Lebanon payroll and tax overview.

Lebanon lies on the eastern edge of the Mediterranean Sea, sharing land borders with Syria to the north and east, and Israel to the south. Lebanon’s Mediterranean location makes it a popular trading destination and a gateway to Europe and the Middle East for many international businesses. After a period of turmoil in the early 2000s, Lebanon’s economy grew rapidly, averaging 9.1% growth between 2007 and 2010. Lebanon’s constitution enshrines a laissez-faire economic approach and the country has a relatively free and liberal economic system that values private initiative and private property, and places no restrictions on foreign exchange or capital movement. The financial landscape is generally oriented to service businesses with main growth sectors including banking and tourism. Other important sectors include agriculture, chemical and metal production, and transport equipment. Emerging from the regional disruption of the Syrian civil war, Lebanon’s GDP stood at around $58 billion in 2019. In order to stimulate ongoing recovery, Lebanon’s government has instigated a series of economic reforms including using the private sector to drive economic growth. Lebanon is a member of the UN, the Arab League, and the OIC and in 2019 was ranked 143 on the World Bank’s Ease of Doing Business Survey.

Registering a Company and Establishing an Entity in Lebanon

Registrations will depend on the legal form of the establishment. If it is a foreign company they should open a branch or a representation office in Lebanon. They should send the decision by official minutes and it should be legalized. In Lebanon you should appoint a lawyer in order to register the minutes of the ministry of the economy to obtain an authorization and then to be registered at the commercial register and they have to appoint a Lebanese manager for the entity.

After preparing all the necessary documents it normally takes between one week and 10 days to complete the registration process.

The procedure of registering a company is as follows:-

Designate a Lebanese Lawyer

Each newly formed company must retain and pay an attorney on an annual basis. On April 26 2012, the Beirut Bar Association increased the minimum annual retainer to LBP 9,000,000 effective as of January 2013. This retainer can be paid by the company during the year.

Start-up fees are set by the Beirut Bar Association at LBP 3,000,000. This usually takes 1 day.

Deposit the Capital in a Lebanese Bank Account

This procedure can be carried out on the basis of a signed (or notarized) copy of the articles of association. This can sometimes take more than 2 days and accrues no charge.

For a personal entity or a branch, it is not necessary.

Register at the Company Registry

The applicant submits the following documents to the company registrar at the Ministry of Justice, along with the total amount of required fees:

• Articles of association
• Commercial circulars
• Minutes of the first general meeting of the partners
• Registration application and a draft of the registration certificate to be issued
• Document attesting the capital deposit
• Partners’ identity cards or passports (copy)
• Documents evidencing that the company is entitled to occupy the premises where it exercises its activities

Business Banking in Lebanon

It is mandatory to have an in-country bank account to process payroll in Lebanon.

Banks are open Monday to Friday (8:00am till 4:30pm) and Saturday (8:00am to 1:00pm), however working hours might vary between banks. All banks are closed on a Sunday and during official holidays.

Working Week and Working Hours in Lebanon

The typical working week in Lebanon is Monday to Friday from 8am until 5.30pm. Most offices are closed at the weekend.

Basic Facts about Lebanon

General infomation

Full Name: Lebanon Republic

Population: 6.082 million (World Bank, 2017)

Capital: Beirut

Major Language: Arabic

Religion: Islam and Christianity

Currency: Lebanese Pound

Internet Domain: .lb

International Dialling Code: +961

Income Tax in Lebanon

The income tax on salaries should be submitted and paid as below;

• 1st quarter Jan-Feb-Mar: submission and payment before 15 April
• 2nd quarter Apr- May- Jun: submission and payment before 15 July
• 3rd quarter Jul- Aug- Sep: submission and payment before 15 October
• 4th quarter Oct- Nov- Dec: submission and payment before 15 January

Income tax law imposes a tax on all wages, salaries including overtime, gratuities and fringe benefits, after deduction of family allowances. Employers withhold the amounts due from salaries and remit them to tax authorities.

Taxpayers are required to submit their payroll tax, VAT, CIT (Corporate Income Tax) and BPT declarations electronically. Taxpayers need to fill in an electronic registration by visiting the MoF website (www.finance.gov.lb). The MoF provides the taxpayer with an envelope including the e-Pin needed to access his account on the MoF website. The E-filing service is currently available for VAT, CIT, payroll tax and BPT declarations only.

Social Security in Lebanon

Lebanon commits to the principles of equality in rights and obligations and to the improvement of the socio-economic situation, which ensures the rights of its citizens through a comprehensive social approach, endorsed by all the Lebanese, to confirm social security on the basis of justice and equal opportunities.

It is important to understand that it is not an employee‘s responsibility to register with the social securities.

The employer must register all their employees and will deduct the part that should be paid by the employee at source and pay it on his behalf in addition to the rest of the taxes and social security contributions.

The social security contribution is as follow:

% paid by the employee:

For sickness and maternity (medical): 3% (ceiling of lbp 2,500,000)

% paid by the employer:

For sickness and maternity (medical): 8% (ceiling of lbp 2,500,000)

Family allowances: 6% (ceiling of lbp 1,500,000)

End of service allowance: 8.5% (on the whole salary)

Reporting Tax in Lebanon

Monthly

Reporting social security for less than 10 employees should be done after each quarter of the year and its related payments should be done before the end of the following month. For 10 employees and more, the reporting should be made on monthly basis and its related payments made before the end of the following month. This needs to be paid before the end of next month.

Any delays in the tax or social security payment will be subject to the penalty.

New Employees in Lebanon

New starts need to be registered at the social security within 15 days from the starting date and 3 months from the starting date at the Ministry of Finance.

The following registration forms should be filled and submitted to the Ministry of finance:

• R3,
• R3-1
• R4

The forms can be found on employment authority’s website or at the authorities’ offices.

The documents required for the registration are as follows:

For Single: copy of the ID

For Married: extract from the family civil register, issuance date does not exceed 3 months.

The other details required for the new starts are:

• Name
• Gender
• Date of Birth
• Marital Status
• Number of Children
• Wife Working or Not
• Basic Salary
• Transportation Benefits
• Medical Insurance

The company must provide payroll authorities with the registration numbers at the MOF and NSSF in case the employee was previously registered by another company if not, once registered he will get a fiscal number as well as a social security number.

Leavers in Lebanon

Leavers are required to fill in and sign the leaver’s form which must be submitted to the social security. As for the ministry of finance, the employer should mention the leave information in the R7 declaration that is due at the end of the year, as well as from a legal perspective a clearance letter should be signed by the employee.