Lebanon

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.

General infomation

• Full Name: Lebanon Republic
• Population: 5.48 million (World Bank, 2022)
• Capital: Beirut
• Major Language: Arabic
• Religion: Islam and Christianity
• Currency: Lebanese Pound
• GNI Per Capita: US $4,970 (World Bank 2021 - last update)
• Internet Domain: .lb
• International Dialling Code: +961

How Do I Say in Arabic?

• Hello: As-Salām 'Alaykum
• Good Morning: Ṣabāḥul KẖAyr
• Good Evening: Masā' Al-Khayr
• Do You Speak English?: Hal Tatakallam El-Ingliziyya
• Good Bye: Bāy Bāy
• Thank You: Shukran
• See You Soon: Ashoufak 'Ourayyeb

Dates and Numbers in Lebanon

In Lebanon dates can be written in the day, month and year sequence, or the month day and year sequence.

For Example: DD/MM/YYY  01/07/2024 or 01 July 2024.

The convention for writing numbers in Lebanon uses the comma as a decimal separator. For example 45,300,500 LBP (forty five million three thousand and five hundred Lebanon pound).

Lebanon, with its strategic Mediterranean location and rich cultural tapestry, provides a unique blend of opportunities for businesses. The country's historical role as a trade and finance hub has fostered a business environment marked by entrepreneurship and innovation.

Key sectors such as banking, real estate, and information technology offer significant potential. Lebanon's human capital is a standout feature, with a highly educated, skilled, and multilingual workforce ready to drive business success.

However, doing business in Lebanon also presents its own set of challenges. The political landscape can be complex, and economic fluctuations require a robust risk management strategy. Navigating the local regulatory framework requires careful planning and local expertise.

Companies successful in Lebanon often emphasise building strong relationships with local partners, understanding the nuances of the business culture, and staying adaptable to the changing economic climate.

While Beirut is the central business hub, opportunities also exist in other regions, each with its unique character and potential.

Lebanon's investment landscape is characterised by sectors with high growth potential. The real estate market has traditionally attracted significant investments, with both commercial and residential projects offering opportunities. The country's IT sector is burgeoning, fueled by a tech-savvy youth population and supportive incubators and accelerators nurturing a vibrant startup ecosystem.

The tourism sector, leveraging Lebanon's rich history, diverse culture, and natural beauty, presents opportunities for investment in hospitality, leisure, and heritage conservation.

Investors should be mindful of the economic and political context, conducting comprehensive market research and risk assessment.

The Lebanese government has shown a commitment to encouraging investment through reforms and incentives. Special Economic Zones (SEZs) offer benefits like tax incentives, simplified administrative procedures, and infrastructure support. 

Lebanon's welcoming stance towards Foreign Direct Investment (FDI) is reflected in its diverse investment opportunities across various sectors. The country offers different types of FDI avenues, catering to the strategic objectives of global investors.

Greenfield Investments

Entrepreneurs and businesses can explore untapped potential by initiating new ventures. Sectors like technology, renewable energy, and healthcare are ripe for innovation and offer substantial opportunities, supported by Lebanon's entrepreneurial culture and skilled talent pool.

Mergers and Acquisitions (M&A)

The merger and acquisition route allows investors to integrate with the Lebanese market swiftly. Established sectors such as banking, real estate, and telecommunications present opportunities for mergers or acquisitions, providing immediate market access and local expertise.

Joint Ventures and Strategic Alliances

Partnering with Lebanese companies can be a strategic move, especially for foreign investors aiming to leverage local market insights and networks. This collaborative approach is particularly beneficial in industries where local knowledge is a key success factor.

Portfolio Investments

Investors can engage in portfolio investments, benefiting from Lebanon's robust banking sector. Investing in stocks or financial assets of Lebanese companies allows participation in the local market with potential for returns.

Special Economic Zones (SEZs)

Lebanon offers Special Economic Zones that provide a conducive environment for foreign investment. These zones offer incentives such as tax benefits, streamlined administrative procedures, and infrastructure support, aiming to attract investment in specific sectors and promote economic growth.

While Lebanon presents several opportunities for FDI, it's paramount for investors to thoroughly understand the market, legal frameworks, and the socio-economic landscape. The Lebanese government provides various incentives and protections for foreign investors, including legal safeguards and the ability to repatriate profits. Engaging with local experts and comprehensive market research is crucial for navigating the Lebanese investment landscape effectively and ensuring sustainable and profitable ventures.

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.

Registering a company or establishing an entity in Lebanon varies depending on the legal form of the business.

Types of Business Entities for Foreign Companies in Lebanon

Foreign companies looking to establish a presence in Lebanon have specific entity options tailored to their needs, facilitating their operations while complying with Lebanese law. The primary structures available to foreign entities are:

Branch Office

A branch office is an extension of the foreign parent company, allowing it to engage in commercial activities in Lebanon. It is fully part of the foreign company and does not constitute a separate legal entity. To establish a branch office, the parent company must register it with the Lebanese Commercial Registry and obtain the necessary licenses for operation. The branch office is subject to Lebanese taxation on income derived from its activities within Lebanon.

Representative Office

A representative office serves as a non-commercial extension of the foreign parent company in Lebanon. Its activities are limited to marketing and research purposes for its parent company and cannot engage in sales or revenue-generating activities within Lebanon. This limitation makes it a suitable option for foreign companies looking to explore the Lebanese market without committing to full-scale operations. Representative offices must also register with the Lebanese Commercial Registry but are subject to fewer regulatory requirements than branch offices, reflecting their limited business scope.

Initial Steps for Company Registration in Lebanon

For both entity types, foreign companies must:

• Legalise corporate documents: Ensure that corporate documents (such as the decision to open a branch by official minutes or representative office) are legalised by the Lebanese consulate in the country of origin.
• Appoint a legal representative: Engage a Lebanese lawyer to facilitate the registration process and ensure compliance with local laws and regulations. . In Lebanon you should appoint a lawyer in order to register the minutes of the ministry of the economy to obtain an authorisation
• Register with the commercial registry: Submit the required documents, including the legalised corporate documents, to the Lebanese Commercial Registry.
• Lebanese Manager: Companies must appoint a Lebanese national as the manager of the local entity.

Documentation for Registering a Company in Lebanon

Before proceeding with registration, the following documents are required:

• Articles of Association
• Commercial Circulars
• Minutes of the first General Meeting of Partners
• Registration Application and Draft of the Registration Certificate
• Document evidencing the Capital Deposit
• Partners’ Identity Cards or Passports (copies)
• Proof of the company’s entitlement to its business premises

Registration Procedure for Registering a Company in Lebanon

1. Designate a Lebanese Lawyer: Essential for guidance through the legal process.
2. Deposit the Capital: In a Lebanese bank account.
3. Register at the Company Registry: With the necessary documents.
4. Notify the Ministry of Finance: About the start of operations.
5. Register at the National Social Security Fund (NSSF): For employee benefits.

Although not mandated by law, the majority of companies prefer to have company stamps. They can be order at any seal-making company.

This information is currently being updated for 2024.

A permit from the Ministry of Labour is required for foreigners to work in Lebanon. The Lebanese law entitles the foreign workers who are in possession of a work permit to endure all the working and social rights while their stay in Lebanon. Social rights mean that they have to be registered at the social security but without the benefits, unless there is principle of reciprocity between Lebanon and the foreign country.

Free visas and Temporary Residence valid for a period of six months are granted on border departments and centres according to the following:

For Arab investors, Businessmen and their family members who are visiting Lebanon for the first time with the purpose of investment. This is followed by presenting an official document from the appropriate authorities proving their professional occupation in addition to a recommendation letter from the same authorities in favour of granting the visa. Businessmen and their family members will need to hold this letter from the Investment Development Authority of Lebanon (IDAL) in the favor of granting the visa in order to obtain a Visa.

For Arab investors, Businessmen, Traders and their family members their will require an invitation from a Lebanese businessman according to the following:

The invitee/employers must apply along with the supporting documents to the General Directorate of General Security that should include:

1. A written commitment to bring over the employee on the applicant's responsibility.
2. A photocopy of his commercial record.
3. A passport's photocopy of the employee with an official document issued by the competent authorities certifying his professional occupation.

Investors and Businessmen possessing a temporary residence for a period of 6 months and who have already launched investment projects in Lebanon, can present a request to the General Directorate of General Security to obtain a yearly or a permanent residence, valid for 3 years which is renewable. For the citizens of the countries who have not granted immediate visas at the airport, their cases will be treated according to the following:

• Bankers, Directors/General Managers and employers after presenting a document that certifies their positions.
• People from Lebanese origin provided they present a proof.
• Touristic delegations of a minimum eight persons pursuant to an application presented by an authorized tourist company in Lebanon along with a departure commitment by that company.
• The patients coming for hospitalization and medical treatment according to a detailed report from a specialized physician justifying the reason of the medical treatment and hospitalization in Lebanon.

The rules for obtaining a Work Permit differ a bit depending on the type of work you intend to do.

A person eligible for residency may also apply for the same type of residency for their spouse, children and "servants and drivers". Employee’s spouse does not have the right to work in Lebanon on their work permit.

The Tax year in Lebanon is from 1 January to 31st December.

Income Tax in Lebanon

In Lebanon, both resident and non-resident businesses are subject to income tax on their earnings. This encompasses a wide range of income sources, including wages, salaries, business income, and other benefits, ensuring comprehensive tax coverage across different income types.

Employee Income Taxation in Lebanon

For businesses, understanding how income tax applies to employee compensation is crucial. Income tax is deducted from employees' wages, salaries, overtime pay, gratuities, and fringe benefits, after accounting for family allowances. These deductions are managed by employers, who are responsible for withholding the correct amounts and remitting them to the Lebanese tax authorities.

Progressive Tax Rates for Payroll in Lebanon

The Personal Income Tax (PIT) system in Lebanon uses progressive rates for taxing wages and salaries. As of the latest update from the 2022 Budget Law, the applicable tax brackets range from 2% to 25%, based on annual payroll amounts between LBP 18 million and LBP 675 million. This adjustment, effective from January 1, 2022, represents a shift from the previous brackets, which ranged from LBP 6 million to LBP 225 million. It's important to note that these rates have been maintained into 2024.

For retirement pensions and similar benefits, the tax rates are halved, offering some relief in these specific cases.

Business Income Taxation in Lebanon

Businesses operating in Lebanon, including sole proprietorships and partnerships, are also subject to PIT on their business income, following a progressive rate structure.Significantly, the tax rates for business income have been updated to range from 4% to 25%, a change initiated by Article 24 of the Budget Law 2019, which amended Article 32 of the Income Tax Law. This adjustment, applicable from the fiscal year 2019, marked an increase from the previous upper limit of 21%.

Tax rates are on a sliding scale between 2% and 25%, on annual payroll tax brackets between LBP 18 million and LBP 675 million. Please find below the progressive tax rates in Lebanon for 2024:

Family Rebate Exemption in Lebanon

In addition, and in accordance with published the tax-deductible family exemptions as follows::

Example: an employee married and his wife not working and have 3 children so the exempt will be : 37,500,00 + 12,500,000 + 2,500,000 + 2,500,000 + 2,500,000 = 57,500,000 per year.

In Lebanon, engaging with the Social Security National Fund (SSNF) is a critical requirement for all businesses with employees. 

Social Security Registration Requirement in Lebanon

• Who Must Register: Any company with at least one employee.
• Deadline for Registration: Within one month from the start of the company's operations.

Social Security Contributions and Deductions in Lebanon

Social Security contributions in Lebanon are based on the actual monthly values of all applicable pay elements. If a pay element is subject to income tax, it's also subject to Social Security contributions and deductions.

Social Security contributions in Lebanon in 2024 are as follows:

Social Security Exemptions in Lebanon

Certain pay elements are exempt from Social Security contributions, aligning with exemptions applicable for income tax purposes. These include:

• Representation allowance: Up to 10% of the basic salary.
• Transportation allowance: Adjusted to a daily rate of 450,000 LBP as of February 15, 2024, according to Decree No. 12966. This is calculated monthly based on the number of workdays (e.g., 22 days * 450,000 LBP) and is not subject to tax or Social Security as it is considered a pre-tax allowance.
• Schooling allowance: Permissible under the Labour Law, with tax-exempt amounts announced annually and varying by school and grade.
• Personal Allowances: Including any allowances granted to cover job-related expenses, provided they are supported by invoices or similar documents.

Tax and Social Security Reporting Requirements in Lebanon

Lebanese businesses have specific obligations regarding the frequency of tax and social security reporting and payments. These obligations vary based on the number of employees within the company. Understanding these requirements is crucial for timely compliance and avoiding penalties.

Monthly Reporting

Companies in Lebanon that have 10 or more employees are obligated to carry out monthly reporting of taxes and social security contributions. The payments associated with these reports are due before the end of the month following the reporting period. 

Quarterly Reporting

Businesses in Lebanon with fewer than 10 employees have a different set of requirements. These smaller entities are required to report their social security contributions on a quarterly basis. Once a quarter concludes, they have until the end of the following month to complete their payment submissions. This system aims to simplify the administrative burden on smaller businesses, giving them more flexibility in managing their reporting and payment schedules.

Penalties for Late Payments in Lebanon

It's important for businesses in Lebanon to adhere to these deadlines strictly. Any delays in tax or social security payments will incur penalties. Ensuring timely compliance not only helps avoid these penalties but also contributes to the smooth operation of businesses.

Businesses with new employees in Lebanon must follow a registration process for compliance with the Social Security National Fund and Ministry of Finance.

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.

New Employee Required Forms for Ministry of Finance Registration in Lebanon

• R3
• R3-1
• R4

Forms are available on the employment authority’s website or at the authorities’ offices.

Documentation Based on Marital Status

• For Single employees: Copy of the ID.
• For married employees: Extract from the family civil register (must be issued within the last 3 months).

New Employee Payroll Authority Notification in Lebanon

In Lebanon a 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.

When an employee leaves a company in Lebanon, follow these steps are required ensure compliance with local regulations:

1. Leaver's Form: Have the departing employee fill in and sign the leaver’s form and submit this form to the Social Security National Fund.
2. Ministry of Finance Reporting: By the end of the fiscal year employers must include leavers information in the R7 declaration with the Ministry of Finance.
3. Legal Clearance: Obtain a clearance letter signed by the employee, confirming the settlement of any obligations or entitlements.

In Lebanon, providing payslips to employees is considered a best practice for transparency and clarity regarding wage calculations, deductions, and net pay. However, there is currently no specific legal mandate requiring all employers to issue payslips, or a requirement for these payslips to be digital.

Payroll Reports in Lebanon

All payroll reports must be kept for 10 years in Lebanon.

Lebanese Payslip Example

Holiday Accruals and Calculations in Lebanon

In Lebanon, holiday accruals and calculations for full-time employees follow a structured approach, ensuring that workers are granted adequate time off as they continue their tenure with an employer.

Holiday Entitlement in Lebanon

Upon completing their first year of employment, full-time employees are entitled to 15 days of paid vacation. Annual leave entitlement is increased based on length of service.

Scale of Annual Leave Entitlement

Employees have the option to accumulate up to two years' worth of annual leave, offering flexibility in planning extended time off.

Employees are required to notify their employer of their intention to take leave. While it's the employee's right to request vacation time, the approval of such requests lies at the discretion of the employer, ensuring business continuity.

In Lebanon, employees are entitled to public holidays in addition to their annual leave, and these days are paid. Public holidays are established by law and include religious and national holidays.

Employees receive full pay which equates to their regular daily wage. 

Company Holiday Policy

Every company in Lebanon is at liberty to outline its own holiday policy, which includes specifying which days are considered holidays. Regardless of the holiday policy, holidays are compensated at the regular pay rate, with the exception of transportation allowances, which are deducted.

Maternity Leave in Lebanon

In Lebanon, the employment law ensures the support and protection of female employees during the period of childbirth.

Female employees are entitled to 70 days of paid maternity leave. 

Maternity leave pay is typically covered by the Lebanese National Social Security Fund (NSSF) for employees who are registered and contribute to the NSSF. The NSSF provides maternity benefits that cover full pay during the leave period, up to a certain cap, which is subject to change. For women not covered by the NSSF or in cases where the employer does not participate in the NSSF, the employer may directly pay the maternity leave benefits.

To be eligible for maternity leave benefits from the NSSF, a female employee must have contributed to the NSSF for a certain period before taking maternity leave. This typically involves having a specified minimum amount of contributions in the months leading up to the leave. If the employer is directly responsible for the payment (in non-NSSF cases), the eligibility criteria can be set by the employer but should comply with Lebanese labour laws.

During maternity leave, employers are prohibited from issuing warnings or terminating the employment contract of the employee, offering a layer of job security during and after pregnancy. This protection extends to situations where the employer might have been unaware of the pregnancy at the time of hiring, with one exception: if the employee was more than five months pregnant at the time of hiring and the employer was unaware, the rules can differ.

Paternity Leave in Lebanon 

In Lebanon, paternity leave is a provision that allows new fathers to take time off work to be with their newborns and support their partners.

New fathers are entitled to up to three days of paid paternity leave. The leave granted for paternity purposes is paid for by the employer at 100%, ensuring that new fathers can take this time off without financial penalty.

Sick Leave in Lebanon

Sick leave in Lebanon is designed to provide employees with necessary time off for health-related issues, ensuring they can recover without the immediate worry of financial instability.

Employees become eligible for sick leave after having been employed for more than three months. This initial period allows employers to ensure commitment and reliability before granting full benefits.

Upon eligibility, employees are entitled to a half-month of sick leave with full pay. This entitlement is designed to cover short-term illnesses, allowing employees adequate time to recover before returning to work. The duration of sick leave an employee is entitled to can change based on their years of service with the company, often increasing with tenure to reflect the commitment and loyalty of long-term employees.

For extended medical leave, employers have the right to request a medical examination by a doctor to verify the employee's health condition and need for prolonged absence.

Sick leave is paid by the employer, ensuring that employees receive their full salary for the duration of their entitled sick leave period. The National Social Security Fund (NSSF) may also provide benefits for extended sick leave, depending on the employee's coverage and contributions to the NSSF.

If the sick leave exceeds the entitled period, employers may deduct the extra days from the employee's salary.  However, this is subject to the employer's sick leave policy and Lebanese labour law, which may offer protections for employees under certain conditions.

While on sick leave, employees are protected from receiving any warnings or dismissal notices from their employer.

National Service in Lebanon 

There is no mandatory National Service in Lebanon.

As of 2023, and maintained in 2024, Lebanon has set its minimum wage at LBP9,000,000 per month, a figure that reflects the country's response to its economic challenges and the needs of its workforce. This adjustment aims to provide a baseline for employers and employees, ensuring a minimum income standard amidst the fluctuating economic landscape.

As of now, institutions in Lebanon submitting wage, employment, or leave permits featuring wages below 20,000,000 LBP (Twenty million Lebanese pounds) per month are mandated to be referred to the Inspection Directorate by all regional and local directorates and offices. This measure ensures adherence to the current minimum wage standards.

The typical working week in Lebanon is Monday to Friday from 8am until 5.30pm.

Most offices are closed at the weekend.

There are multiple statutory holiday schedules within Lebanon. Below are the statutory national holidays in Lebanon for 2024.

Please note that Islamic holidays are based on the lunar Hijri calendar, so the dates vary each year and are determined by the sighting of the moon. 

Expenses in Lebanon

Each company in Lebanon is entitled to devise its own expenses policy, allowing for tailored approaches that suit business operations and employee needs. Companies need to clearly specify which expenses are intended for the benefit of the employees. Such expenses are generally considered taxable and may also be subject to social security contributions.

Employees are entitled to a daily transportation allowance of 450,000 LBP, which is not taxable, providing support for daily commutes without additional tax burden.

Company Cars and Car Mileage in Lebanon 

Expenses related to car mileage are not subject to tax when reimbursed to employees. Similarly, company cars designated for business purposes are exempt from tax implications.

Expenses policy generally comprises of:

• General expenses: The expenses should be specified if they are for the interest of the employees.
• Anything paid for the benefit of the employees will be subject to Tax and Social Security.
• Car mileage: Note car mileage is not subject to tax.
• Company cars: Used for business purposes are not subject to tax.

For Lebanese employees family extract should be submitted to prove the marital status and number of children. All the following Family benefits should be added.

Family Allowance in Lebanon

A significant update was introduced in the decree published on November 30, 2023, outlining new family allowance rates for employees' spouses and children:

• Wife Allowance: 600,000 LBP per month.
• Child Allowance: 330,000 LBP per child per month, up to a maximum of five children.
• Maximum Allowance: The total family allowance an employee can receive is capped at 2,250,000 LBP per month.

Documentation and Taxation for Family Allowance in Lebanon

Employees must submit a family extract to their employer to verify marital status and the number of children. This document is essential for calculating the correct family allowance.

While specific allowances such as transportation are not taxable, other benefits including the family allowance may be subject to taxation and social security contributions, depending on the company's policy and Lebanese law.

In 2024, Lebanon is seeing significant legislative changes and updates, particularly in the areas of social security, taxation, and budgetary policies.

Social Security Reforms in Lebanon

Lebanon has introduced landmark social security reforms, considered one of the most significant socioeconomic changes in the past three decades. The reforms include the establishment of a comprehensive pension system for private sector workers, significantly altering the governance of the National Social Security Fund (NSSF). The new pension system aims to provide long-term periodical benefits for retirement, death, and disability, addressing the gaps in the previous end-of-service indemnity system. This change is crucial for ensuring a decent retirement for the Lebanese population, especially considering the economic challenges faced since 2019​​.

2024 Budget and Tax Changes in Lebanon

The Lebanese Parliament passed an amended 2024 budget, which has been a subject of intense debate, especially regarding taxes and the dollarisation of the economy. The budget anticipates higher state revenues through VAT and customs fees and includes measures targeting entities that benefited illicitly during Lebanon's financial crisis. The budget has faced criticism for disproportionately burdening middle and lower-income households while failing to implement broader tax base reforms or progressive collection methods. Notably, the budget draft initially proposed raising VAT from 11% to 12%, but recent statements suggest this increase may not be implemented. Moreover, there's an ongoing discussion about collecting more fees and taxes in US dollars, although the practical implementation of this remains uncertain. Despite the challenges, the budget aims to address the significant financial losses and economic decline Lebanon has faced in recent years​​​​.

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.