The government of Lebanon is working to strike the right balance between measures to increase tax revenues for funding expected expenses and measures to attract investment in key sectors. Even though the tense political climate in the region is affecting the country’s economy, its tax system and comparatively low tax rates continue to create an attractive environment for foreign investors.
The major incentives on offer to attract foreign investment in Lebanon include an income tax exemption of 5 to 10 years for industrial entities investing in underdeveloped areas, provided these entities create a new industrial product not produced before in Lebanon. A 50 percent income tax exemption is available for income tax on Lebanese industrial exports1.
A further basket of exemptions is available for projects approved by Investment Development Authority of Lebanon (IDAL). IDAL’s mission is to provide investors with a one-stop shop for accessing a range of incentives and business support services, licenses and government decrees and decisions.
Priority sectors identified as having the greatest investment potential and impact on socioeconomic growth include Industry, Agriculture, Agro-Industry, Tourism, Information, Communication, Technology, and Media.
In light of Lebanon’s urgent need to increase tax revenue to meet anticipated expenditures, drafts of a number of new tax laws are under review. These include a new unified tax law for the total income of individuals, including commercial and industrial income, wages and salaries, movable income and inherited income.
The government is also drafting the respective tax laws in respect of Petroleum Tax Law no. 132, which was promulgated in 2010.
As part of its efforts to foster economic growth and financial stability, Lebanon sustains ongoing communication and cooperation with the Organisation for Economic Co-operation and Development (OECD). However, Lebanon has not yet indicated whether it would introduce any specific actions in relation to the OECD’s Action Plan on Base Erosion and Profit Shifting.
Lebanon’s domestic law applies tax on profits from industrial, commercial and non-commercial professions derived in its territory, subject to protection under one of Lebanon’s tax treaties. Wages and salaries and income from movable capital are taxable in Lebanon when derived either in Lebanon or by a resident in Lebanon.
1Decree no. 248 dated 22/4/2014