Tax Guide for US Expats Living and Working in Lebanon
Who Is Liable For Income Taxes in Lebanon
All resident and nonresident individuals are subject to income tax on their income derived in Lebanon. However, certain individuals, such as agricultural workers, nurses and clergymen, are exempt from tax.
Income subject to tax. The following are the three categories of taxable income:
- Profits of sole traders from industrial, commercial and noncommercial professions
- Salaries, wages and pensions
- Income from movable capital (dividends, interest and other types of investment income)
Employment income. Individuals are subject to tax on their salaries and wages earned in Lebanon.
Gross employment income includes total salaries and allowances, wages, indemnities, bonuses, gratuities and other benefits in cash and in kind.
In determining net employment income, the following deductions may be claimed:
- Representation allowances up to 10% of basic salary
- Transportation allowance provided under the Labor Law
- Personal allowances
- Schooling allowances allowable by the Labor Law
- In general, all allowances granted to cover disbursements incurred in connection with the performance of employment duties if they are supported by invoices or similar documents
Net employment income is taxed at progressive rates ranging from 2% to 20%.
Self-employment income. Sole traders are taxed on the basis of lump-sum profits, which are equal to a specified percentage of gross income.
Sole traders must submit to the Ministry of Finance before 1 February of each year a statement showing their total gross income and sales during the preceding year. They are taxed at progressive rates ranging from 4% to 21% (for a table of rates applicable to self-employment income.
Gross income is defined as the total gross proceeds from all operations concluded by the taxpayer during the year preceding the year of assessment. It includes the value of commodities, goods, instruments or materials sold or hired, commissions, brokerage fees, interest, exchange differences and fees.
Deductions
Personal deductions and allowances. Resident individuals are entitled to the following family exemptions, which are deducted from taxable income.
B. Other taxes
Built property tax. Built property tax is generally imposed on rental income, including fees for services provided by the landlord to the tenant. However, it is imposed on estimated rental income determined by the Department of Built Property Tax if any of the following conditions apply:
- No rent contract exists.
- The property is occupied by the owner.
- The property is occupied by another party for no rent (free of charge).
Tax is calculated on the net income from property which equals the gross rental income subject to Built Property Tax, as described above, less allowable expenses as stated in the rent contracts.
These expenses are specified by law and are limited to a certain percentage of income.
To qualify unoccupied property for exemption from the Built Property Tax, the owner must file the relevant declaration to the competent authorities within a month from the date on which the property was vacated.
Inheritance and gift tax. Inheritance and gift taxes are imposed in Lebanon and consist of a flat tax and a proportional tax.
The flat tax is imposed at a rate of 0.5% of the gross inheritance or gift amount less an exemption of LL 40 million.
The net amount of the inheritance, after the deduction of the flat tax, is distributed among the various heirs in accordance with the law. Each heir, depending on his or her relationship with the deceased, may claim deductions ranging between LL 8 million and LL 40 million.
Stamp duty. Under the Lebanese Stamp Duty Law, fiscal stamps at a rate of 3 per 1,000 must be affixed to all deeds or contracts. Payment of stamp duty is due within five days from the date of signature of the deed or contract. A fine equal to five times the duty is imposed if the stamp duty is paid after the deadline or if it is not paid at all.
Rent contracts must be registered each year and are subject to stamp duty at a rate of 0.3% of the rent.
C. Social security
Lebanon operates a compulsory social security scheme that requires contributions from both employers and employees. The social security scheme in Lebanon covers the following areas:
- Sickness and maternity
- Family allowance
- End-of-service indemnity
Contributions. All companies that have at least one employee must register with the Social Security National Fund within one month of beginning operations. New employees must be registered within 15 days from the date of their employment. Social security contributions by employers are payable on a quarterly basis for companies with less than 10 employees and on a monthly basis for larger companies. Employee contributions are withheld by the employer and paid to the authorities together with the employer’s contribution.
Contributions to the social security scheme are calculated as percentages of monthly salaries and wages including overtime, gratuities and fringe benefits. For the sickness and maternity and family allowance schemes, the maximum amount on which contributions are calculated is LL 1.5 million.
For the sickness and maternity scheme, the contribution rates are 7% for employers and 2% for employees. Only employers make contributions to the family allowances and end-of-service indemnity schemes. The contribution rates are 6% and 8.5%, respectively.
Non-Lebanese employees need not be registered with the Social Security National Fund if their contracts are signed outside Lebanon and if they can prove that they enjoy social security benefits in their home country similar to the benefits granted in Lebanon.
Totalization agreements. Lebanon has entered into totalization agreements with Belgium, France, Italy and the United Kingdom to prevent double payment of social security contributions by expatriates working in Lebanon.
Double tax relief and tax treaties
Lebanon has entered into double tax treaties with the following countries.
Armenia
France
Romania
Belarus
Iran
Russian
Federation
Bulgaria
Malta
Syria
Czech Republic
Morocco
Tunisia
Egypt
Oman
United Arab Emirates
Lebanon has signed other tax treaties that are not yet in force.
To learn more about the history, culture, economy and other information about the Lebanon
We have been preparing US income tax returns for US Citizens and permanent residents living in Lebanon for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Lebanon and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Lebanon.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a request a consultation by phone, skype or email