EMPLOYEES PERSONAL INCOME TAX 

 

1. 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. 

 

 

 2. 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 

 

 

3. Tax calculation  

Salaries are subject to progressive rates. The sliding scale is between 2% and 20%. In order to have monthly deductions on yearly income, the taxes are calculated using the yearly taxable income which is then divided by the number of monthly payments. The income tax rates as of 1/1/1996 are as follows : 

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. 

To clarify, the following example is given :

* 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 (see page 1)  = 11,500,000

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

(B) % tax rate  (see tax. rate schedule)  =  4 %

(C)computed decrease (see tax. rate schedule)  =  120,000 

Calculation : 

Yearly income tax : (12,500,000 × 4%) - 120,000  =  LL. 380,000.00

Monthly tax : (380,000 ÷ 12) = LL. 31,667