsequent years in accordance with point 1 above. The book value as recorded in the taxpayer's accounts and declarations, or in the reconstructed records, is used to calculate those losses, after verification by the competent financial department.(1)

b — Taxation on the basis of flat-rate profit

Taxpayers not subject to the actual or estimated profit method of taxation must submit to the financial departments, before 1 February of each year, a declaration of their total income realised during the preceding year.

Income to be declared for taxation on the basis of flat-rate net profit means the taxpayer's receipts from all transactions carried out in any form, definitively and actually, during the year preceding the assessment year, and in particular the total collected by the taxpayer as the price of goods, merchandise, tools or supplies sold, as rent for items leased, and also as commissions, brokerage fees, proceeds or interest arising directly from commercial transactions, exchange differences or professional fees, etc. Income that is in principle subject to other specific income taxes (bank interest, loan interest, real-property revenues, etc.) remains subject to the specific tax applicable to it and is deducted in full from the income subject to the Part One tax, together with the corresponding charges directly related to that income.

Total income to be used as the basis for determining the flat-rate net profit is extracted from the daily register provided for in the Commercial Code, for taxpayers required to keep commercial accounts, or from the register provided for in the following Article 20, for taxpayers who are holders of non-commercial, non-industrial professions.

Every taxpayer who is a holder of a non-commercial, non-industrial profession must keep the daily register provided for in the Commercial Code and enter in it his daily income as referred to in the preceding Article 18. Those in professions required to maintain professional secrecy may confine themselves to recording the breakdown of amounts collected, together with the date of receipt, without stating the names of the payers. The clerks of the competent courts endorse and number the registers of all taxpayers subject to tax on commercial and industrial profits, regardless of the method of taxation to which they are subject. Notaries endorse and number the registers of all other taxpayers.(1)

A committee seated at the Ministry of Finance is responsible for determining the ratios to be applied to total income in order to calculate the flat-rate net profit.(2)

The committee referred to in the preceding article is composed of: - The Director General of Finance or his representative, as chairman. - A representative of the Ministry of Economy and Trade, appointed by the Minister of Economy and Trade, as member. - A representative of the Chamber of Commerce and Industry in Beirut, proposed by the president of that Chamber, as member. - An expert representing, as appropriate, merchants, industrialists or holders of non-commercial professions, appointed by the Minister of Finance, as member. - A civil servant from the Ministry of Finance (Income Tax Department), as rapporteur. This committee is appointed by the Minister of Finance, meets upon the chairman's invitation, and takes its decisions by majority vote; in case of a tie, the chairman's vote is decisive.

The committee sets, for each type of trade, industry, profession or activity, an average annual rate. These rates are compiled in a global table approved by decision of the Minister of Finance and published in the Official Gazette. The Minister of Finance shall determine each year the professions for which the committee may revise the established rates. The rates for other professions remain in force.

c — Taxation on the basis of estimated profit

The tax is imposed on taxpayers not subject to the actual or flat-rate profit method, on the basis of estimated profit.

A special committee responsible for estimating the annual profit subject to tax is constituted in each province, composed of: - The head of the Income Tax Department, or the head of the provincial finance office, or a senior tax inspector, as chairman. - A representative of the Ministry of Economy and Trade, appointed by the Minister of Economy and Trade, as member. - A representative of the provincial Chamber of Commerce and Industry, proposed by the president of that Chamber, or a member of the provincial council where no Chamber of Commerce exists, appointed by the Governor, as member. - A civil servant from the Ministry of Finance (Income Tax Department) or from the competent financial unit or department in the province, as member. - The competent Income Tax inspector, as rapporteur. These committees are appointed by decision of the Minister of Finance on the proposal of the Director General of Finance. They meet upon the chairman's invitation and take their decisions by majority vote; in case of a tie, the chairman's vote is decisive.

For the purpose of estimating the net profit, the committee uses all information obtained about the taxpayer and may rely on external signs of his standard of living, and may summon him if it considers this necessary. The committee draws up nominal lists of estimated profits, duly certified, which serve as the basis for tax assessment.

The estimation takes effect for a period of three consecutive years. The Minister of Finance may, by decision, order a review of the committee's estimates where justified economic circumstances arise.

d — Common provisions

The financial departments are responsible for imposing the tax on actual, flat-rate or estimated profits derived from declarations or estimated, by means of basic assessment schedules. If upon scrutiny of the accuracy of the declaration they find grounds for amendment, they notify the taxpayer of the amount of the amendment and its reasons, together with notice of the additional tax or supplementary assessment, by registered letter with acknowledgement of receipt.

If the taxpayer ceases activity, the tax is imposed on his industrial, commercial and non-commercial profits not yet assessed. The assessment covers the actual or flat-rate profit realised during the period between the last day of the period covered by the previous assessment and the day on which the taxpayer ceased activity. With respect to estimated profit, the tax is imposed on the profit calculated proportionally to the period of activity during the year in which the cessation occurred. A taxpayer who ceases activity and is subject to the actual or flat-rate profit method must file a declaration to that effect with the financial departments within one month of the date of cessation, together with all information and documents necessary to determine the taxable profit. If the taxpayer is engaged in another activity, or owns an establishment other than the one he has sold or ceased during the year, he must notify the financial departments accordingly within one month of the date of cessation or sale, and include in his annual general declaration the results of the activities of the establishment in which he has ceased operations. In all cases, all categories of taxpayers must state the buyer's name, address and particulars. The provisions of this article apply to court-appointed receivers and liquidation agencies upon the occurrence of bankruptcy,(2) at which point the one-month filing period begins from the date of the decision appointing them.

If the taxpayer fails to file the legal declaration within the prescribed time limit, a penalty(4) of ten percent (10%) per month of delay on the amount of tax due is imposed, counting any fraction of a month as a full month, up to a maximum of one hundred percent (100%) of the tax, until the end of the first year of the prescribed filing period. If no declaration is filed, the competent financial administration proceeds with a direct assessment on the basis of the profit it determines and imposes a penalty equal to the amount of the tax assessed. If the taxpayer does not keep the legally required accounts, or refuses to produce them or to show them to the competent tax inspectors, or refuses to provide the documents necessary to verify the accuracy of the declaration and the accounts, or to cooperate with the inspectors, a direct assessment is made on the basis of the profit estimated by the financial departments, and a penalty equal to the amount of the tax assessed is imposed.(1) If the accounts are regular but one of the legal conditions is not met, the penalty is reduced to 10% and no direct assessment is made. In all cases, even if the results of the activity are negative, the penalty payable by the taxpayer must not be less than five hundred thousand Lebanese pounds if subject to actual profit taxation, or one hundred thousand Lebanese pounds if subject to flat-rate profit taxation. Upon repetition of the violation within three years, the penalty is doubled; no settlement procedure may be applied to such penalties. The profits and income forming the basis of the assessment may not be less than the profits and income realised by the taxpayer in any of the three preceding years. In cases where there are grounds to believe that the profits and income to be adopted by the financial departments for direct assessment exceed the minimum referred to above, the estimation committee provided for in Article 25 of this Part determines the additional profit and income to be added to that minimum. The taxpayer may object to the direct assessment within the legal time limits, whether the assessment is based on the minimum referred to above or on the committee's determination, provided the objection is substantiated. [Added by Law 80/27 of 19/7/1980]: The basic rules to which income taxpayers are subject are determined by unified basic regulations enacted by decree adopted by the Council of Ministers on the proposal of the Minister of Finance.(2)

The tax is imposed on the net income received by the taxpayer during the year preceding the assessment year, even if the source of income ceases during the assessment year or before it.(2)

Gross income means the aggregate of salaries, wages, emoluments, compensation, bonuses, gratuities and cash and in-kind benefits.(3)

For the purpose of determining net income, the following are deducted from gross income:

1. 1)Amounts deducted and paid for retirement in accordance with applicable laws and regulations.
2. 2)Compensation for office expenses, representation,(4) travel and transport,(5) cashier's responsibility, fodder allowance, uniform allowance, and in general all compensation granted to cover expenses reasonably incurred in the performance of duties required by the service.
3. 3)[Added by Law 80/27 of 19/7/1980]: Fifty percent (50%) of amounts paid as a genuine flight allowance to pilots and other crew members subject to tax in Lebanon.
4. 4)[Added by Law 85/7 of 10/8/1985]: Education grants, nursery grants, and grants given by the relevant establishment to the employee or a member of his immediate family, within the conditions and limits of the amounts prescribed in the civil service employees' cooperative, provided these grants are given on a permanent basis under a comprehensive scheme covering all employees and duly approved by the Ministry of Labour.

Taxpayers subject to the actual profit method of taxation, and those referred to in Article 44, must keep for their employees a register in which they record, without omission, erasure or alteration, the names of employees, officers, workers, assistants and other members of the payroll, their salaries and wages, the nature of their work, the date they began work, and, upon termination, the date they ceased work or were dismissed. This obligation also applies to individuals, institutions, companies and associations paying retirement pensions or life allowances. [As amended by Laws 85/7 of 10/8/1985 and 89 of 7/9/1991, penalty updated by Law 282 of 30/12/1993]: Any person who fails to keep this register, or refuses to show it to the competent Ministry of Finance officials, is subject to a fine of LBP 50,000, independently of any other penalties prescribed therefor.(1)

All taxpayers,(3) whatever their method of taxation, as well as establishments exempt from the tax on profits, must submit before 1 March of each year a declaration of the aggregate salaries and wages of all their employees subject to tax or exempt therefrom, regardless of the amount, together with an annual individual statement of the total income of each employee or worker, the tax withheld, the amount of the basic salary, and the date of commencement of employment. This obligation also applies to employers personally liable for paying and declaring the tax on salaries and wages. The declaration submitted by the employer and the individual statement are complementary documents submitted to the competent tax administration on the prescribed forms. The declaration submitted by the employer must be fully consistent, as regards the names of employees, the aggregate salaries, wages and emoluments paid to them, with the declaration submitted to the National Social Security Fund. A fine of between LBP 200,000 and LBP 500,000 is imposed for violation of this paragraph.(4) The implementing regulations are determined by decisions of the Minister of Finance.

In addition to the declaration required of the employer pursuant to the preceding article, every employee, worker or wage earner holding simultaneously a position or employment in more than one establishment or enterprise must personally submit to the regional finance office, before 1 May of each year, a declaration stating the names and addresses of the various employers with whom he was employed during the preceding year, and the amounts he received from or which accrued to him from each of them during that year. This obligation also applies to every employee or worker who simultaneously exercises a profession subject to the tax provided for in Part One of this Legislative Decree and receives from another source a pension or life allowances.(1)

If the employer fails to submit within the prescribed period the declarations provided for in Part Two, the competent financial departments directly impose a penalty of ten percent (10%) per month of delay, counting any fraction of a month as a full month, up to the amount of the tax. For employees, workers and wage earners referred to in the preceding article, as well as employers personally liable for paying and declaring the tax on salaries and wages, and institutions, associations and bodies that do not seek to make a profit and whose number of employees does not exceed five, who fail to file the annual declaration, the competent financial departments impose the tax directly, together with a flat-rate penalty of LBP 50,000. Upon repetition of the violation within three years, the penalty is doubled and may not be settled by any procedure. If an employer does not keep the employees' register referred to in Article 51, or refuses to produce it or to show the competent inspectors the necessary documents to determine the actual taxable income, and refuses to cooperate with the competent inspectors, a direct assessment is made together with a penalty equal to the tax assessed on the basis of the income estimated by the competent financial departments. The minimum penalty imposed on employers referred to in this article, excluding the taxpayers referred to in the second paragraph, is LBP 200,000. Upon repetition within three years, the penalty is doubled and may not be settled by any procedure. Objections to direct assessments may be lodged within the time limits provided for in Chapter One of Part Four, subject to the submission of the necessary documents to verify the actual taxable income.(2)

Every employer required to keep the employees' register referred to in Article 51 who ceases activity, transfers his enterprise or establishment, or leaves before the end of the year, must file the declaration provided for in Article 52 within one month of the date of cessation, transfer or departure, failing which the penalty provided for in Article 54 is imposed. The same provisions apply to court-appointed receivers and liquidation agencies(1) in the event of bankruptcy,(2) at which point the one-month period begins from the date of the decision appointing them. Taxes imposed pursuant to the provisions of this article are immediately due.

The tax rate on income from movable capital is set at ten percent (10%) of gross income; no surcharge is added to the principal of the tax. [Added by Law 85/7 of 10/8/1985]: Notwithstanding any other provision, the tax on income from movable capital is paid upon filing the declaration of the income subject thereto. This tax is imposed by a payment order which may be organised on a settlement basis. The implementing regulations are determined by decisions of the Minister of Finance.

Article 72 bis — Tax Rate on Distributions of Capital Companies [Added by Law 80/27 of 19/7/1980] Distributions by Lebanese capital companies are subject to a flat-rate tax of ten percent (10%) in all cases, even if the company is exempt from the Part One tax pursuant to Articles 5 and 5 bis; no surcharge is added thereto. Exempt from the distribution tax is any increase in capital drawn from profits that have already been subject to the Part One tax or that are exempt therefrom pursuant to Articles 5 and 5 bis. Also exempt from the distribution tax are profits realised before 1980 that were subject to the progressive tax(1) provided for in Part One of the Income Tax Law or in the Real Property Tax Law. [As amended by Law 85/7 of 10/8/1985]: Foreign capital companies operating in Lebanon are deemed to have distributed all their profits, which are subject to the tax provided for in this article after deducting: - The Part One tax due on the profits. - The 10% reserve required by Article 133 of the Money and Credit Law enacted by Decree 13513 of 1/8/1963. [Note: The paragraph added to Article 72 bis by Law 173 of 14/2/2000 as amended was repealed by Law 64 of 20/10/2017.] The distribution tax on any given company must not fall below five percent (5%) even if all the conditions set out above are cumulatively met.

Any person who obstructs the exercise of the right of access provided for in Chapter Two of Part Four, or refuses to provide the administration with the information it requests, is liable to a penalty of between one million and five million Lebanese pounds. The penalty is imposed by the competent financial departments. Payment of the penalty does not relieve the taxpayer of his primary obligations, nor does it preclude prosecution pursuant to applicable law for failure to fulfil those obligations.

Any violation of the provisions of this Legislative Decree or of the regulations implementing it, not expressly provided for therein, is punishable by a fine of between two hundred thousand and five hundred thousand Lebanese pounds. [See Article 67 of Law 144 of 31/7/2019 (Budget 2019) regarding the exemption of arbitrators from paying financial penalties.]

The competent financial departments are responsible for imposing the penalties prescribed pursuant to this Legislative Decree. These penalties are collected in accordance with the principles governing the collection of direct taxes and comparable fees. Penal sanctions and fines provided for in Article 108 are imposed by the competent courts at the request of the Ministry of Finance, without the need to first notify the taxpayer to correct his declaration.

The tax is imposed on the actual or declared flat-rate profit, after deducting from each natural person taxpayer a family allowance of LBP 7,500,000 (seven million five hundred thousand Lebanese pounds). An additional deduction of LBP 2,500,000 (two million five hundred thousand) is available to the married taxpayer, and LBP 500,000 (five hundred thousand) for each dependent child, subject to the following conditions: - Children who have not yet reached the age of eighteen, or who are up to twenty-five years old and still in university. - Children with a permanent disability who are not employed, subject to certification of the disability by the permanent medical committee at the Ministry of Health. - For the widow, divorcee or legally separated woman, provided the number of dependent children does not exceed five. Where both spouses each exercise a profession or hold a position from which each benefits, they share equally the deduction granted for each dependent in accordance with this article. In the event of legal separation (judicial, civil or religious divorce) between the spouses, the spouse paying alimony is the one who benefits. - If the husband is not employed, or if his wife independently exercises a profession or holds a position subject to tax, the wife also benefits from the deduction granted for the dependent, in addition to the deduction for children, in accordance with the first paragraph of this article. If the father or mother has died or has a permanent proven disability and does not receive an employment salary, the child also benefits from the additional family deduction. These deductions apply as from the fiscal year 1999. [As amended by Law 14 of 20/8/1990]: Each Lebanese actual company is entitled to only one deduction. As for the tax on estimated profit, it is imposed after deducting an amount equivalent to the legal minimum wage for a married person without children, per year, per taxpayer. This provision applies as from the fiscal year following the year in which the last final estimation was made.(1)

The tax rate on profits from commercial, industrial and non-commercial professions is set as follows: - 4% on the portion of taxable profit not exceeding LBP 9,000,000 (nine million Lebanese pounds). - 7% on the portion exceeding LBP 9,000,000 but not exceeding LBP 24,000,000 (twenty-four million Lebanese pounds). - 12% on the portion exceeding LBP 24,000,000 but not exceeding LBP 54,000,000 (fifty-four million Lebanese pounds). - 16% on the portion exceeding LBP 54,000,000 but not exceeding LBP 104,000,000 (one hundred and four million Lebanese pounds). - 21% on the portion exceeding LBP 104,000,000 but not exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). - 25% on the portion exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). The profits of capital companies (joint stock companies, limited liability companies, and limited partnerships by shares in respect of the limited partners' share) are subject to a flat-rate tax of 17% (seventeen percent). In calculating the tax, any fraction of one Lebanese pound in the taxable profit is disregarded. No surcharge is added to the principal of the tax. This provision applies as from the fiscal year 2019. [As amended by Law 144 of 31/7/2019 (Budget 2019)]

The tax is imposed on the net annual income determined pursuant to Articles 48, 49 and 50 of the Income Tax Law, after deducting from each natural person taxpayer the family allowance pursuant to Article 31 of the Income Tax Law, subject to the applicable conditions, in addition to a deduction of twelve million Lebanese pounds from the pension base for retired persons. [As amended by Law 144 of 31/7/2019 (Budget 2019)]

If one of the taxpayers subject to the tax provided for in this Part simultaneously exercises a profession subject to the Part One tax, he may benefit only from the deduction provided for in Part One.(3)

The tax rates on salaries, wages and retirement pensions are as follows: - 2% on the portion of taxable net income not exceeding LBP 6,000,000 (six million Lebanese pounds). This rate applies proportionally to the corresponding portion of retirement pension bases. - 4% on the portion of taxable net income exceeding LBP 6,000,000 but not exceeding LBP 15,000,000 (fifteen million Lebanese pounds). Same note for retirement pension bases. - 7% on the portion exceeding LBP 15,000,000 but not exceeding LBP 30,000,000 (thirty million Lebanese pounds). Same note. - 11% on the portion exceeding LBP 30,000,000 but not exceeding LBP 60,000,000 (sixty million Lebanese pounds). Same note. - 15% on the portion exceeding LBP 60,000,000 but not exceeding LBP 120,000,000 (one hundred and twenty million Lebanese pounds). Same note. - 20% on the portion exceeding LBP 120,000,000 but not exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). Same note. - 25% on the portion exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). Same note. This provision applies as from 1 August 2019. [As amended by Law 144 of 31/7/2019 (Budget 2019)]

The portions of income subject to tax and the deductions from the base are apportioned according to the period of employment for which the wages were paid, counting thirty days per month. [As amended by Law 282 of 30/12/1993 and Law 326 of 28/6/2001 (Budget 2001)]: The deduction from the base is the amount equivalent to LBP 25,000 (twenty-five thousand Lebanese pounds) per month of the year for daily wage earners and workers paid on a piece-work or quantity basis, regardless of their family situation.(1) Piece-work wages are taxed at a flat rate of 3%, whatever their amount, without any deduction from the base. Piece-work wages means wages paid to daily workers employed on a temporary basis on a piece-work or quantity basis.

The taxable income or profit from Lebanese shares and bonds is determined as follows:

1. 1)With respect to shares of all types and founders' and interest shares, and amounts withheld by Lebanese joint stock companies from profits or distributed from reserves: the income is determined by reference to the auditors' statements, the resolutions of general shareholders' meetings, boards of directors, and similar documents.
2. 2)With respect to bonds: the income is determined by reference to the interest or income distributed during the year.
3. 3)With respect to lottery prizes: the income is determined by reference to the prize amount itself expressed in Lebanese pounds.
4. 4)With respect to redemption prizes: the income is determined by the difference between the amount redeemed and the original issue value of the bond.
5. 5)[Note: A new paragraph 5 was added by Law 88/3 of 20/1/1988, then repealed by Law 282 of 30/12/1993, except for gains from the disposal of shares, which remain exempt from income tax.]

The tax falls due within the month following the decision to pay the profits, interest, proceeds or other revenues from shares and founders' shares. The tax on interest from bonds falls due within one month of the due date of such interest.

Every company, institution or public or private body must pay the tax to the Treasury within the period set out in the preceding article, and may then recover it from the holders of shares or bonds. The following documents must be submitted at the time of payment:

1. 1)For shares: extracts from auditors' statements, resolutions of general shareholders' meetings or boards of directors, and in general any resolution concerning the distribution of profits or reserves.
2. 2)For bonds: a table showing the number of bonds, the nominal value of each bond, the interest rate, and the due date.
3. 3)For lottery prizes and redemption prizes: a certified copy of the original lottery record and a table showing the number of bonds drawn in each lottery, the issue value, the amount of prizes due, and the amount subject to tax.

Natural and legal persons who fail to pay the tax within the legal period pursuant to the preceding article, or who pay it inadequately, are directly liable for the unpaid amounts, plus a penalty of three percent (3%) per month of delay, counting any fraction of a month as a full month.

The Treasury's rights to assessments may be reinstated by additional schedules or supplementary assessments up to the third year following the year in which the concealed or unknown income should have been assessed, without prejudice to any penalties to which the taxpayer or person liable for the tax may be subject. Assessments cancelled in whole or in part for formal defects not affecting their substance, or because of an error in the type of tax or in the name of the taxpayer, may also be reinstated. The tax may be imposed on any profit or income proven by a judicial decision, arbitration award or inventory report, up to the last day of the civil year following the year of the judgment, award or report, in addition to the time limit provided for in the preceding paragraph.

Any person wishing to leave Lebanese territory permanently must obtain, prior to departure, a certificate from the Ministry of Finance proving that he has paid the income tax due. The competent departments are prohibited from endorsing the passport(1) of any person wishing to leave Lebanese territory permanently before he presents the certificate referred to in the preceding paragraph. The certificate is not, however, required of non-residents who wish to leave the country even temporarily.

Declarations, objections, statements and other documents and instruments submitted to the Ministry of Finance in connection with income tax are exempt from stamp duty.

Persons who provide information relating to concealed income are granted a reward of between 10% and 30% of the value of the penalties collected as a result of the information provided.

a. Every taxpayer who commences a new activity must notify the financial departments within two months of the date of commencement; failure to do so results in the following penalties: - LBP 3,000,000 for joint stock companies. - LBP 1,000,000 for limited liability companies and limited partnerships by shares. - LBP 1,000,000 for general partnerships and taxpayers mandatorily assessed on actual profit. - LBP 500,000 for all other taxpayers. The procedures for proving the date of commencement of activity are determined by decision of the Minister of Finance. b. Taxpayers who have not declared the commencement of activity within the prescribed period and who file declarations within a period determined by the Minister of Finance, not exceeding 31/12/1997, are exempt from the non-declaration penalty.

All natural and legal persons enjoying permanent exemptions or special exemptions from income tax, as well as all commercial companies enjoying a permanent exemption pursuant to Article 5 of this Legislative Decree, must file annual declarations and statements with the competent financial departments and make available to the competent officials, upon request, all documents and accounts reflecting the activity, profits, losses and transactions conducted with third parties. For late filing or refusal, a penalty of between two hundred thousand and five hundred thousand Lebanese pounds is imposed.

Taxes, penalties and other amounts due to the State pursuant to this Legislative Decree enjoy a general first-ranking privilege over all assets of the taxpayers liable for them or responsible for paying them to the Treasury. This privilege applies even in the case of voluntary arrangement, judicial liquidation or bankruptcy.

Notwithstanding the provisions of the Commercial Code, and for the purpose of applying the provisions of the income tax, registers and documents necessary to prove the validity of entries and declarations must be kept for five years following the basic assessment year.

For the purposes of this Legislative Decree, the following words and expressions have the meanings assigned to them: - Tax on industrial, commercial and non-commercial profits: Part One tax. - Tax on salaries, wages and retirement pensions: Part Two tax. - Tax on income from movable capital: Part Three tax. - Income: profit — revenues. - (Taxpayer — employer): any natural or legal person subject to the tax. - Establishment: commercial establishment — industrial establishment — non-industrial establishment — public and private establishments — profession of any kind — craft — work. - Proceeds: income from movable capital whatever its denomination — interest — proceeds — revenues.

The terms and expressions contained in this Legislative Decree are interpreted in a manner consistent with the public interest and the protection of the rights of the Treasury. The implementing regulations are determined by decree(1) adopted by the Council of Ministers.

This Legislative Decree shall enter into force as from 1 January 1960, and all laws, legislative decrees, ordinary decrees and regulations contrary thereto or inconsistent with its content are repealed as from that date, whether general or special.

This Legislative Decree shall be published and communicated wherever necessary. Signed on 29 June 1959. Signatory: Fouad Chehab Published in Official Gazette No. 35, dated 4 July 1959.

The tax is imposed in the name of each taxpayer at his domicile or at the place where he exercises his trade, industry or profession as at 1 January of the assessment year. If the taxpayer owns more than one establishment or exercises multiple activities, the tax is imposed on the aggregate profits realised in Lebanon, and his principal establishment serves as the centre of assessment. [Added by Law 497 of 30/1/2003]: Notwithstanding any other provision, with a view to facilitating the handling of transactions and ensuring effective oversight, the Minister of Finance may establish centralised assessment centres for income tax administration, according to criteria set for that purpose.

In Lebanese general partnerships(1) and limited partnerships, each partner with full legal capacity is personally assessed on his share of the profits, as is each partner lacking such capacity when the partnership arises from the application of Article 66 of the Commercial Code. The balance of profits is assessed in the name of the company. However, the tax imposed in the name of each partner is in all cases a liability of the company.

The tax is imposed by means of annual assessment schedules and is collected in accordance with the principles governing the collection of direct taxes and similar fees. The placing of the basic assessment schedules in collection must be announced in the Official Gazette, on the radio and in the press. Each taxpayer also receives a personal notice of the tax imposed on him. Other assessment schedules are not published; the person concerned is notified of the tax arising therefrom by registered letter with acknowledgement of receipt.

In the event of a transfer of the enterprise to a third party, whether gratuitously or for consideration, and whether the sale is compulsory or voluntary, the seller and the buyer are jointly and severally liable for the payment of taxes due from the seller for the current year and the two preceding years not yet extinguished by the legal period of limitation. This obligation does not, however, extend to assessments imposed in the name of the seller after the expiry of one year from the date of the sale as registered with the competent financial departments. The provisions of this article, and those of Article 29, also apply in the event of the taxpayer's death; the heirs must then provide the necessary information for the imposition of the tax within two months of the date of death.

The representatives of natural and legal persons subject to the tax are considered liable for its payment.

A person who is liable for the payment of tax on behalf of the original taxpayer is entitled to recover what he has paid from the principal amounts that he receives or collects on that taxpayer's account, on the same terms as the privilege enjoyed by the Treasury.

The basic tax is imposed in the name of each taxpayer on the basis of declarations filed in accordance with the provisions of Chapter Three of this Part. If upon scrutiny of the accuracy of the declarations the financial departments find grounds for amendment, they notify the taxpayer of the amendment and its reasons, together with notice of the additional tax or supplementary assessment, by registered letter with acknowledgement of receipt.

The tax is imposed by means of annual assessment schedules and is collected in accordance with the principles governing the collection of direct taxes and similar fees, subject to the provisions of the following Article 62. The placing of the basic assessment schedules in collection must be announced in the Official Gazette, on the radio and in the press.

A personal notice of the tax imposed on each taxpayer is sent to him through the employer or the institution paying the retirement pension or life allowances, with the possibility of substituting individual notices with summaries from the assessment schedules drawn up for each employer separately.

The employer must withhold the tax from the salaries and wages paid to employees and pay the withheld amounts to the Treasury each quarter, no later than the fifteenth of the month following the quarter in question. This obligation also applies to individuals, institutions, companies and associations paying retirement pensions or life allowances; those who fail to pay to the Treasury within the prescribed period the amounts they should have paid are personally and additionally liable for the unpaid amounts, plus a penalty of three percent (3%) per month of delay, counting any fraction of a month as a full month. If an employer proves that he paid additional amounts to employees (such as a year-end bonus) before 15 January of the current or preceding fiscal year, such amounts are exempt from the late-payment penalty, provided the tax thereon is paid within the legal deadline prescribed for the annual declaration. This provision applies as from the fiscal year 2003. Its implementing regulations are determined by decree adopted by the Council of Ministers on the proposal of the Minister of Finance. [Added by Law 583 of 23/4/2004]: All employers, whatever their method of income taxation, are required to draw up a quarterly statement of salaries and wages for each employee, whatever the amount and whether or not any tax is due thereon, and to submit it together with the advance payment notice when any tax or penalty is due, to the competent financial department within the legal time limit set for each instalment payment.(1) A penalty of five percent (5%) of the amount of tax due is imposed for violation of this paragraph, which may not exceed LBP 1,000,000 (one million) and may not be less than LBP 200,000 (two hundred thousand) per employee for whom the quarterly statement has not been filed.(2) For employers personally liable for paying and declaring the tax on salaries and wages, and for institutions, associations and bodies that do not seek to make a profit and whose number of employees does not exceed five, a flat-rate penalty of LBP 50,000 (fifty thousand Lebanese pounds) is imposed in case of violation.

The provisions of this Part relating to the keeping of the employees' register, the declaration of their income, the withholding of the tax therefrom, and its payment to the Treasury, apply to public administrations, public establishments, major municipalities and other municipalities and bodies determined by decree adopted by the Council of Ministers.

The tax due on civil servants, officers, employees and workers, and other wage earners and retirees of all sectors, who receive their salaries, wages and allowances from the State, is deducted monthly from the taxpayer's income during the month in which it falls due. The provisions of this Part relating to the obligations of employers and the method of organising assessment schedules and paying the tax do not apply to the State.

A person who is liable for the payment of tax on behalf of the original taxpayer is entitled to recover what he has paid from the principal amounts that he receives or collects on that taxpayer's account, on the same terms as the privilege enjoyed by the Treasury.

All correspondence between the financial departments and taxpayers subject to this tax is conducted through the employer or the institution paying retirement pensions or life allowances.

All rights and obligations of the non-resident employer, as provided for in this Part, are transferred to the resident taxpayer, in particular with regard to the filing of declarations and the payment of tax.

All foreign shares and foreign public and private bonds held by natural or legal persons resident in Lebanon, whether foreigners or Lebanese nationals, are subject to tax. Any natural or legal person in Lebanese territory who pays the proceeds of the said shares and bonds withholds the tax for the benefit of the Treasury.

Every person engaged in the profession of collecting, paying or purchasing coupons or other financial instruments for the purpose of paying profits, interest, proceeds, lottery prizes, redemption prizes and other income from bonds and financial instruments referred to in the preceding article, must file a declaration to that effect with the competent financial departments within one month of the date of commencement of activity, failing which a penalty of between LBP 200,000 and LBP 500,000 is imposed. It is prohibited for all the persons referred to above to pay, collect or purchase coupons and other financial instruments without withholding the tax, unless they can prove that another intermediary has already withheld it.

The persons referred to in the preceding article must, for each payment they make, draw up a schedule in duplicate containing the following information:

1. 1)The name of the payer, his commercial address, profession or trade.
2. 2)The type of coupons or other financial instruments presented for collection, their number and their individual value in Lebanese pounds at the time of payment.
3. 3)The total gross amount in Lebanese pounds.
4. 4)The amount of tax due.
5. 5)The registration number in the register referred to below, the date, the payer's signature, and the name and address of the collector together with his signature.
6. 6)One copy of the schedule is given to the collector as a receipt. The second copy is kept by the payer; a penalty ranging from LBP 200,000 to LBP 500,000 is imposed for failure to prepare such schedules.

The same persons must keep two numbered registers, endorsed by the financial departments, in which they record day by day, without omission or alteration, the transactions of payment, sale or purchase of coupons or other financial instruments from which the tax must be withheld. These registers contain the information set out in the tables referred to in the preceding article. Register No. 1 is reserved for payment transactions that required direct withholding of the tax by the responsible person. Register No. 2 is reserved for sale and purchase transactions for which no withholding was required because another intermediary had already withheld it. A penalty ranging from LBP 200,000 to LBP 500,000 is imposed for failure to keep these registers.(2)

The withholding agent must, at the end of each half-year, prepare a summary from Register No. 1, and send it together with the withheld tax to the financial authorities. The tax must be paid within the month following the half-year; the provisions of Article 76 apply to violations.(1)

Owners of foreign shares and bonds, or persons who collect their proceeds, resident in Lebanon, who transfer their profits, interest, proceeds or other income abroad, or collect them abroad, whether directly or through intermediaries, must submit to the financial departments before 1 March of each year a statement indicating the total of those profits, interest, proceeds and income collected during the preceding year. Failure to file this statement results in a penalty of ten percent (10%) of the amount of tax imposed for each month of delay, counting any fraction of a month as a full month, up to a maximum of fifty percent (50%) of the tax assessed. Upon repetition, the penalty is doubled to the equivalent of the tax; no settlement procedure may apply to such penalties. This tax must be paid before 1 April of each year; in case of late payment, a penalty of three percent (3%) per month of delay is added to the unpaid amounts, counting any fraction of a month as a full month.

Amounts collected in Lebanon by persons, companies or establishments having no professional establishment there, in respect of activities subject to this tax, as well as the profits, revenues and proceeds they earn in Lebanon, are assessed in accordance with the provisions of the following two articles.

The net amount subject to tax is fixed at fifteen percent (15%) of the original income referred to in the preceding article, on a flat-rate basis; fifty percent (50%) thereof is deducted if it has the character of compensation for services rendered. The tax is withheld and collected at a rate of fifteen percent (15%). No surcharge is added to the principal of the tax.

Any person who pays amounts subject to taxation pursuant to Article 41 must declare those amounts within the time limit prescribed for the declaration of his own profits, after having withheld the tax calculated on the basis of the preceding Article 42. The withheld tax must be paid to the Treasury together with the declaration.

Insurance and savings institutions of all kinds, as well as sea, land and air navigation companies that are subject to tax, and oil refineries, are taxed solely on the basis of flat-rate profit in accordance with the provisions of sub-section (b) of Chapter Three of this Part, and may not request to be taxed on the basis of actual profit pursuant to Article 12. Insurance and savings institutions are personally liable for the tax due on them and may not pass it on to depositors, subscribers or beneficiaries, notwithstanding any prior contrary condition or agreement. Public works contractors are assessed on the flat-rate profit method based on the amounts they actually receive from public contracts during the civil year for the works they carry out. They may not avail themselves of the right of election provided for in Article 12.

First: Establishments subject to the actual profit method of taxation may, every five years, carry out a revaluation of their fixed assets in accordance with the procedures laid down in the Commercial Code for the valuation of contributions in kind to capital companies. The revaluation report is submitted to the competent financial department, which may object to it before the Income Tax Objection Committee within three months of the date of notification. The said committee must issue its decision on the objection and determine the final revaluation within a maximum of six months from the date on which the establishment submits its observations on the rapporteur's report. If no decision is issued within that period, the revaluation report is deemed approved.

Second: If fixed assets are revalued at a price higher than their original cost or the balance remaining after depreciation, the difference is treated as a capital gain. This gain is not subject to income tax in the following cases:

1. 1)If it is maintained separately in a special account on both sides of the balance sheet.
2. 2)If it is used to cover losses still appearing and identified in the balance sheet, within the limits of the amounts so used.
3. 3)In all other cases, this gain is subject to income tax at the rate of 10%. Depreciation may then be calculated on the new value resulting from the revaluation.

Third: The capital gain arising from a total or partial disposal is subject to income tax at the rate of 15%. However, a taxpayer who reinvests all or part of this gain within two years following the year of its realisation may request that the tax imposed be deducted from the amounts reinvested in the construction of permanent housing for the use of employees and wage earners working in the enterprise. In that case, the conditions and requirements of Article 5 bis of the Income Tax Law apply. The capital gain from a disposal is also exempt to the extent that it is used to offset subsequent losses of the enterprise. Capital companies taxed on the flat-rate profit basis may also carry out a revaluation of their fixed assets every five years, in accordance with the same procedures.

b — The following are subject to tax at the rate of fifteen percent (15%): gains from the disposal of fixed assets, including real estate, belonging to natural or legal persons subject to income tax on the actual, flat-rate or estimated profit basis.

c(1) — The following are subject to tax at the rate of fifteen percent (15%): gains from the disposal of real estate belonging to natural or legal persons not subject to income tax, or who are permanently, specially or exceptionally exempt from that tax, or belonging to natural persons subject to income tax where such real estate does not form part of the assets of a professional activity, as follows: - Exempt from the above tax are gains from the disposal of the primary residence of the natural person, provided the residences do not exceed two. - For the purpose of calculating the taxable gain from disposal, eight percent (8%) of the value of the gain is deducted for each complete year elapsed between the date of acquisition of the real estate and the date of disposal. The gain from disposal is exempt from tax if the transferor has held the property for twelve or more complete years, provided any balance due is paid in the year of disposal. - Persons referred to above must, upon carrying out a taxable disposal transaction, declare the disposal and pay the tax due within two months of the date of disposal. - Violations of this article are subject to the penalties provided for in Law 44 of 11/11/2008 (Tax Procedures Law). - The implementing regulations of this article are determined by decision of the Minister of Finance.

Article 45 bis — Exceptional Revaluation of Assets, Real Estate and Fixed Assets [Added by Law 282 of 30/12/1993] Natural and legal persons required to keep regular accounts under statutory or regulatory provisions may, on a one-time basis, carry out an exceptional revaluation of fixed assets (including shares, bonds and company participations) as well as real estate and fixed assets, whether held as fixed assets or for trading purposes, to correct for the effects of inflation caused by the depreciation of the Lebanese pound exchange rate against foreign currencies and by changes in the value of such real estate and fixed assets, retroactively as from the fiscal year 1975. The exceptional revaluation covers all fixed assets, real estate and fixed assets referred to above that are recorded in the enterprise's books at a date prior to 1 January 1994, provided that the value does not exceed the market price. [As amended by Law 301 of 21/3/1995]: The positive differences resulting from the exceptional revaluation are subject to a new proportional tax at the rate of 1.5% (one and a half percent) of the value of those differences. These differences are exempt from any other income tax, regardless of their subsequent use. The tax on the differences is paid in cash within one month of the date of the revaluation. Taxpayers assessed on the flat-rate or estimated profit basis may also benefit from this revaluation if the existence of documents allowing the revaluation of fixed assets, real estate and fixed assets is established. In no case shall these provisions, with respect to banks, conflict with the Money and Credit Law and the other regulatory and implementing provisions issued by Banque du Liban. The implementing procedures for this article are determined by decree adopted by the Council of Ministers on the proposal of the Minister of Finance.

The tax is imposed on interest, proceeds, commissions, reinvestment compensation, early payment compensation and any other income from secured debts, whatever their denomination and method of payment. All such income is referred to in this Chapter as 'interest'. 'Secured debt' means any debt (loan, bond, etc.) for which security has been registered in Lebanon, whatever the type or form of that security (mortgage, pledge, sale with right of redemption, sale with right of recovery, leasehold sale, etc.), or for which the law prescribes the registration of security, such as motor vehicles, ships and the like.

The tax is imposed on all gross interest arising from the security, whether nominal or actual, whatever the date of its creation. The rate stated in the security deed is used to calculate the interest, provided it is not below the customary level; otherwise the legal rate applies. In all cases, the competent financial departments may recover concealed Treasury rights up to the third year following the year in which the security was discharged, and the creditor is liable for a penalty equal to three times the recovered tax. The tax and penalty are collected in accordance with the direct tax collection law.

If the principal of the debt or part thereof is collected before the interest, the tax is calculated as if the payment had been applied first to the interest. The tax is reduced in proportion to the loss suffered on the original capital if the creditor has exhausted all legal enforcement measures and the subject matter of the security has in no case accrued to him.

If the debtor, or any rights-holder succeeding him, has paid the tax due on the interest, he benefits by operation of law from a set-off by deducting the amount paid from the interest due to the creditor, or failing that from the principal of the debt.

No person may obtain total or partial release of a pledge or security registered as guarantee for an interest-bearing debt without first proving that the tax due on such interest has been paid. Where the pledge or security is enforced through enforcement proceedings, the enforcement departments withhold the tax from the amounts collected and pay it to the Treasury.

The tax on interest from secured debts is collected by means of payment orders issued by the competent department at the request of the party concerned, whether the creditor, the debtor or their respective representatives.

The tax covers the gross amount of interest, proceeds and other income referred to in paragraphs 9 and 10 of Article 69, and falls on the creditor notwithstanding any contrary condition; however, the debtor is required to withhold it and pay it to the Treasury, unless he proves that the creditor has already paid it. The tax is collected by means of payment orders issued by the competent financial department. A declaration must be filed indicating the name of the creditor (and his account number where disclosure is prohibited), the amount of the interest and the debt, and the date of their creation and due date. The debtor files this declaration together with the declaration required in respect of his own activities for the Part One tax, or before 1 January if he is not subject to that tax. Enforcement offices, when proceeding with the enforcement of various debts, withhold the tax due to the Treasury and calculate the tax over the full period between the date of creation of the debt and the date of its payment, regardless of limitation rules. Where a debt is enforced through enforcement proceedings, those offices withhold the tax from the amounts collected and pay it to the Treasury. Violation of the provisions of this article results in the penalties provided for in Article 82 being imposed on the creditor and the debtor, who are jointly and severally liable for paying them together with the tax to the Treasury.

The State is definitively entitled to fifty percent (50%) of the following amounts and securities extinguished by limitation:

1. 1)Profits from shares and bonds issued by Lebanese commercial and civil companies and bodies, whether public or private, as well as their interest, proceeds and revenues.
2. 2)Shares, founders' shares, bond redemptions and other financial instruments issued by the same companies and bodies.
3. 3)Cash deposits and, in general, all cash amounts deposited in banks, credit and finance institutions and other establishments accepting funds in the form of deposits or current accounts.
4. 4)Shares, bonds and all financial instruments deposited in banks or other establishments accepting them as deposits or in any other form.
5. 5)Amounts paid as security, for any reason whatsoever, to Lebanese commercial and civil joint stock companies, public and private Lebanese bodies, or to public administrations.
6. 6)The taxpayer is entitled to recover from the Treasury the portion that has accrued to it, if a judgment is later rendered in the holder's favour, within the limits of that judgment.

Companies, banks, institutions, public and private bodies and public administrations referred to in the preceding article are required to declare to the financial departments, before 1 June of each year, all amounts or financial instruments extinguished by limitation during the preceding year, half of which accrues to the Treasury, and to attach to the declaration the amount due to the Treasury. For violation of the provisions of this article, the violator is required to pay the full amount extinguished by limitation, plus a penalty equal to half that amount.

The tax covers the profits of commercial, industrial and craft enterprises and free professions, as well as the profit of any activity yielding income not subject to another income tax. No income is exempt from the tax except by an express provision of law.

The tax is assessed in the name of natural and legal persons, whether resident in Lebanese territory or abroad, on the total profits they realise in Lebanon.

The following are among the persons liable to this tax:

1. 1)Companies, of whatever type and purpose.
2. 2)Natural or legal persons:
3. 3)Those who act as intermediaries in the purchase or sale of real estate and commercial establishments, or who purchase them in their own name for resale.
4. 4)Those who operate a commercial or industrial establishment equipped with furniture or tools necessary for its exploitation, whether the lease covers all or part of the intangible elements of the establishment, or none of them.
5. 5)Those who benefit from the proceeds of the exploitation of underground resources.
6. 6)Brokers, agents, intermediaries and, in general, any natural or legal person who acts as intermediary in the purchase or sale of any type of assets.
7. 7)Any natural or legal person who derives a profit from any income-producing activity not subject to another income tax.

The tax covers salaries, wages, emoluments, allowances, retirement pensions, whether public or private, and life allowances accruing in Lebanese territory on behalf of:

1. 1)A public fund, to any person resident in Lebanon or abroad.
2. 2)A private fund, to any person resident in Lebanon, and also to any person resident abroad in respect of services rendered in Lebanon.

The tax on income from movable capital covers the various revenues, profits, interest and proceeds of such capital, whatever their denomination or the nationality of the institutions that produced them or the place of residence of those to whom they accrue, provided they are received in Lebanon or accrue to a person resident therein. These revenues, profits, interest and proceeds include in particular:

1. 1)Revenues of all types arising from shares, founders' shares and interest shares issued by joint stock companies, or financial, industrial, commercial and civil establishments, and other public and private bodies.
2. 2)Attendance fees and directors' fees drawn from profits.
3. 3)Attendance fees of shareholders at general assemblies.
4. 4)Amounts drawn from reserves or profits for the redemption or amortisation of shares or founders' shares before cessation of activity.
5. 5)Distributions of reserve funds and profits in the form of bonus shares or any other form.
6. 6)Interest, proceeds and revenues from bonds and loans(4) issued by the State, municipalities and other public and private bodies and companies.
7. 7)Lottery prizes and draws paid to creditors and bondholders.
8. 8)Interest, proceeds and revenues from secured debts.
9. 9)Interest, proceeds and revenues from civil loans and from privileged and ordinary debts, unless arising from commercial transactions.
10. 10)Interest, proceeds and revenues from insurances and cash deposits, whatever the deposit and whoever the holder, including current accounts.
11. 11)The tax provided for in this article is imposed even if the company, institution, body or utility was exempt from tax prior to the issuance of this Legislative Decree under an agreement with the State or special statutory provisions.

Interest, proceeds, profits and revenues derived from the exercise of a profession are subject to the Part One tax. In all other cases, the tax on income from movable capital covers every profit, revenue or capital income not subject to another income tax. Only items expressly exempt by law are excluded.(1)

Every taxpayer is entitled to object to the taxes imposed on him pursuant to this Legislative Decree if he considers them erroneous or excessive. Objections to these taxes must be lodged with the competent financial departments within two months:

1. 1)From the date of publication in the Official Gazette announcing that the basic assessment schedules have been placed in collection, where the assessment subject to the objection is included in those schedules.
2. 2)From the date of notification of the personal notice, where there are additional assessments or supplements or deductions independent of the basic schedules.

If the objection filed pursuant to the preceding article satisfies all formal conditions and the grounds contained therein are well-founded in fact and in law, the competent department shall correct the assessment by means of monthly schedules and notify the summary thereof to the person concerned by registered letter with acknowledgement of receipt. If the competent financial department considers the objection unfounded, it notifies the person concerned accordingly and refers the objection, together with its opinion, to the special committee provided for in the following article for examination and decision. In all cases, the head of the competent department must decide on the objection, or refer it with his opinion to the committee, within six months of the date of its filing at the latest.

A decree shall constitute, in each province, one or more primary committees to examine and decide on the objections referred to above, composed of: - A judge appointed on the proposal of the Minister of Justice, as chairman. - A civil servant from the Ministry of Finance belonging to at least the third category, appointed by the Minister of Finance, as member. - A representative of the Chamber of Commerce and Industry, appointed on the proposal of its president, or a representative of the provincial council or the municipal council, appointed by the Governor on the proposal of the Minister of Interior where no Chamber of Commerce exists, as member. - The head of the Income Tax Department or his representative, as rapporteur.

A tax inspector (first grade) from the competent department is placed at the disposal of the committee as secretary; he may stand in for the rapporteur when needed, but neither he nor the rapporteur may participate in the vote. The procedural rules applicable before the administrative courts, relating to the exchange of briefs, time limits and verification, apply before this committee at all stages of proceedings, except with respect to the government commissioner.

The rapporteur must notify the committee's decision to the competent financial department and to the taxpayer within fifteen days of the date of its issuance. Both the financial department and the taxpayer are entitled to appeal this decision before the Council of State within twenty days of the date of notification.

Appeals are lodged directly before the Council of State. Objections may be lodged within two months of the date of notification of the administrative decision. Taxpayers whose objections were rejected for failure to comply with the legal deadline may benefit from the new time limit.

Acceptance of the appeal filed by the taxpayer is conditional on the deposit of a security equal to five percent (5%) of the amount of the tax objected to. Any appeal not accompanied by a receipt proving payment of the security is rejected on formal grounds. The security, together with the court fees, is paid into the fund held at the Council of State within the prescribed appeal period.

If the Council of State's decision is entirely in the taxpayer's favour, he is entitled to recover the security referred to in the preceding article. If the decision is entirely in the Treasury's favour, the security becomes a vested right of the Treasury. If the decision is partially in the taxpayer's favour, the security is returned only in proportion to the tax that the decision orders to be cancelled.

The following are exempt from tax: (2)

1. 1)Educational institutes.
2. 2)Hospitals, morgues and shelters that admit patients free of charge, and similar nursing and first-aid establishments, within the limits of the net profits derived from public or private funds and grants.
3. 3)The following text was added to paragraph 2 of Article 5 by Law No. 85/7 of 10/8/1985 (Budget Law 1985):
4. 4)Hospitals, morgues, shelters, homes for the elderly, dispensaries, sanatoria and similar nursing and first-aid establishments, owned or operated by non-profit institutions, associations or bodies, are fully exempt from tax on their profits.
5. 5)State-owned psychiatric hospitals.
6. 6)Consumer cooperatives, trade unions and agricultural cooperatives with a commercial character.
7. 7)Foreign investors, to the extent that they sell in Lebanon, during the harvest season, the crops and livestock they have raised there, and do not trade in them after the harvest period has ended.
8. 8)National maritime navigation companies, provided that the home country of foreign companies accords the same treatment to Lebanese companies (reciprocity condition).
9. 9)Public utilities that do not compete with private enterprises.(3)
10. 10)Tourist establishments of a craft character. [Text added by Legislative Decree 58/67 of 5/7/1967]
11. 11)Fees that notaries are entitled to collect pursuant to Article 17 of the Notaries Law, the compensation referred to in Article 20 of Law No. 59/146 known as the Transfer and Inheritance Tax Law, and compensation paid by the State to notaries. [Text added by Law 392/2002 of 8/2/2002]

Article 5 bis — Investment of Profits of Industrial Establishments [Added by Law 80/27 of 19/7/1980]

First:

1. 1)Industrial establishments may, at their own discretion and as from 1980, allocate a fixed portion of their annual net profits to investment in their fixed assets, subject to the following conditions:
2. 2)The investment must be aimed at creating new industrial fixed assets that will increase the productive capacity of the enterprise in a lasting and quantifiable manner. The following are not considered as such: investment in temporary equipment used for a specific workshop activity and ceasing when that activity ends; nor investment in provisional stores used under a temporary admission system.
3. 3)Construction of housing exclusively for the use of workers and salaried employees of the enterprise, subject to the provisions of the Housing Law and its implementing regulations, provided:
4. 4)- The housing is owned by the enterprise for at least 12 years.
5. 5)- It is used only for the stated purpose.
6. 6)- The total amount invested does not exceed 15% of the aggregate annual wages and salaries effectively paid to salaried employees.
7. 7)These provisions do not apply to exceptional wages paid for such housing.
8. 8)Industrial establishments wishing to benefit from the above provisions must notify the competent financial departments of their intention before the start of the investment year, and must submit to the competent financial department the records and data relating to the investments they intend to carry out, failing which they forfeit the right to benefit from the exemption.
9. 9)The investment record is the record maintained by the enterprise of any financial transaction resulting from a definitive commitment with a third party for investment purposes.
10. 10)Where the above conditions are met and the invested amounts cover the investment, a deduction of up to fifty percent (50%) of the profits of the year in which the financial investment is made and the three following years is granted. This percentage is raised to 75% where the investment is made in one of the regions that the government wishes to develop, as specified by decree adopted by the Council of Ministers.
11. 11)The portion deducted from annual net profits and used to cover fixed investments, in accordance with the conditions set out above, is exempt from income tax, provided the deduction does not exceed the limits of the four years referred to above for each investment transaction.
12. 12)The competent financial departments must permanently verify that the establishments benefiting from the provisions of this law comply with the prescribed conditions. Any amounts deducted for investment purposes that are not used for the stated purpose must be added to the profits of a subsequent year and subjected to tax, plus a penalty of 3% per month of delay, counting any fraction of a month as a full month.

Second:

1. 1)The following industrial establishments, set up in Lebanon as from 1980, are exempt from income tax for ten consecutive years from the date production commences, provided they simultaneously satisfy all of the following conditions:
2. 2)The factory is established in one of the regions that the government wishes to develop, as specified by decree adopted by the Council of Ministers.(1)
3. 3)The enterprise produces new goods not previously manufactured in Lebanon before 1 January 1980. 'New goods' means goods not previously manufactured in Lebanon at all, including goods derived from the processing or packaging of local or imported semi-finished goods, as well as goods manufactured from imported semi-finished goods through an assembly, completion or transformation process.
4. 4)The value of the fixed assets owned by the new enterprise in Lebanon and used for the production of the said new goods must not be less than five hundred million Lebanese pounds.
5. 5)The aggregate profits exempt from income tax during the said period must not, in any case, exceed the value of the fixed assets as at the date production commences.
6. 6)Industrial establishments wishing to benefit from the above provisions must notify the competent financial departments before production commences and must submit certified records and data relating to the value of their fixed assets and production specifications.
7. 7)The exemption is granted by decree adopted by the Council of Ministers on the proposal of the Minister of Finance.
8. 8)Establishments benefiting from the above exemptions must submit to the competent financial departments, within the time limit prescribed for filing annual accounts, the accounts and certified records required by income tax law. All records and certified documents relating to the accounting of their fixed assets must comply with the provisions of commercial law.
9. 9)The competent financial departments shall permanently monitor establishments benefiting from the provisions of this law to verify compliance with the prescribed conditions.

Third: [Added by Law 248 of 15/4/2014]

1. 1)Fifty percent (50%) of the tax due on Lebanese industrial exports is exempt from income tax.
2. 2)Only the certificate of origin issued by a competent body is accepted as primary evidence to qualify as Lebanese industrial exports.
3. 3)Customs data are accepted as evidence of the value of industrial exports qualifying for the certificate of origin, as well as data drawn up by the Ministry of Finance for that purpose.
4. 4)Establishments benefiting from this exemption must file accounts of their profits with the competent financial departments, within the time limit prescribed for filing annual accounts, together with the data referred to above.
5. 5)Excluded from this exemption are companies and establishments exploiting underground resources and any others that must be excluded by decrees adopted by the Council of Ministers on the proposal of the Minister of Finance.
6. 6)The implementing regulations of this article are determined by decision of the Minister of Finance.

The following are exempt from tax:

1. 1)Allowances received by clergy for performing religious services.
2. 2)Salaries and salary supplements received by ambassadors of foreign states and their diplomatic representatives, consuls and consular representatives, and the foreign national employees among their staff, subject to the condition of reciprocity.
3. 3)Salaries and salary supplements received by military personnel of any rank belonging to the armed forces of allied states.
4. 4)Retirement pensions of retired persons, and pensions of the survivors of martyrs of the armed and security forces and of wounded members of the armed forces, as defined by Article 85 of the National Defence Law.(2)
5. 5)Life allowances and temporary compensation paid to victims of work accidents.
6. 6)Wages of agricultural workers.
7. 7)Wages of domestic servants in private households.
8. 8)Wages of nurses and nursing staff in hospitals, morgues, shelters and similar nursing and first-aid establishments.
9. 9)Dismissal compensation paid in accordance with the laws in force in Lebanon.
10. 10)Family allowances paid in accordance with applicable laws.
11. 11)Wages of licensed midwives working in hospitals.

The following are exempt from the tax:

1. 1)[Repealed by Law 80/27 of 19/7/1980.]
2. 2)Amounts paid to reimburse creditors' or shareholders' funds, if not drawn from the profit and loss account or reserves.
3. 3)Repayments of shareholders' and creditors' funds in concession companies, even if drawn from reserves or the profit and loss account, where the reason for repayment arises from the obligation to hand over the installations to the authority at the end of the concession period without consideration.
4. 4)Interest on amounts deposited in savings accounts, provided the interest does not exceed one thousand Lebanese pounds per year.
5. 5)[As amended by Law 282 of 30/12/1993]: Interest and proceeds on all current accounts held with banks.
6. 6)Revenues from Lebanese Treasury bonds.

Income tax inspectors(1) are entitled to inspect, at the taxpayer's premises or at the premises of persons liable to pay the tax, all registers and documents, and anything else that may assist in the imposition of the tax.(2)

No natural or legal person, not even official departments, may invoke professional secrecy when the competent Ministry of Finance officials request to inspect documents and records relating to the imposition of income tax.

The financial departments may request the Public Prosecution to gain access to any proceedings pending before the courts. The judicial authority may inform the departments, through the Public Prosecution, of any information suggesting that a taxpayer has defrauded or attempted to defraud the financial departments with respect to income tax, whether the proceedings are civil, commercial or criminal, and even if they have ended by a final judgment.

Every natural or legal person in Lebanon is required to make available to the competent Ministry of Finance officials, upon request, all registers, documents and information in his possession that assist in determining the tax bases that may be due from him or from other taxpayers. [Added by the Law of 20/6/1961]: Notwithstanding any other provision, senior tax inspectors, principal tax and audit inspectors, and verification inspectors enjoy the right of access ordinarily conferred on tax inspectors under the various tax and fee laws, within the limits of their territorial jurisdiction and in accordance with procedures agreed with the Director General of Finance, and are subject to the same professional secrecy obligations. Authorised inspectors and members of the Financial Audit Office may also exercise this right within their mandate and in accordance with those procedures.

Professional secrecy is binding, and any person whose duties, powers or jurisdiction require involvement in the assessment, collection or examination of objections relating to income tax is subject to the provisions of Article 579 of the Penal Code. However, professional secrecy may not be invoked in proceedings affecting the interests of the administration, or in the exercise of audit, verification, fiscal and administrative inspection activities. Income tax inspectors and audit and collection inspectors must take an oath before the competent judicial authority prior to taking up their duties.

Taxpayers and their representatives may not request information or extracts from assessment files, except with regard to declarations and documents previously submitted by them.

All data and correspondence relating to income tax exchanged between administration officials or sent by them to taxpayers are placed in sealed envelopes.

The tax is imposed on the net profit realised during the year preceding the assessment year, even if the source of profit ceases during the assessment year or before it.

The net profit is the aggregate taxable income of the taxpayer, after deducting all expenses and charges required for the exercise of commerce, industry or the profession. These expenses and charges include in particular:

1. 1)The cost of purchasing goods or merchandise sold, and the cost of services paid during the year.
2. 2)The rent of the premises in which the profession is exercised, or its rental value if the taxpayer is the owner.
3. 3)Interest on loans contracted with third parties for business purposes.
4. 4)Salaries and wages, and all amounts paid to employees and workers as remuneration for their services or as severance pay in accordance with the applicable special conditions.
5. 5)Ordinary general expenses, including the cost of insuring employees.
6. 6)Taxes and fees paid or due in the year on the enterprise or profession, other than the taxes specified in this Legislative Decree.
7. 7)Depreciation calculated on the original cost of the tangible fixed assets of the enterprise. The Minister of Finance, on the proposal of the Director General of Finance, shall issue a decision setting the rates of such depreciation within minimum and maximum limits. The taxpayer may choose the rate or rates appropriate to the circumstances of his enterprise, provided he notifies the competent financial departments in advance of his depreciation schedule. The rates chosen are binding and fixed for the duration required for accumulated depreciation to equal the original cost.
8. 8)For intangible fixed assets, no depreciation may be carried out unless they are subject to extinction due to an agreed or compulsory lapse of a period; in that case, their cost is deducted in equal annual instalments over the applicable period of the licence or lease.
9. 9)Provisions set aside to meet losses from bad debts likely to materialise or become final, from redundancy payments, retirement pensions, or accident compensation in accordance with applicable law.
10. 10)Additional provision for banks [added by Legislative Decree 81/83 of 27/6/1977]: Banks may, as from 1977, set aside provisions to cover losses on debts declared irrecoverable for which bankruptcy proceedings have been initiated, after approval by the Banking Control Committee at Banque du Liban, upon the creditor bank's request.
11. 11)Additional provision for financial institutions [added by Law 583/2004 of 23/4/2004]: Financial institutions may, as from 2004, set aside provisions of the same nature, also after approval by the Banking Control Committee at Banque du Liban.
12. 12)Provisions set aside that are not used for the purpose for which they were established, or whose continued maintenance in the following year is not justified, are added to the profits of the year in question.
13. 13)Amounts proven to have been paid by way of aid, assistance or charity to officially recognised religious, social, cultural or sports establishments, within the general limits set by decree adopted by the Council of Ministers.
14. 14)[Added by Decree 15735 of 11/3/1964 as amended by Law 67/26 of 8/5/1967]: Donations made in 1964, 1965, 1966, 1967 and 1968 to the Lebanese Cultural Society for the construction of the House of Culture are deductible from the profits of those years.
15. 15)[Added by Law 286/1994 of 12/2/1994]: Donations paid to the Lebanese State, and those to be paid in subsequent years, are also deductible from the profits of the year in which they are paid.
16. 16)Proven debts established by a court or arbitration award.
17. 17)Legal and commercial advertising expenses proven by regular invoices, within the limits set by decree adopted by the Council of Ministers. [Added by Legislative Decree 39 of 23/2/1977]
18. 18)Charges levied on real-property revenues on behalf of municipalities pursuant to Article 57 of the Law of 17/9/1962, borne by capital companies. [Added by Law 80/27 of 19/7/1980]

The following are not deductible:

1. 1)Capital expenditure and expenditure exceeding its maintenance value, other than ordinary maintenance expenses.
2. 2)Taxes and fees paid or due to a foreign state on income earned in Lebanon, without other justification.
3. 3)Losses incurred by the taxpayer from the activities of establishments, branches, agencies or representative offices, whether inside or outside Lebanon, whether wholly owned or in which the taxpayer participates.
4. 4)Actual expenses that the taxpayer cannot prove were incurred in connection with the activities of establishments, branches, agencies or representative offices inside or outside Lebanon.
5. 5)Personal expenses, including amounts that the employer or partner deducts for himself for managing the enterprise or for his personal expenses.
6. 6)Representation allowances exceeding 10% of the basic salary of the employed director, as well as any excess beyond the customary limits in salaries, wages and other expenses required for the exercise of commerce, industry or the profession.
7. 7)Exceptional taxes and penal fines.

The revenues from movable capital and from built and unbuilt real estate that form part of the assets of a profession or enterprise are included in the income covered by the tax. If such revenues are in principle subject to one of the other specific income taxes and have been added to the profits at the time they were realised, they may be deducted in full from those profits and not added to the tax provided for in this Part. [Note: A new paragraph was added to Article 8 by Law 80/27 of 19/7/1980, then repealed by Law 282 of 30/12/1993.]

The proportion of profits received by Lebanese capital companies as a result of their shareholding in other Lebanese capital companies is deducted in full from their income subject to the tax provided for in this Part; it remains, however, subject when redistributed to the tax provided for in Article 72 bis of the Income Tax Law.

For the purpose of determining the net profit subject to tax, every taxpayer required to keep commercial accounts pursuant to the Commercial Code must file a declaration of his actual profit or of his total income. In the latter case, the administration determines the net profit subject to tax on a flat-rate basis by applying a prescribed rate to total income. Taxpayers not required to keep commercial accounts have their taxable profits estimated in accordance with the provisions of sub-section (c) of Chapter Three of this Part. If the taxpayer is a holder of a non-commercial, non-industrial profession, he must file a declaration of his total income, unless he requests to be taxed on the basis of actual profit pursuant to sub-section (a) of Chapter Three of this Part. The partner with full legal capacity in general or limited partnerships, and each partner lacking such capacity when the partnership arises from the application of Article 66 of the Commercial Code, is personally responsible for filing the declaration relating to his share. The limited partnership is responsible for filing a global declaration for all the shares of the limited partners in the profits and losses.

Declaration of actual profit is mandatory for the following categories of taxpayers:

1. 1)General partnerships, capital companies, as well as consumer cooperatives, trade unions and agricultural cooperatives with a commercial character.
2. 2)Branches of the establishments mentioned in the preceding paragraph when their head office is abroad.
3. 3)[As amended by Law 326 of 28/6/2001 (Budget 2001)]: Factories, workshops and all other industrial establishments employing more than four persons on a permanent basis, except those that are craft enterprises.
4. 4)Banks, money-changers, and persons engaged in banking activities.
5. 5)Importers, exporters, wholesale merchants, brokers and commission agents.
6. 6)Merchants employing more than four persons.
7. 7)Owners of stores selling chemical and food products.
8. 8)Operators of riding, hunting or shooting establishments.
9. 9)Operators of first- and second-category hotels according to the official classification.
10. 10)Operators of first- and second-category theatres and cinemas according to the official classification.
11. 11)[As amended by Law 326 of 28/6/2001]: Publishing houses and printing presses employing more than four persons on a permanent basis.
12. 12)[As amended by Law 326 of 28/6/2001]: Mills operating for third parties as well as those employing more than four persons on a permanent basis.
13. 13)Lessors of furnished establishments.

Categories not mentioned in the preceding article are taxed on the basis of flat-rate or estimated profit; however, any person may request to be taxed on the basis of actual profit, provided he submits a request to that effect before the end of January of the assessment year. A person who has chosen the method of taxation on the basis of actual profit may not in subsequent years request to revert to the flat-rate or estimated profit method.

a — Taxation on the basis of actual profit

The declaration of actual profit is submitted to the competent financial departments before 1 April of each year, and before 1 June with respect to capital companies, together with a copy of the balance sheet, a summary of the profit and loss account, and a statement of the expenses and charges to be deducted pursuant to Article 7. As for the auditors' report and the explanatory statements relating to companies subject to the auditing regime provided for in the Commercial Code, these are submitted before 1 January of each year. The administration may extend the time limit by one month in duly justified exceptional circumstances. Taxpayers other than holders of commercial and industrial professions who are not required to file a balance sheet shall file a declaration indicating the total of their gross income and the total of the deductible expenses and charges, as well as the net profit for the preceding year. Enterprises whose financial year does not coincide with the calendar year may, with the agreement of the competent financial departments, take the date of closing of that financial year as the starting point for the three- or five-month periods provided for in this article.

The profit to be declared is the actual profit realised during the preceding year, or during the twelve-month period whose results form the basis of the latest balance sheet (if that period differs from the calendar year). In the case of the commencement of a new activity, the profit realised between the date of commencement of activity(1) and the last day of December of the year preceding the assessment year must be declared.

If it appears that establishments affiliated with establishments located outside Lebanon, or supervised by establishments located abroad, transfer part of their profits to abroad, whether by inflating purchase or sale prices, or by reducing them, or by any other means, the profits so transferred must be added, when the tax is imposed, to the profits stated in the accounts. Where sufficient evidence is not available to determine the actual profit, the profits of comparable establishments are taken as the basis of comparison and for determining the profit, in addition to external evidence and information available to the competent financial departments.

If a deficit occurs in a given year, that deficit is treated as a charge of the following year and is deducted from the actual profit realised during that year. If that profit is insufficient to absorb the entire deficit, the remaining balance is deducted from the profits of the second year, and if any balance remains, from the profits of the third year. The deficit may not be carried forward beyond the third year following the year of its occurrence. The deficit must be declared within the time limit prescribed for the declaration of actual profit, in the same manner.

[Added by Legislative Decree 81 of 27/6/1977]: By way of exception, the deficit incurred during either of the years 1975 and 1976 may be carried forward for up to eight consecutive years instead of three, to be absorbed successively during that period as follows: - By applying the full profits of the first four years. - Then by deducting up to fifty percent (50%) of the taxpayer's annual profits during each of the last four years. The balance of the deficit may not be carried forward beyond the eighth year following the year of its occurrence. The balance of profits realised during the last four years referred to above remains subject to the ordinary legal provisions.

[Added by Laws 79/2 of 22/3/1979 and 79/6 of 21/12/1979]: When carrying forward the deficit incurred during 1975 and 1976 to the results of subsequent years, the year 1978 is not counted if its result was a deficit, in the calculation of the eight years provided for in Legislative Decree 81 of 27/6/1977. In that case, the taxpayer benefits from an additional ninth year to carry forward the deficit. The carry-forward of the deficit incurred by taxpayers subject to income tax for 1978 is also governed by the provisions of Legislative Decree 81 of 27/6/1977 relating to the deficit incurred during 1975 and 1976.

[Added by Legislative Decree 59 of 9/9/1983]: By way of exception, the deficit incurred during either of the years 1981 and 1982 may be carried forward for up to eight consecutive years instead of three, to be absorbed in the same manner. The balance may not be carried forward beyond the eighth year. The balance of profits from the last four years remains subject to the ordinary legal provisions.

[Added by Law 85/7 of 10/8/1985]: By way of exception, the deficit incurred during either of the years 1983 and 1984 may be carried forward for up to eight consecutive years instead of three, in the same manner and subject to the same conditions.

[Added by Law 14 of 20/8/1990]: By way of exception, the deficit incurred during either of the years 1989 and 1990 may be carried forward for up to eight consecutive years instead of three, in the same manner and subject to the same conditions.

[Added by Law 273 of 15/4/2014]:

1. 1)By way of exception, the deficit incurred during 2003 and 2004 may be carried forward for one additional year for each of those two years. The deficit incurred during any of the years 2005, 2006, 2007 and 2008 may be carried forward as follows:
2. 2)For up to seven additional years, i.e. ten years following the year the deficit occurred, for enterprises and companies destroyed as a result of the Israeli aggressions against Lebanon during the period from 12 July to 14 August 2006 inclusive.
3. 3)For four additional years, i.e. up to seven years following the year the deficit occurred, for all other taxpayers.
4. 4)The deficit balances referred to above may not be carried forward beyond the prescribed periods.
5. 5)As for losses resulting from direct damage to tangible fixed assets caused by terrorist acts or Israeli aggressions occurring during 2005, 2006, 2007 and 2008, these are treated as deductible charges from profits and may be carried forward to subsequent years in accordance with point 1 above. The book value as recorded in the taxpayer's accounts and declarations, or in the reconstructed records, is used to calculate those losses, after verification by the competent financial department.(1)

b — Taxation on the basis of flat-rate profit

Taxpayers not subject to the actual or estimated profit method of taxation must submit to the financial departments, before 1 February of each year, a declaration of their total income realised during the preceding year.

Income to be declared for taxation on the basis of flat-rate net profit means the taxpayer's receipts from all transactions carried out in any form, definitively and actually, during the year preceding the assessment year, and in particular the total collected by the taxpayer as the price of goods, merchandise, tools or supplies sold, as rent for items leased, and also as commissions, brokerage fees, proceeds or interest arising directly from commercial transactions, exchange differences or professional fees, etc. Income that is in principle subject to other specific income taxes (bank interest, loan interest, real-property revenues, etc.) remains subject to the specific tax applicable to it and is deducted in full from the income subject to the Part One tax, together with the corresponding charges directly related to that income.

Total income to be used as the basis for determining the flat-rate net profit is extracted from the daily register provided for in the Commercial Code, for taxpayers required to keep commercial accounts, or from the register provided for in the following Article 20, for taxpayers who are holders of non-commercial, non-industrial professions.

Every taxpayer who is a holder of a non-commercial, non-industrial profession must keep the daily register provided for in the Commercial Code and enter in it his daily income as referred to in the preceding Article 18. Those in professions required to maintain professional secrecy may confine themselves to recording the breakdown of amounts collected, together with the date of receipt, without stating the names of the payers. The clerks of the competent courts endorse and number the registers of all taxpayers subject to tax on commercial and industrial profits, regardless of the method of taxation to which they are subject. Notaries endorse and number the registers of all other taxpayers.(1)

A committee seated at the Ministry of Finance is responsible for determining the ratios to be applied to total income in order to calculate the flat-rate net profit.(2)

The committee referred to in the preceding article is composed of: - The Director General of Finance or his representative, as chairman. - A representative of the Ministry of Economy and Trade, appointed by the Minister of Economy and Trade, as member. - A representative of the Chamber of Commerce and Industry in Beirut, proposed by the president of that Chamber, as member. - An expert representing, as appropriate, merchants, industrialists or holders of non-commercial professions, appointed by the Minister of Finance, as member. - A civil servant from the Ministry of Finance (Income Tax Department), as rapporteur. This committee is appointed by the Minister of Finance, meets upon the chairman's invitation, and takes its decisions by majority vote; in case of a tie, the chairman's vote is decisive.

The committee sets, for each type of trade, industry, profession or activity, an average annual rate. These rates are compiled in a global table approved by decision of the Minister of Finance and published in the Official Gazette. The Minister of Finance shall determine each year the professions for which the committee may revise the established rates. The rates for other professions remain in force.

c — Taxation on the basis of estimated profit

The tax is imposed on taxpayers not subject to the actual or flat-rate profit method, on the basis of estimated profit.

A special committee responsible for estimating the annual profit subject to tax is constituted in each province, composed of: - The head of the Income Tax Department, or the head of the provincial finance office, or a senior tax inspector, as chairman. - A representative of the Ministry of Economy and Trade, appointed by the Minister of Economy and Trade, as member. - A representative of the provincial Chamber of Commerce and Industry, proposed by the president of that Chamber, or a member of the provincial council where no Chamber of Commerce exists, appointed by the Governor, as member. - A civil servant from the Ministry of Finance (Income Tax Department) or from the competent financial unit or department in the province, as member. - The competent Income Tax inspector, as rapporteur. These committees are appointed by decision of the Minister of Finance on the proposal of the Director General of Finance. They meet upon the chairman's invitation and take their decisions by majority vote; in case of a tie, the chairman's vote is decisive.

For the purpose of estimating the net profit, the committee uses all information obtained about the taxpayer and may rely on external signs of his standard of living, and may summon him if it considers this necessary. The committee draws up nominal lists of estimated profits, duly certified, which serve as the basis for tax assessment.

The estimation takes effect for a period of three consecutive years. The Minister of Finance may, by decision, order a review of the committee's estimates where justified economic circumstances arise.

d — Common provisions

The financial departments are responsible for imposing the tax on actual, flat-rate or estimated profits derived from declarations or estimated, by means of basic assessment schedules. If upon scrutiny of the accuracy of the declaration they find grounds for amendment, they notify the taxpayer of the amount of the amendment and its reasons, together with notice of the additional tax or supplementary assessment, by registered letter with acknowledgement of receipt.

If the taxpayer ceases activity, the tax is imposed on his industrial, commercial and non-commercial profits not yet assessed. The assessment covers the actual or flat-rate profit realised during the period between the last day of the period covered by the previous assessment and the day on which the taxpayer ceased activity. With respect to estimated profit, the tax is imposed on the profit calculated proportionally to the period of activity during the year in which the cessation occurred. A taxpayer who ceases activity and is subject to the actual or flat-rate profit method must file a declaration to that effect with the financial departments within one month of the date of cessation, together with all information and documents necessary to determine the taxable profit. If the taxpayer is engaged in another activity, or owns an establishment other than the one he has sold or ceased during the year, he must notify the financial departments accordingly within one month of the date of cessation or sale, and include in his annual general declaration the results of the activities of the establishment in which he has ceased operations. In all cases, all categories of taxpayers must state the buyer's name, address and particulars. The provisions of this article apply to court-appointed receivers and liquidation agencies upon the occurrence of bankruptcy,(2) at which point the one-month filing period begins from the date of the decision appointing them.

If the taxpayer fails to file the legal declaration within the prescribed time limit, a penalty(4) of ten percent (10%) per month of delay on the amount of tax due is imposed, counting any fraction of a month as a full month, up to a maximum of one hundred percent (100%) of the tax, until the end of the first year of the prescribed filing period. If no declaration is filed, the competent financial administration proceeds with a direct assessment on the basis of the profit it determines and imposes a penalty equal to the amount of the tax assessed. If the taxpayer does not keep the legally required accounts, or refuses to produce them or to show them to the competent tax inspectors, or refuses to provide the documents necessary to verify the accuracy of the declaration and the accounts, or to cooperate with the inspectors, a direct assessment is made on the basis of the profit estimated by the financial departments, and a penalty equal to the amount of the tax assessed is imposed.(1) If the accounts are regular but one of the legal conditions is not met, the penalty is reduced to 10% and no direct assessment is made. In all cases, even if the results of the activity are negative, the penalty payable by the taxpayer must not be less than five hundred thousand Lebanese pounds if subject to actual profit taxation, or one hundred thousand Lebanese pounds if subject to flat-rate profit taxation. Upon repetition of the violation within three years, the penalty is doubled; no settlement procedure may be applied to such penalties. The profits and income forming the basis of the assessment may not be less than the profits and income realised by the taxpayer in any of the three preceding years. In cases where there are grounds to believe that the profits and income to be adopted by the financial departments for direct assessment exceed the minimum referred to above, the estimation committee provided for in Article 25 of this Part determines the additional profit and income to be added to that minimum. The taxpayer may object to the direct assessment within the legal time limits, whether the assessment is based on the minimum referred to above or on the committee's determination, provided the objection is substantiated. [Added by Law 80/27 of 19/7/1980]: The basic rules to which income taxpayers are subject are determined by unified basic regulations enacted by decree adopted by the Council of Ministers on the proposal of the Minister of Finance.(2)

The tax is imposed on the net income received by the taxpayer during the year preceding the assessment year, even if the source of income ceases during the assessment year or before it.(2)

Gross income means the aggregate of salaries, wages, emoluments, compensation, bonuses, gratuities and cash and in-kind benefits.(3)

For the purpose of determining net income, the following are deducted from gross income:

1. 1)Amounts deducted and paid for retirement in accordance with applicable laws and regulations.
2. 2)Compensation for office expenses, representation,(4) travel and transport,(5) cashier's responsibility, fodder allowance, uniform allowance, and in general all compensation granted to cover expenses reasonably incurred in the performance of duties required by the service.
3. 3)[Added by Law 80/27 of 19/7/1980]: Fifty percent (50%) of amounts paid as a genuine flight allowance to pilots and other crew members subject to tax in Lebanon.
4. 4)[Added by Law 85/7 of 10/8/1985]: Education grants, nursery grants, and grants given by the relevant establishment to the employee or a member of his immediate family, within the conditions and limits of the amounts prescribed in the civil service employees' cooperative, provided these grants are given on a permanent basis under a comprehensive scheme covering all employees and duly approved by the Ministry of Labour.

Taxpayers subject to the actual profit method of taxation, and those referred to in Article 44, must keep for their employees a register in which they record, without omission, erasure or alteration, the names of employees, officers, workers, assistants and other members of the payroll, their salaries and wages, the nature of their work, the date they began work, and, upon termination, the date they ceased work or were dismissed. This obligation also applies to individuals, institutions, companies and associations paying retirement pensions or life allowances. [As amended by Laws 85/7 of 10/8/1985 and 89 of 7/9/1991, penalty updated by Law 282 of 30/12/1993]: Any person who fails to keep this register, or refuses to show it to the competent Ministry of Finance officials, is subject to a fine of LBP 50,000, independently of any other penalties prescribed therefor.(1)

All taxpayers,(3) whatever their method of taxation, as well as establishments exempt from the tax on profits, must submit before 1 March of each year a declaration of the aggregate salaries and wages of all their employees subject to tax or exempt therefrom, regardless of the amount, together with an annual individual statement of the total income of each employee or worker, the tax withheld, the amount of the basic salary, and the date of commencement of employment. This obligation also applies to employers personally liable for paying and declaring the tax on salaries and wages. The declaration submitted by the employer and the individual statement are complementary documents submitted to the competent tax administration on the prescribed forms. The declaration submitted by the employer must be fully consistent, as regards the names of employees, the aggregate salaries, wages and emoluments paid to them, with the declaration submitted to the National Social Security Fund. A fine of between LBP 200,000 and LBP 500,000 is imposed for violation of this paragraph.(4) The implementing regulations are determined by decisions of the Minister of Finance.

In addition to the declaration required of the employer pursuant to the preceding article, every employee, worker or wage earner holding simultaneously a position or employment in more than one establishment or enterprise must personally submit to the regional finance office, before 1 May of each year, a declaration stating the names and addresses of the various employers with whom he was employed during the preceding year, and the amounts he received from or which accrued to him from each of them during that year. This obligation also applies to every employee or worker who simultaneously exercises a profession subject to the tax provided for in Part One of this Legislative Decree and receives from another source a pension or life allowances.(1)

If the employer fails to submit within the prescribed period the declarations provided for in Part Two, the competent financial departments directly impose a penalty of ten percent (10%) per month of delay, counting any fraction of a month as a full month, up to the amount of the tax. For employees, workers and wage earners referred to in the preceding article, as well as employers personally liable for paying and declaring the tax on salaries and wages, and institutions, associations and bodies that do not seek to make a profit and whose number of employees does not exceed five, who fail to file the annual declaration, the competent financial departments impose the tax directly, together with a flat-rate penalty of LBP 50,000. Upon repetition of the violation within three years, the penalty is doubled and may not be settled by any procedure. If an employer does not keep the employees' register referred to in Article 51, or refuses to produce it or to show the competent inspectors the necessary documents to determine the actual taxable income, and refuses to cooperate with the competent inspectors, a direct assessment is made together with a penalty equal to the tax assessed on the basis of the income estimated by the competent financial departments. The minimum penalty imposed on employers referred to in this article, excluding the taxpayers referred to in the second paragraph, is LBP 200,000. Upon repetition within three years, the penalty is doubled and may not be settled by any procedure. Objections to direct assessments may be lodged within the time limits provided for in Chapter One of Part Four, subject to the submission of the necessary documents to verify the actual taxable income.(2)

Every employer required to keep the employees' register referred to in Article 51 who ceases activity, transfers his enterprise or establishment, or leaves before the end of the year, must file the declaration provided for in Article 52 within one month of the date of cessation, transfer or departure, failing which the penalty provided for in Article 54 is imposed. The same provisions apply to court-appointed receivers and liquidation agencies(1) in the event of bankruptcy,(2) at which point the one-month period begins from the date of the decision appointing them. Taxes imposed pursuant to the provisions of this article are immediately due.

The tax rate on income from movable capital is set at ten percent (10%) of gross income; no surcharge is added to the principal of the tax. [Added by Law 85/7 of 10/8/1985]: Notwithstanding any other provision, the tax on income from movable capital is paid upon filing the declaration of the income subject thereto. This tax is imposed by a payment order which may be organised on a settlement basis. The implementing regulations are determined by decisions of the Minister of Finance.

Article 72 bis — Tax Rate on Distributions of Capital Companies [Added by Law 80/27 of 19/7/1980] Distributions by Lebanese capital companies are subject to a flat-rate tax of ten percent (10%) in all cases, even if the company is exempt from the Part One tax pursuant to Articles 5 and 5 bis; no surcharge is added thereto. Exempt from the distribution tax is any increase in capital drawn from profits that have already been subject to the Part One tax or that are exempt therefrom pursuant to Articles 5 and 5 bis. Also exempt from the distribution tax are profits realised before 1980 that were subject to the progressive tax(1) provided for in Part One of the Income Tax Law or in the Real Property Tax Law. [As amended by Law 85/7 of 10/8/1985]: Foreign capital companies operating in Lebanon are deemed to have distributed all their profits, which are subject to the tax provided for in this article after deducting: - The Part One tax due on the profits. - The 10% reserve required by Article 133 of the Money and Credit Law enacted by Decree 13513 of 1/8/1963. [Note: The paragraph added to Article 72 bis by Law 173 of 14/2/2000 as amended was repealed by Law 64 of 20/10/2017.] The distribution tax on any given company must not fall below five percent (5%) even if all the conditions set out above are cumulatively met.

Any person who obstructs the exercise of the right of access provided for in Chapter Two of Part Four, or refuses to provide the administration with the information it requests, is liable to a penalty of between one million and five million Lebanese pounds. The penalty is imposed by the competent financial departments. Payment of the penalty does not relieve the taxpayer of his primary obligations, nor does it preclude prosecution pursuant to applicable law for failure to fulfil those obligations.

Any violation of the provisions of this Legislative Decree or of the regulations implementing it, not expressly provided for therein, is punishable by a fine of between two hundred thousand and five hundred thousand Lebanese pounds. [See Article 67 of Law 144 of 31/7/2019 (Budget 2019) regarding the exemption of arbitrators from paying financial penalties.]

The competent financial departments are responsible for imposing the penalties prescribed pursuant to this Legislative Decree. These penalties are collected in accordance with the principles governing the collection of direct taxes and comparable fees. Penal sanctions and fines provided for in Article 108 are imposed by the competent courts at the request of the Ministry of Finance, without the need to first notify the taxpayer to correct his declaration.

The tax is imposed on the actual or declared flat-rate profit, after deducting from each natural person taxpayer a family allowance of LBP 7,500,000 (seven million five hundred thousand Lebanese pounds). An additional deduction of LBP 2,500,000 (two million five hundred thousand) is available to the married taxpayer, and LBP 500,000 (five hundred thousand) for each dependent child, subject to the following conditions: - Children who have not yet reached the age of eighteen, or who are up to twenty-five years old and still in university. - Children with a permanent disability who are not employed, subject to certification of the disability by the permanent medical committee at the Ministry of Health. - For the widow, divorcee or legally separated woman, provided the number of dependent children does not exceed five. Where both spouses each exercise a profession or hold a position from which each benefits, they share equally the deduction granted for each dependent in accordance with this article. In the event of legal separation (judicial, civil or religious divorce) between the spouses, the spouse paying alimony is the one who benefits. - If the husband is not employed, or if his wife independently exercises a profession or holds a position subject to tax, the wife also benefits from the deduction granted for the dependent, in addition to the deduction for children, in accordance with the first paragraph of this article. If the father or mother has died or has a permanent proven disability and does not receive an employment salary, the child also benefits from the additional family deduction. These deductions apply as from the fiscal year 1999. [As amended by Law 14 of 20/8/1990]: Each Lebanese actual company is entitled to only one deduction. As for the tax on estimated profit, it is imposed after deducting an amount equivalent to the legal minimum wage for a married person without children, per year, per taxpayer. This provision applies as from the fiscal year following the year in which the last final estimation was made.(1)

The tax rate on profits from commercial, industrial and non-commercial professions is set as follows: - 4% on the portion of taxable profit not exceeding LBP 9,000,000 (nine million Lebanese pounds). - 7% on the portion exceeding LBP 9,000,000 but not exceeding LBP 24,000,000 (twenty-four million Lebanese pounds). - 12% on the portion exceeding LBP 24,000,000 but not exceeding LBP 54,000,000 (fifty-four million Lebanese pounds). - 16% on the portion exceeding LBP 54,000,000 but not exceeding LBP 104,000,000 (one hundred and four million Lebanese pounds). - 21% on the portion exceeding LBP 104,000,000 but not exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). - 25% on the portion exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). The profits of capital companies (joint stock companies, limited liability companies, and limited partnerships by shares in respect of the limited partners' share) are subject to a flat-rate tax of 17% (seventeen percent). In calculating the tax, any fraction of one Lebanese pound in the taxable profit is disregarded. No surcharge is added to the principal of the tax. This provision applies as from the fiscal year 2019. [As amended by Law 144 of 31/7/2019 (Budget 2019)]

The tax is imposed on the net annual income determined pursuant to Articles 48, 49 and 50 of the Income Tax Law, after deducting from each natural person taxpayer the family allowance pursuant to Article 31 of the Income Tax Law, subject to the applicable conditions, in addition to a deduction of twelve million Lebanese pounds from the pension base for retired persons. [As amended by Law 144 of 31/7/2019 (Budget 2019)]

If one of the taxpayers subject to the tax provided for in this Part simultaneously exercises a profession subject to the Part One tax, he may benefit only from the deduction provided for in Part One.(3)

The tax rates on salaries, wages and retirement pensions are as follows: - 2% on the portion of taxable net income not exceeding LBP 6,000,000 (six million Lebanese pounds). This rate applies proportionally to the corresponding portion of retirement pension bases. - 4% on the portion of taxable net income exceeding LBP 6,000,000 but not exceeding LBP 15,000,000 (fifteen million Lebanese pounds). Same note for retirement pension bases. - 7% on the portion exceeding LBP 15,000,000 but not exceeding LBP 30,000,000 (thirty million Lebanese pounds). Same note. - 11% on the portion exceeding LBP 30,000,000 but not exceeding LBP 60,000,000 (sixty million Lebanese pounds). Same note. - 15% on the portion exceeding LBP 60,000,000 but not exceeding LBP 120,000,000 (one hundred and twenty million Lebanese pounds). Same note. - 20% on the portion exceeding LBP 120,000,000 but not exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). Same note. - 25% on the portion exceeding LBP 225,000,000 (two hundred and twenty-five million Lebanese pounds). Same note. This provision applies as from 1 August 2019. [As amended by Law 144 of 31/7/2019 (Budget 2019)]

The portions of income subject to tax and the deductions from the base are apportioned according to the period of employment for which the wages were paid, counting thirty days per month. [As amended by Law 282 of 30/12/1993 and Law 326 of 28/6/2001 (Budget 2001)]: The deduction from the base is the amount equivalent to LBP 25,000 (twenty-five thousand Lebanese pounds) per month of the year for daily wage earners and workers paid on a piece-work or quantity basis, regardless of their family situation.(1) Piece-work wages are taxed at a flat rate of 3%, whatever their amount, without any deduction from the base. Piece-work wages means wages paid to daily workers employed on a temporary basis on a piece-work or quantity basis.

The taxable income or profit from Lebanese shares and bonds is determined as follows:

1. 1)With respect to shares of all types and founders' and interest shares, and amounts withheld by Lebanese joint stock companies from profits or distributed from reserves: the income is determined by reference to the auditors' statements, the resolutions of general shareholders' meetings, boards of directors, and similar documents.
2. 2)With respect to bonds: the income is determined by reference to the interest or income distributed during the year.
3. 3)With respect to lottery prizes: the income is determined by reference to the prize amount itself expressed in Lebanese pounds.
4. 4)With respect to redemption prizes: the income is determined by the difference between the amount redeemed and the original issue value of the bond.
5. 5)[Note: A new paragraph 5 was added by Law 88/3 of 20/1/1988, then repealed by Law 282 of 30/12/1993, except for gains from the disposal of shares, which remain exempt from income tax.]

The tax falls due within the month following the decision to pay the profits, interest, proceeds or other revenues from shares and founders' shares. The tax on interest from bonds falls due within one month of the due date of such interest.

Every company, institution or public or private body must pay the tax to the Treasury within the period set out in the preceding article, and may then recover it from the holders of shares or bonds. The following documents must be submitted at the time of payment:

1. 1)For shares: extracts from auditors' statements, resolutions of general shareholders' meetings or boards of directors, and in general any resolution concerning the distribution of profits or reserves.
2. 2)For bonds: a table showing the number of bonds, the nominal value of each bond, the interest rate, and the due date.
3. 3)For lottery prizes and redemption prizes: a certified copy of the original lottery record and a table showing the number of bonds drawn in each lottery, the issue value, the amount of prizes due, and the amount subject to tax.

Natural and legal persons who fail to pay the tax within the legal period pursuant to the preceding article, or who pay it inadequately, are directly liable for the unpaid amounts, plus a penalty of three percent (3%) per month of delay, counting any fraction of a month as a full month.

The Treasury's rights to assessments may be reinstated by additional schedules or supplementary assessments up to the third year following the year in which the concealed or unknown income should have been assessed, without prejudice to any penalties to which the taxpayer or person liable for the tax may be subject. Assessments cancelled in whole or in part for formal defects not affecting their substance, or because of an error in the type of tax or in the name of the taxpayer, may also be reinstated. The tax may be imposed on any profit or income proven by a judicial decision, arbitration award or inventory report, up to the last day of the civil year following the year of the judgment, award or report, in addition to the time limit provided for in the preceding paragraph.

Any person wishing to leave Lebanese territory permanently must obtain, prior to departure, a certificate from the Ministry of Finance proving that he has paid the income tax due. The competent departments are prohibited from endorsing the passport(1) of any person wishing to leave Lebanese territory permanently before he presents the certificate referred to in the preceding paragraph. The certificate is not, however, required of non-residents who wish to leave the country even temporarily.

Declarations, objections, statements and other documents and instruments submitted to the Ministry of Finance in connection with income tax are exempt from stamp duty.

Persons who provide information relating to concealed income are granted a reward of between 10% and 30% of the value of the penalties collected as a result of the information provided.

a. Every taxpayer who commences a new activity must notify the financial departments within two months of the date of commencement; failure to do so results in the following penalties: - LBP 3,000,000 for joint stock companies. - LBP 1,000,000 for limited liability companies and limited partnerships by shares. - LBP 1,000,000 for general partnerships and taxpayers mandatorily assessed on actual profit. - LBP 500,000 for all other taxpayers. The procedures for proving the date of commencement of activity are determined by decision of the Minister of Finance. b. Taxpayers who have not declared the commencement of activity within the prescribed period and who file declarations within a period determined by the Minister of Finance, not exceeding 31/12/1997, are exempt from the non-declaration penalty.

All natural and legal persons enjoying permanent exemptions or special exemptions from income tax, as well as all commercial companies enjoying a permanent exemption pursuant to Article 5 of this Legislative Decree, must file annual declarations and statements with the competent financial departments and make available to the competent officials, upon request, all documents and accounts reflecting the activity, profits, losses and transactions conducted with third parties. For late filing or refusal, a penalty of between two hundred thousand and five hundred thousand Lebanese pounds is imposed.

Taxes, penalties and other amounts due to the State pursuant to this Legislative Decree enjoy a general first-ranking privilege over all assets of the taxpayers liable for them or responsible for paying them to the Treasury. This privilege applies even in the case of voluntary arrangement, judicial liquidation or bankruptcy.

Notwithstanding the provisions of the Commercial Code, and for the purpose of applying the provisions of the income tax, registers and documents necessary to prove the validity of entries and declarations must be kept for five years following the basic assessment year.

For the purposes of this Legislative Decree, the following words and expressions have the meanings assigned to them: - Tax on industrial, commercial and non-commercial profits: Part One tax. - Tax on salaries, wages and retirement pensions: Part Two tax. - Tax on income from movable capital: Part Three tax. - Income: profit — revenues. - (Taxpayer — employer): any natural or legal person subject to the tax. - Establishment: commercial establishment — industrial establishment — non-industrial establishment — public and private establishments — profession of any kind — craft — work. - Proceeds: income from movable capital whatever its denomination — interest — proceeds — revenues.

The terms and expressions contained in this Legislative Decree are interpreted in a manner consistent with the public interest and the protection of the rights of the Treasury. The implementing regulations are determined by decree(1) adopted by the Council of Ministers.

This Legislative Decree shall enter into force as from 1 January 1960, and all laws, legislative decrees, ordinary decrees and regulations contrary thereto or inconsistent with its content are repealed as from that date, whether general or special.

This Legislative Decree shall be published and communicated wherever necessary. Signed on 29 June 1959. Signatory: Fouad Chehab Published in Official Gazette No. 35, dated 4 July 1959.