decision #323/1

The Ministry of Finance (MoF) has issued on the 15th May 2023 the decision #323/1 (attached a scanned copy) in application of the article 39 of the Budget Law 2022 (Law #10). According to this article of the Budget Law 2022, the capital gain (i.e. difference between the acquisition cost and the effective selling price) generated by individuals from the transfer of their shares in the following joint-stock companies (SAL) are subject to a tax equal to the transfer and registration fees on real estate properties (i.e. 3% for Lebanese nationals and 5% for foreigners):

1)      Companies whose sole or main object is to own lands or build properties.

2)      Companies whose main activity is trading real estate properties or real estate development.

3)      Companies with real estate properties (net value after depreciation) exceeding 50% of their total fixed assets.

A 50% discount on the tax due is applied if the transfer of shares is concluded between shareholders (including legal entities) or with their direct relatives (lineal ancestors or descendants) but excluding spouses.

The capital gain generated by individuals in other joint-stock companies (SAL) is exempted from this tax while capital gain generated by partners (including non-residents) in limited liability companies (SARL) is subject to capital gain tax according to the article 45 of the Income Tax Law with the obligation to declare this capital gain and pay the related tax within 2 months from the notarized transaction date.

Shareholders are allowed to do an exceptional revaluation of their shares for one time only before the 30 June 2023 to be performed by a certified public accountant member of the LACPA. The revaluation of the shares has to be done in Lebanese Pounds at their effective value at the publication date of the Budget Law 2022 (i.e. 15th November 2022).The revaluation variance is subject to 1% tax.

The seller has the obligation to declare the transfer of shares transaction and pay the related taxes within a period of two months from the transfer date according to new declaration forms to be prepared by the MoF, knowing that both the seller and the buyer are jointly liable to pay the taxes resulting from this transaction. The effective selling price of the shares has to be based on the company’s financial statements of the year preceding the transfer and the tax authorities have the right to challenge and modify the selling price according to the article 10 of the tax procedures law (Law #44).

The holding and offshore companies are exempted from capital gain tax on the transfer of shares in foreign companies while the holding company is also exempted from capital gain tax on the transfer of shares in Lebanese affiliated companies if these shares were held for more than two years.

The share transfer agreements are subject to the 4‰ fiscal stamp duty.

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