Lebanon

Lebanon’s tax and wealth planning landscape is shaped by a variety of tax rates and regulations that govern tax on revenue and inheritance and gift tax.

Tax on revenue

Personal income tax (PIT). According to the principle of territoriality, taxes on personal income are levied if one of the following conditions is met:

• the beneficiary of the income has sourced the income from Lebanon;
• the services that triggered the income are executed on Lebanese territory or have contributed to the welfare of a company located in Lebanon, even though the source of funding is outside Lebanon; or
• the source of funding is in Lebanon, regardless of where the beneficiary resides or where the effort was made.

PIT is levied on wages and salaries at progressive rates. Based on the 2024 Budget Law, PIT is levied at between 2% and 25% on annual payroll tax brackets between LBP 360 million and LBP 13.5 billion.

Income from foreign assets. Individuals resident in Lebanon are also liable to 10% capital gains tax on income derived from foreign assets according to Article 82 of Law No. 44/59 on Income Tax.

Corporate income tax (CIT). The Income Tax Law offers different regimes of declaration for levying CIT, depending on the legal type of the corporation. The most common regime, namely, the “effective gain”, is mandatory for joint-stock companies and optional for limited liability companies and is established at 17%. Companies are also liable for a capital gains tax on immovable property of 15%, as detailed below under the heading “Capital gains tax on immovable property”.

Lebanese resident shareholders are liable to a 10% tax on effectively distributed dividends.

Tax on interests. As per Law No. 144 of the 2019 Budget Law, income, revenue and interest earned from accounts opened at Lebanese banks and from treasury bonds are subject to a 10% withholding tax.

Capital gains tax on immovable property (for companies and individuals). According to Article 45, paragraph 3 of the Income Tax Law, capital gains generated from real estate assets in Lebanon owned by individuals and legal entities which are not subject to income tax, or which enjoy permanent, special, or exceptional exemptions from such tax, or assets belonging to individuals subject to income tax where such properties do not constitute part of their professional assets, shall be taxed at a rate of 15%.

The said tax does not apply to individuals when the sale concerns their primary residences, up to two residences per person, nor does it apply when the property subject to sale has been held by such individual for a complete duration of 12 years or more. Individuals’ tax is reduced progressively up until the 12 years are reached.

When such transactions are taxable, they must be declared and the tax due thereon must be paid within two months, as of the date of the transaction.

Inheritance and gift tax

Inheritance taxes in Lebanon are, in principle, levied on all movable and immovable assets situated in Lebanon and transmitted by a Lebanese or non-Lebanese person upon demise, regardless of the inheritor’s usual place of residence or domicile, but without prejudice to contrary dispositions of international tax conventions. Inheritance taxes are also due on all movable and immovable assets situated outside Lebanon and transmitted upon the demise of a Lebanese or non-Lebanese person who was resident in Lebanon prior to such demise. That said, tax liability upon inheritance is based on both territoriality and the residence principle, with priority for the latter, however, without prejudice to contrary provisions of bilateral tax treaties.

The criteria for “residence” for the purposes of levying inheritance tax are defined in Decree No. 2827/1959. According to the decree, deceased individuals who were residing in Lebanon prior to their demise, or had an enterprise in Lebanon in which they used to carry out an activity, are considered as residents for inheritance tax purposes. In 2016, an amendment to Law No. 44 with respect to the definition of “tax residency in Lebanon” foresees other residency criteria, whereby a person is also considered a resident, if he/she:

• has a house in Lebanon permanently available to his/her family members (i.e., spouse and dependent children), in other words, a habitual abode; or
• is present in Lebanon for more than 183 days in any given 12-month period.

Inheritance tax. According to Legislative Decree No. 146/1959, which determines the taxes applicable to gift and inheritance, taxes apply to the following assets:

• all movable and immovable assets transferred during the two years preceding the demise of the inheritor, whether directly or through a nominee/agent, to an heir or legatee having such quality at the moment of the transaction;
• financial securities and other assimilated assets (shares, titles, funds, etc.) that are given and/or registered under the name of an heir or legatee and transferred by the inheritor during the year preceding the demise; and
• the amounts and securities deposited in joint or collective bank accounts, or in safe-deposit boxes, which shall be considered as equally owned by all the holders of the account or the safe, unless the contrary was proved.

Although Law No. 520/1996 contains nothing with respect to tax liability, gift tax might apply to certain fiduciary transactions carried out under fiduciary Law No. 520/1996, notably, when such transactions involve free transfer of an asset or a movable right constituting the fiduciary fund to a third-party beneficiary through the fiduciary or trustee.

Gift tax. Gift tax is also relevant for manual donations that are made, according to simple tradition, from hand to hand. Practically, some manual donations pertaining to certain tangible and movable assets (e.g., jewelry, precious stones, furniture and similar objects) or tangible securities escape any taxation, despite the clarity of legal provisions requiring the declaration of such donations to the tax authorities and imposing a tax right on these assets.

Calculation of inheritance and gift tax. Taxes levied on inheritance are of two types: (i) a fixed tax rate of 5‰ (five per thousand) due on the gross inheritance portion of each heir; and (ii) a progressive tax rate that varies depending on the class of heirs and which applies to the net value of each heir’s portion of the estate after relevant deductions.

The fixed tax rate is 5‰ for all movable and immovable assets transmitted to the heirs, after the deduction of LBP 200 million from the gross value of such assets, while the progressive tax is levied on the net inheritance portion transmitted to an heir or transferred to a recipient, according to the rates detailed in the table below and after operating the deduction of relevant exemptions as per statutory provisions.

Taxation of trust, foundation and wakf transactions

Taxation of a trust. Since Lebanon does not have a law governing trusts as such, it does not provide for any particular tax regime for a trust. Hence, trust transactions concerning Lebanese assets or Lebanese individuals will be analyzed and characterized on a case-by-case basis and assimilated into a particular existing tax regime. The choice of the applicable tax regime will depend, inter alia, on the nature of the settlor’s legal person (company or individual), their residence, the location of the assets and the nature of the trust (revocable or irrevocable), and hence on the characterization of the transaction as a gift or will.

Based on Lebanese tax principles and foreign comparative laws (notably those of France and Luxembourg), there are reasons to believe that, as long as the trust is revocable (i.e., the settlor has the right to revoke the trust or to have all, or a portion, of the trust property returned to him/her), the designation of different classes of beneficiaries in the trust deed by a settlor resident in Lebanon or for Lebanese located assets will not trigger tax consequences itself; as, for instance, liability for a gift tax.

Hence, tax will not, in principle, be due out of the mere creation of the trust nor the transfer of Lebanese assets from Lebanon to the trust account abroad. This analysis is supported by the opinion of some eminent tax experts in Lebanon but is yet to be practically confirmed by legislative texts or fiscal authorities.

In the event that the trust becomes irrevocable due to the settlor’s demise, two scenarios should be considered:

• If the settlor was not a Lebanese resident upon demise, Lebanese authorities would not have the power to impose any taxation in this regard.
• If the settlor was residing in Lebanon upon his/her demise, the integral value of the trust fund would most probably be imposable under Lebanese inheritance tax, in accordance with the principles stated above.

Conversely, an irrevocable trust designating heirs or third parties as beneficiaries (irrespective of the class of beneficiaries) can constitute a donation that would be subject to gift tax in Lebanon upon the creation of the trust, subject to declaration within 90 days of the establishment of the trust in accordance with the provisions of the aforementioned Legislative Decree No. 146, dated 12 June 1959, and its amendments.

Lebanese-resident beneficiaries. Another tax liability triggered by the trust is that of Lebanese-resident beneficiaries. In cases where beneficiaries of any trust are tax residents in Lebanon, they would be liable to tax on income generated and distributed from the trust’s assets. According to Lebanese Income Tax Law, income from movable assets is treated independently from business revenue or wages and salaries. Under the said law, any income from movable assets (interest, dividends, arrears, bonds, etc.), whether derived in Lebanon or reverting to a Lebanese resident (local and foreign proceeds), is considered liable to the local (Lebanese) tax.

Practically, the tax liability of capital gains on movable revenue is due on the beneficiary’s worldwide income at the rate of 10%, whenever the beneficiary is deemed to be residing in Lebanon, except as specified in a double taxation treaty (if any) and provided that such revenue is effectively distributed or paid to the beneficiary and not capitalized or carried forward.

The declaration and payment by the beneficiary of the tax on revenue from movable assets is possible through two procedures:

• If the payment is made by or through any Lebanese-resident person entitled to withhold tax payments (mainly banks and similar), the withholder will be bound to withhold the applicable tax of 10% and remit it to the Treasury at the end of each semester.
• In the event the beneficiary of the foreign shares/bonds and movable assets, resident in Lebanon, collects abroad, personally or through an agent, proceeds deriving from the said shares/bonds or movable assets, the beneficiary will be compelled to file a declaration (tax return) of the said taxes before March 1 each year showing the total amount of earnings collected during the preceding year and to pay it to the Treasury before April 1.

Lebanese resident trustee. Another tax liability generated by the creation of a trust is that of a Lebanese resident trustee. Based on Law No. 74, dated 27 October 2016, a Lebanese resident carrying out trustee activities for a foreign trust is liable for the declaration and payment of income tax in Lebanon, based on the real profit tax regime, on the totality of income generated out of such activities. The rate of income tax will depend on whether the trustee is a legal entity, in which case the CIT rate will be applicable, or an individual, in which case the PIT rate will be applicable. This law is the only one in Lebanon in which trust activities are explicitly mentioned, however, without defining either the vehicle or the activities.

Taxation of a foundation. Foundations are not governed by Lebanese laws nor by any specific tax regime, hence, the applicable tax regime for the creation of foundations will be assimilated into an existing regime, depending on the characterization applied by judges or authorities to such a foundation.

If characterized as an association as it is often, the foundation will be exempt from CIT, as well as from capital gains tax (in the case of a transfer of property), and will only be liable for gift taxes on funds received, with an exemption amounting up to LBP 900 million funds received, provided the foundation remains in compliance with the association principles and does not generate commercial revenue.

Taxation of wakf. The wakf (wakf Khairi) is a legal construct created by virtue of a unilateral act that shall have the effect of immobilizing a property owned by the settlor when executing such an act. The executed act will then have the effect of making the property inalienable, non-transferable among living individuals, non-transmissible upon death, and protected from any mortgage as will be further detailed in Section 2.5, below. One of the major advantages of establishing a wakf is benefiting from its statutory tax exemptions, provided the wakf remains in conformity with its limited purpose and does not compete with commercial enterprises.

Religious wakf is subject to the fiscal regime applicable to public authorities, exempt from any direct and indirect tax, and any tax assimilated thereto. Domestic wakf (wakf ahli, zirri) is subject to the fiscal regime of associations, as detailed above, provided its scope of activity remains limited to the charitable objectives and that it does not compete with private corporations.

Local taxes in Lebanon are limited to some types of duties and fees collected by municipalities for constructed properties and are not to be factored into the overall tax strategy for estate and succession planning.

The national case law does not offer any insight into private client matters such as the trust structure.

Local case law does not exist in Lebanon as the judiciary authorities exist on a national level only.

Under implicit pressure for compliance with international standards, Lebanon has taken many actions to further combat tax evasion and enhance transparency in the process of arming domestic tax authorities to better trace and sanction tax evasion attempts.

The adoption in 2015 of Law No. 44 on Fighting Money-Laundering and Terrorism incriminated tax evasion by including it as a crime that can be a source of money laundering.

Additionally, Lebanon has signed the Multilateral Competent Authority Agreement (MCAA) for the automatic exchange of financial account information based on the Common Reporting Standard (CRS) framework, which was ratified and implemented by a domestic law No. 55/2016 on the Exchange of Information for Tax Purposes and practically determined by Decree No. 1022/2017, to facilitate the automatic and non-automatic exchange of information between Lebanon and other participating jurisdictions. Consequently, Lebanon has committed to implementing the CRS for the automatic exchange of financial account information, according to which, financial institutions in Lebanon are required to identify and report financial accounts held by tax residents of CRS-participating jurisdictions to the Lebanese authorities, who will then exchange this information with the tax authorities of those jurisdictions on an annual basis.

Moreover, in light of the financial crisis in Lebanon in 2019, and the new banking secrecy law in Lebanon adopted on October 29, 2022 that lifted the secrecy on so many bank accounts, the general trend of transparency in Lebanon is directing Lebanese nationals to transform their liquid assets into immovable assets or to isolate their assets, notably if they are resident abroad, in more local types of planning solutions rather than foreign ones.

Furthermore, Lebanese nationals and residents are more open to discussion in relation to structures such as trusts or foundations, whether in relation to their private assets or business assets, thanks to the better understanding of these structures abroad.

In addition, real estate companies are now less often used as structures to hold immovable assets for families thanks to recent tax developments, as described in Section 2.5, below.

These regulations are significantly relevant for estate and succession planning purposes.

No significant developments were registered due to the pandemic in this regard.

Lebanese law is silent on trusts and foundations

Lebanese law does not recognize trusts or foundations as these terms are absent from its legal jargon and are not governed by any legislation. The only reference to “trust” appears in Law No. 74, dated October 27, 2016, which establishes a fiscal obligation for individuals residing in Lebanon engaging in trustee activity for foreign trusts (mentioned above in Section 1.1).

Although not necessarily the case, trusts might sometimes be assimilated in Lebanon into an agreement on future succession, and as a civil law jurisdiction, Lebanon prohibits agreements regarding future succession while also preventing wills from freezing assets or rendering them inalienable, except under the wakf construct. This lack of a comprehensive legal framework for succession planning limits Lebanese individuals’ ability to utilize trusts and foundations, without however clearly prohibiting this use. Several Lebanese families indeed are using trusts and foundations for their estate planning, which include assets in Lebanon. Advice to clients is given on a case-by-case basis.

Treatment of foreign trusts and foundations

Lebanon’s non-ratification of the Hague Convention of 1985 on trusts places the country “off the map” with regard to recognition of international trusts, complicating trust enforcement within the country. The lack of case law authority prevents clear predictions regarding the enforcement of foreign trusts or foundations, as outcomes would depend heavily on a judge’s interpretation, given that these constructs are not defined in Lebanese law. Misclassifications by some Lebanese authors, who erroneously qualify trusts as “fiduciary acts” or “succession contracts” and confuse foundations with charitable associations, do not promise an accurate classification in the Lebanese legal system.

Regardless of its potential qualification, if a trust or a foundation enforcement shall produce effects that violate the Lebanese public order, this will lead to their annulment or non-recognition, partially or totally. Specific legal provisions and public order principles are central to the refusal of enforcing foreign trusts or foundations in Lebanon, notably:

• Breach of the statute governing the acquisition of real estate property by non-Lebanese persons. This principle is outlined in Legislative Decree No. 11614 (January 4, 1969) and its amendments, (notably Law No. 296/2001). These laws prohibit non-Lebanese individuals and entities from acquiring, whether directly or indirectly (through companies), more than 3000 square meters across the total surface of Lebanon without special permission. Acquisitions exceeding this limit require a presidential decree, given at the President’s discretion and without objective criteria. Foreign trustees seeking to acquire real estate in Lebanon must adhere to these limitations. Any structure that contravenes these regulations will not be recognized or enforced in Lebanon and may lead to criminal sanctions against the stakeholders.
• Violation of the Lebanese public order. A typical example of a public order rule in succession law is unequivocally the forced heirship rule set out in the civil inheritance law applicable to non-Mohamadi. The said rule has been endorsed by Lebanese courts as a mandatory rule, the violation of which, by any means, shall prevent the recognition and enforcement of the related mechanisms by Lebanese courts, if challenged.

In practice, if the structure of a foreign trust or foundation reduces the rights of the heirs protected by the forced heirship rules to less than their statutorily reserved portions, the heirs shall have the right to raise their right to ownership before courts and to object to the enforcement of the contemplated structure.

Finally, Lebanon does not offer any tools for trustees’ liability, for protecting the prejudiced interests of beneficiaries, nor for enforcing sanctions where necessary.

Local taxes in Lebanon are limited to some types of duties and fees collected by municipalities for constructed properties and are not to be factored into the overall tax strategy for estate and succession planning.

The national case law does not offer any insight into private client matters such as the trust structure.

Local case law does not exist in Lebanon as the judiciary authorities exist on a national level only.

The only structures made expressly and statutorily available by Lebanese legislation for wealth planning and management are, on the one hand, the fiduciary, which is reserved, however, for banks and financial institutions and subject to restricted conditions, and on the other hand, the wakf, a construct inherited from the Ottoman era and maintained in place for specific purposes. The execution of a will is similarly an option. These tools are practicable without prejudice to the rooted principle of prohibition of pacts pertaining to future successions.

Fiduciary. The fiduciary contract was introduced in Lebanon for the first time in 1996 by virtue of Law No. 520, titled ‘Development of the Financial Market and Fiduciary Contracts’. It is merely financial, aimed in reality, as its title indicates, at developing financial markets rather than serving as an estate planning tool.

According to the said law, only banks, financial establishments, and other establishments regulated by the Central Bank have the authority to act as fiduciary agents. The conveyance of assets to a fiduciary entails the transfer of the ownership of such assets, which the fiduciary has to keep separate from his/her personal estate. The investor may act as either the grantor or the beneficiary in this arrangement.

The fiduciary shall act on behalf of the beneficiary, and the latter shall bear responsibility for the economic decisions that the former takes. Additionally, the decisions taken by the fiduciary shall always be for the benefit of the beneficiary and not for his/her personal gain. It remains that fiduciary contracts shall be void if they do not abide by Lebanese public order.

Wakf. The wakf is an Ottoman-inherited construct that manifests itself in the perpetual immobilization of an asset, whose revenue shall then be consecrated for charity purposes. The wakf can be either religious (wakf Khairi), whereby the property is immobilized for the benefit of a charitable institution or a religious order that receives all the income deriving therefrom, or domestic (wakf ahli, zirri), attributed to a certain category of beneficiaries determined by the settler for a certain period, limited to two family generations, after which the immobilized property shall be transferred to a charity or be affected to the public interest.

The wakf is a legal construct created by virtue of a unilateral act that shall have the effect of immobilizing a property owned by the settler when executing such an act. The executed act will then have the effect of making the property inalienable, non-transferable among living individuals, non-transmissible upon death and protected from any mortgage. The wakf will be represented and managed by an administrator. It is irrevocable and can only produce its effects upon its registration before the real estate registrar to which the property is affiliated.

The wakf is not a practical construct for estate planning because its enforcement is not clear in law nor protected by courts; thus, it is not currently a common practice in Lebanon, except to a certain extent by some religious orders and a few families through structures conceived decades ago.

Will. The will is always an option for estate planning, as long as the deceased has left a valid will and has testamentary capacity at the time of executing the will. The testator may include provisions regarding the distribution of his/her assets.

In the absence of specific efficient legal constructions for estate planning and structuring in the Lebanese legal environment, Lebanese nationals have developed some conventional habits of using general legal tools for the purpose of planning and structuring, such as agencies, companies and bank accounts under the joint bank account regime.

Agency. Lebanese individuals have made it a habit to use the concept of an agency for the management and transfer of property by appointing an agent via the execution of a procuration (proxy) also known as a power of attorney (PoA).

Such an appointment would vest the agent with full rights in relation to the contemplated property, allowing him/her to carry out all transactions in relation thereto, including managing and transferring the property to whomever he/she chooses. If the procuration is made irrevocable, such rights of the agent shall remain valid following the demise of the person represented and shall be assimilated into a transfer agreement to the agent.

Procurations can be typically used to authorize a foreign individual/company to act as a trustee if the settlor’s objective is to appoint a professional trustee to merely manage the Lebanese property for the benefit of the beneficiaries. Without the trustee being the legal owner of such property (in the strict sense of ownership given by real estate law in Lebanon), the trustee will be able to transfer the ownership of the Lebanese property to the beneficiaries according to the settlor’s wishes by registering the property under his/her name by virtue of such procuration. However, being entitled through a PoA without a real transfer of property might not enable the application of any trust regime (under a relevant foreign law); it is merely a management tool.

Irrevocable procurations are often used as a way to appoint the beneficiaries themselves as agents of the owner, vesting in them all rights pertaining to the property, in an attempt to distribute the estate according to the personal wishes of its owner. In principle, these irrevocable procurations are assimilated into sales contracts with the agent and suppose payment of the price of the asset.

Any assignment of rights in the properties or transfer of such properties via an irrevocable PoA might be subject to inheritance taxes if assimilated into a donation and if no effective sale took place. If assimilated into a donation, the transaction will be subject to inheritance taxes if no donation taxes were paid, and if the demise of the person who executed the irrevocable PoA occurred within two years of its execution.

Real estate companies. For a while, real estate companies in Lebanon (companies whose main objective is the acquisition, management and sale of real estate property) were a preferred tool for families to manage their immovable property. Indeed, the acquisition of an immovable asset by a joint stock Lebanese company through its capital benefits from a lower acquisition tax of 2% in comparison with what is levied from an individual upon purchase of a property (approximately 6%). Furthermore, the regime of a joint stock company in Lebanon generally benefits from an exemption of taxes on the transfer of shares. Families are able to decide and change their minds easily as to the distribution of shares in these companies as assignment of shares is made tax-free.

Since the enactment of the 2022 Budget Law, however, the transfer of shares held in real estate companies is no longer tax-free. A 3% tax now applies to the assignment of shares for a Lebanese shareholder and a 5% tax applies to that for a foreign shareholder.

Despite some advantages that the real estate entity presents, it should be recalled that its structure is governed by the Lebanese code of commerce, which imposes some limitations with regard to the nationality of shareholders and board members, in addition to the limitation on real estate acquisition by foreigners, which remains applicable, even if the acquisition occurs indirectly, that is, through a real estate company.

Joint bank account. Joint bank accounts benefit from a special regime in Lebanon that allows the exclusion of the assets in these accounts from the inheritance estate of the deceased co-holder. In practice, people tend to use this special regime as a planning tool through which they can ensure the automatic transfer of the account to the co-holder(s) that they choose, without the application of inheritance law to this account.

No significant developments were registered due to the pandemic in this regard.

Not applicable, see Section 3.

Not applicable, see Section 3.

Not applicable, see Section 3.

Not applicable, see Section 3.

Not applicable, see Section 3.

Not applicable, see Section 3.