Tax Residency in Lebanon
1. Criteria for Determining Tax Residency in Lebanon
According to Article 1 of the Lebanese Income Tax Law, an individual is considered a tax resident in Lebanon if they meet any of the following criteria:
- They have their domicile in Lebanon.
- They have their habitual abode in Lebanon.
- They have spent more than 183 days in Lebanon during a calendar year.
For entities, the Income Tax Law provides criteria based on the entity's incorporation or management and control in Lebanon.
The rationale behind these criteria is to ensure that individuals and entities with significant ties to Lebanon, either through physical presence or establishment, are subject to taxation on their worldwide income. By establishing clear criteria for tax residency, the legislation aims to prevent tax evasion and ensure that individuals and entities contribute to Lebanon's tax revenues in line with their economic activities within the country.
2. Impact of International Tax Treaties on Tax Residency Criteria
Lebanon has entered into numerous tax treaties (Double Taxation Treaties or DTTs) with various countries to prevent double taxation and promote cross-border trade and investment. These treaties may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
For instance, under the Lebanon-France tax treaty, an individual is considered a resident of Lebanon if they have their permanent home in Lebanon. However, if an individual has a permanent home in both Lebanon and France, they will be considered a resident of the country where they have the closest personal and economic ties.
The treaty also specifies tie-breaker rules for individuals considered residents of both Lebanon and France under each country's domestic law.
These treaty-specific modifications aim to provide clarity and prevent double taxation by establishing clear rules for determining tax residency in cases involving cross-border activities. They reflect the mutual agreement between Lebanon and the treaty partner country to facilitate tax compliance and enhance economic cooperation between the two countries.
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