What is Personal income tax (PIT)?

Personal income tax (PIT) is levied on wages and salaries at progressive rates. The brackets for the progressive payroll tax rates became between 2% and 25%, instead of between 2% and 20%, as per Article 23 of Budget Law 2019, which amended Article 58 of the Income Tax Law.

According to the principle of territoriality, taxes on salaries are due in Lebanon if one of the following conditions is met:

The beneficiary of the salary is resident in Lebanon, regardless of the source of funding.
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.
The source of funding is in Lebanon, regardless of where the beneficiary resides or where the effort was made.

Personal Income Tax Rate

In Lebanon, the Personal Income Tax Rate is a tax collected from individuals and is imposed on different sources of income like labour, pensions, interest and dividends. The benchmark we use refers to the Top Marginal Tax Rate for individuals. Revenues from the Personal Income Tax Rate are an important source of income for the government of Lebanon.

Personal income tax (PIT) is levied on wages and salaries at progressive rates. The brackets for the progressive payroll tax rates became between 2% and 25%, instead of between 2% and 20%, as per Article 23 of Budget Law 2019, which amended Article 58 of the Income Tax Law. The new payroll tax rates are effective starting 1 August 2019.

These rates are reduced to half for retirement pensions and similar benefits.

PIT is also levied on business income (e.g. sole proprietorships, general partnerships) at progressive rates. The annual progressive brackets for income tax profits became between 4% and 25%, instead of between 4% and 21%, as per Article 24 of Budget Law 2019, which amended Article 32 of the Income Tax Law. The new rates for income tax profits are applicable starting the year 2019.

Taxable income according to the revised regulations:

Employee gross income (which includes salaries, wages, compensation, grants, bonuses, monetary and non-monetary benefits) is subject to taxes on salaries (articles 49, 50 of legislative decree # 144 – Lebanese Income Tax Law). Net taxable income is obtained after deducting from gross income certain expenses and charges (such as transportation allowance, representation allowance, food and cloths allowance and other similar expenses which are incurred by the employee in the normal course of the business; in addition to that are the amounts such as study, birth, marriage and death grants given by the company unanimously to all its employees; provided that these amounts are given in accordance with the same procedures of the Government Employees’ Cooperative) as well as family exemptions. For these allowances to be tax deductible they should be granted to the employees based on the work requirements i.e. if the company grants all employees a transportation allowance for coming to work then this is considered by the tax authorities as part of the benefits granted to the employees and is included in the employees taxable income however, transportation expenses incurred for business related matters are not included in the taxable income. In addition allowances provided are added to the basic salary for social security contribution salary base (articles 68, 69 of Law #13955 – Social Security Law).

Based on Decree #6263 dated January 18, 1995 a transportation allowance of LL.2,000 (payable on working days only) was exceptionally decreed for one year (renewable for another year if public transport was not revitalized- it was renewed for 1997 as per law # 9492 dated November 2,1996), this allowance is tax deductible and not to be included in the social security salary base computation. The same applies to a schooling allowance ranging between LL. 200,000 and LL. 500,000.

Taxable income

Net income less the annual family exemptions listed below:

1996 (Married, wife doesn’t work) 1996 (Married, wife works)

Single 7,500,000 —

Married without child 10,000,000 7,500,000

Married with 1 child 10,500,000 8,000,000

Married with 2 children 11,000,000 8,500,000

Married with 3 children 11,500,000 9,000,000

Married with 4 children 12,000,000 9,500,000

Married with 5 children 12,500,000 10,000,000

Tax calculation

From	Taxable income (A)	Tax Rate (B)	Computed Decrease (C)
0	6,000,000	2%	—-
6,000,000	15,000,000	4%	120,000
15,000,000	30,000,000	7%	360,000
30,000,000	60,000,000	11%	1,050,000
60,000,000	120,000,000	15%	3,300,000
120,000,000	HIGHER	20%	9,000,000

Instead of subdividing the taxable income into sections for tax calculation purposes, one can use the short cut method of calculation which does not require subdivision of income:

Shortcut method :

Multiply the yearly taxable income (A) by the appropriate tax rate (B). This amount is then subtracted from the respective computed decrease (C).

This is simplified as follows : Yearly Income tax = (A×B) – (C).

The total yearly income tax is then divided by the number of monthly payments to reach the tax deduction necessary.

Example:

A married employee with 3 children and an unemployed wife, Monthly salary : 2,000,000 LL.

Yearly income (1,000,000 × 12) = 24,000,000 LL.

Family exemption = 11,500,000

(A) Taxable income (24,000,0000-11,500,000) = 12,500,000

(B) % tax rate = 4 %

(C)computed decrease = 120,000

Calculation :