Lebanon’s new tax law in brief | FFA Real Estate
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Lebanon’s new tax law in brief

Mon, 2017-12-18 13:32 -- admin

The publishing of Law No.64 in the Official Gazette on October 26, 2017 has introduced a number of new taxes as well as made amendments to existing ones while effectively replacing Law No.45. In relation to the real estate sector, the most significant change brought by Law No.64 is the introduction of a 2 percent fee on the amount of any sale contract payable within 15 days of the contract date. If the relevant property is subsequently registered within the period of one year from the contract date, this 2 percent is recoverable; this therefore can be interpreted as an incentive to push the registration process. Failure to register the property within the year will result in the 2 percent being unrecoverable.

When real estate property is disposed of by persons or entities not subject to income tax or who benefit from special exemptions, the new law applies capital gains tax at a rate of 15 percent. The same rate is also applied to those subject to income tax if the property is not related to their profession. Exemptions from capital gains tax apply to up to two primary residences of persons and to properties held for more than 12 years.

The new law also sought to address the issue of illegal occupancy of maritime properties, giving a three-month deadline from the date of its publishing in the Official Gazette to apply for a permit for periodic exploitation in such cases and imposing annual penalties on such exploitation.

Other noteworthy changes resulting from Law No.65 include an increase in the value added tax (VAT) rate from 10 percent to 11 percent, effective from the first quarter of 2018, and an increase in the corporate income tax rate for joint stock companies (SAL), limited liability companies (SARL) and limited partnerships by shares (SCA) from 15 percent to 17 percent for the calendar year ending on December 31, 2017. An increased stamp duty rate, from 3 to the current 4 percent, is to be calculated on the initial amount net of VAT, with the VAT separately stated.

Tax on interest was increased from 5 to 7 percent and is no longer considered as a tax credit on annual corporate income tax but is now a deductible expense for corporate income tax. Taxpayers subject to deemed profit taxation in line with article 44 of the Income Tax Law will now have their net interest income (after tax on interest) considered as part of the taxable income subject to deemed profit taxation. Tax on dividends is now applied at a standard rate of 10 percent, effectively cancelling the previous discounted rate of 5 percent for companies that met certain criteria.