LEBANON
We provide a wide range of tax services to companies, partnerships, individuals and trusts. These are available not only to clients who use our auditing and accounting services, but to any business enterprise or individual requiring specialized tax advice. The services provided fall broadly under two headings:
I. Assistance to clients in meeting their tax compliance obligations.
II. The provision of specialized tax planning advice which aims to ensure that clients’ businesses and financial affairs are arranged in an orderly manner with proper regard to the incidence of taxation.
These services encompass a number of areas which include the following:
COMPANIES, COMPLIANCE
• Preparation of companies’ tax computations for submission to the local tax authorities.
• Advice regarding appeals against tax assessments and tax payments.
• Individual, partnership, and trust tax compliance.
• Preparation of the appropriate tax returns for submission to the tax authorities and handling of any subsequent correspondence, discussions, etc., with the local tax authorities in determining the tax liability.
CORPORATE TAX PLANNING
• The structure of business operations operating through groups or divisions.
• Corporate and group reorganizations.
• Mergers and acquisitions.
• Optimizing the use of available relief and allowances.
• Planning dividend policy.
• Executive remuneration.
• Tax treatment of fringe benefits.
• Planning of overseas assignments.
• Stock options and share incentive schemes.
• International tax planning.
• International group structures.
• Profit repatriation planning by use of dividends or royalties.
• Minimizing the incidence of double taxation.
• Advice on tax aspects of foreign currency fluctuations.
• Advice on double tax treaties and their effects.
• Advice on tax systems in other countries.
• Advice on tax structuring of corporate acquisitions overseas.
• World tax reviews and utilization of losses.
• Personnel tax planning, including Structuring personal business operations.
• Planning for business start-up e.g. partnership and other companies Establishing offshore and holding companies.
COMPANY TAXES
INCOME TAX
Income tax varies according to the following types of companies:
• Tax on SAL – SARL companies: the tax on profit is 17% on net income.
• Tax on holding companies: The Annual fixed tax on capital and reserves are as follows:
6% up to LL 50 Million.
4% between LL 50 Million and up to LL 80 Million.
2% Above LL 80 Million.
Such annual tax is not to exceed LL 5 Million.
Holding companies are also subject, besides above, to the following taxes:
• Tax on moveable capital in Lebanon.
• Tax on capital gains.
• 5% tax on administrative charges and other services billed to subsidiaries operating in Lebanon, provided such charges do not exceed limitations to be set by the Minister of Finance.
• 10% tax on charges for allowing the use of trademarks or other rights for resident companies.
Tax on Offshore companies: A Flat tax of LL 1 Million annually besides capital gains tax. Foreign employees of offshore companies working in Lebanon are allowed exemptions up to 30% of their basic salaries.
TAX RATE FOR FOREIGN COMPANIES
Lebanon adopts a territorial tax system under which all income sourced in Lebanon is subject to tax in the country (while income derived from foreign sources is not subject to tax in Lebanon). For resident companies, corporate income tax is computed at 17% based on the taxpayer’s accounting profits after adjustments resulting from tax rules (i.e. “real profit method”); while for non-resident companies a withholding tax applies at 2.25% on payments for goods and 7.5% on payments for services.
CAPITAL GAINS TAXATION
Capital gains on the sale of assets (tangible, intangible and financial) are taxed at a rate of 15%. The rate goes up to 20% for the assets of oil and gas companies.
Income from disposal of shares realised by a company whose main activity is the acquisition of investments is subject to 17% corporate income taxation.
MAIN ALLOWABLE DEDUCTIONS AND TAX CREDITS
Organisation and start-up expenses are amortised over a period of three to five years. Interest on business loans is deductible (under certain conditions), while interest paid on the taxpayer’s capital is not deductible. Bad debts are deductible if all means for collection of the debt did not succeed. Gifts given by the company in-kind to customers when the amount of each gift exceeds LBP 1 million/person/year and when the total value of gifts in kind exceeds 1% of the turnover are non-deductible.
Employees’ life insurance premiums are deductible as long as they are included in the employees’ benefits subject to payroll tax. Other deductible expenses include: rent of business premises or their depreciation if the premises are owned by the taxpayer; reserves for severance payments, pensions, and disability payments; advertising and publicity expenses (within certain limits); travel, telephone, and vehicle expenses; etc.
Charitable contributions are deductible when made to certain organisations.
Net operating losses can be carried forward up to three years (indefinitely for oil and gas companies). The carry back of losses is not permitted (except for oil and gas companies).
With the exception of the corporate income tax, taxes and duties incurred in the course of business are deductible.
OTHER CORPORATE TAXES
I. Value-added tax (VAT): The standard VAT rate in Lebanon is 11%. Unless specifically exempt, VAT is levied on all commercial transactions undertaken by business entities. Export of goods and services and export-related services, international transport, and some of the intermediate operations are zero-rated. Banking, financial services, and insurance operations are exempt from VAT. Note that the recharge of expenses from an entity in Lebanon to another entity abroad is subject to VAT at 11%. The threshold for mandatory registration is a turnover that exceeds 100 million Lebanese pounds (LBP) in four consecutive quarters.
II. Payroll Tax and SSNF: Employers are responsible for withholding and declaring payroll taxes on behalf of their employees. Payroll tax is levied at progressive rates of 2% to 25%. Social security contributions are the following: borne by the employer (8% for the maternity and sickness benefit schemes, on a maximum of LBP 2.5 million per month, and 6% for the family benefit schemes, on a maximum of LBP 1.5 million per month, plus 8.5% of total annual earnings for the end of service indemnity, without any limit); borne by the employee (3% for the medical scheme, on a maximum of LBP 2.5 million per month).
III. Build Property tax: A built property tax is levied on rental income from Lebanese real property, at rates ranging between 4% and 14%. When transferring ownership of real estate, registration fees of approximately 6% are applicable.
IV. Stamp tax: A 0.4% stamp duty is levied on most contracts. Stamp duty is also levied on the
capital subscription and capital increase.
IN UAE
The Company Taxes are as following
INCOME TAX
in UAE, there are no taxes levied by the Federal Government on income or wealth of companies and individuals (except for oil and gas companies and subsidiaries of foreign banks). Or for oil, gas and petrochemical companies and branch offices of foreign banks are subject to tax at a sliding scale as following
TAX RATE FOR FOREIGN COMPANIES
Branches of foreign banks are taxed at 20% in most Emirates. As a general rule, taxation in the UAE is based on the territoriality concept (and not on the worldwide one). Non-resident companies carrying out a trade or business in an Emirate through a permanent establishment in that Emirate are formally taxable under the relevant Emirate tax decree, although no taxation is imposed on corporates’ income.
CAPITAL GAINS TAXATION
Capital gains are generally not subject to tax, unless they are derived by a company that is taxable under the purview of income tax or banking tax decrees.
MAIN ALLOWABLE DEDUCTIONS AND TAX CREDITS
Deductions are determined based on accounting principles and the tax decrees of the various Emirates. In general, deductions are not that significant as most companies in the United Arab Emirates are not subject to taxation on income (except for upstream oil and gas companies and branches of foreign banks operating in the country).
OTHER CORPORATE TAXES
I. Value-added tax (VAT): The standard VAT rate in UAE is 5% from the first of January 2018. The VAT is applied to the most goods and services, with some goods and services subject to a 0% rate or an exemption from VAT (subject to specific conditions being met).
The mandatory VAT registration threshold is 375,000 United Arab Emirates dirham (AED), and the voluntary registration threshold is AED 187,500. No registration threshold applies to non-resident businesses making supplies on which the UAE VAT is required to be charged.
The 0% VAT rate applies to goods and services exported outside the VAT-implementing Gulf Cooperation Council (GCC) member states, international transportation, the supply of crude oil/natural gas, the first supply of residential real estate, and some specific areas, such as healthcare and education. A VAT exemption applies to certain financial services, as well as to the subsequent supply of residential real estate. Further, transactions in bare land and domestic passenger transport are also exempt from VAT. Certain transactions in goods between companies established in UAE Designated (Free) Zones (DZs) may not be subject to VAT. The supply of services within DZs is, however, subject to VAT in accordance with the general application of the UAE VAT legislation. II. Payroll Tax and Social Security: There is no payroll tax withholding obligation for employers but there is a social security regime in the United Arab Emirates that applies to UAE and GCC national employees only. In most of the Emirates, and for a UAE national employee, social security contributions are calculated at a rate of 17.5% of the employee’s gross remuneration as stated in the employment contract. Out of the 17.5%, 5% is payable by the employee and the remaining 12.5% is payable by the employer (15% in Abu Dhabi, where the overall rate is 20%).
FAMILY AND OWNER MANAGED BUSINESS (FOMB) SERVICES
The considerable experience and expertise of the specialists of our group permit us to act as succession planners for Family and Owner Managed Businesses (FOMB). Our objective in this field is to serve the interests of all FOMB stockholders (owners, families and their companies) by defining the tools and planning the systems that help achieving the following:
• Keeping harmonious flow of work among family members, moderating conflict and simultaneously managing a company for profit Assuming that the FOMB will be preserved for the next generation or that it will be sold and passed harmoniously to non-family owners.
• Determining the owner’s best exit-strategy.
• Deciding whether to keep the business or sell it.
• Defining fairness for all of the owner’s children and minority shareholders, some of whom may not be employed in the company and most of whom won’t be the next president.
• Deciding whether to establish an outside Board of Directors and how to implement a board if appropriate.
• Choosing training and empowering future leaders.
• Achieving the objectives of the next generation without sacrificing the dignity and security of the founding generation.
• Developing a company business plan that is compatible with the family’s and owner’s plan.
Interested in working with AUDIT&MORE?
