EL NEIHOM OFFICE
TAX ADVISOR
CPA
SINCE 1989

SOME FEATURES OF LIBYAN INCOME TAX LAW

Income tax law of Libya is consist of 130 Articles divided to six parts as follow:

PART I

From article no. 1 to article no. 34 they explain the general provision

Article 1" Shall be subject to tax in accordance with the provision of this law, every income arising in the Libyan Arab Republic, from any tangible or intangible assets situated therein, or from any activity or work carried out in the Libyan Arab Republic.

Income derived from abroad shall be subject to tax in the cases provided for in this law.

PART II

From article no. 35 to article no. 85 and consists of 8 chapters which include rules of specific taxes

Chapter 1 Specific taxes in general

Article 35” A specific tax shall be imposed, at the rates and according to the provision specified hereafter, upon each of the following incomes:

1. Income from immovable property.

2. Income from agriculture.

3. Income from trade, industry and crafts.

4. Income from liberal professions.

5. Wages, salaries and the like.

6. Resident’s income from abroad.

7. Income from bank deposits and savings accounts.

Chapter 2 Taxes on income from immovable property

Article 41” The tax shall apply to the income resulting from the exploitation of immovable property, whatever the means of exploitation may be, whether a built-up property, or waste ground other than agricultural land, annexed to building or independent therefrom and whether fenced or not.

The tax shall also apply to the consideration given for the utilization of agricultural land, whether such consideration is fixed without taking into account the yield of land

The income shall be deemed as realized as soon as the right thereto is established, regardless of the likelihood of its collection.

Chapter 3 Tax on income from agriculture

Article 49 the tax shall apply to the net income derived from pure agricultural exploitation of agricultural land, whether such land be planted with trees or not.

Shall not be considered income derived from agriculture, any fixed consideration received by the proprietor or holder of land in returned for the utilization same by third party which consideration is fixed without taking into account the yield of land.

Chapter 4” Tax on income from trade industry and crafts.

Article 53” The tax shall be charged upon the income arising from the exercise of any commercial or industrial activity, or one relating crafts as well as upon every income arising from any other source not subject to another specific tax, unless the income is exempted by a special provision of the law.

Shall also be subject to the tax any income from a commercial act even though it be occasional and not connected with the profession and in this case, the taxpayer shall not enjoy the exemption refereed to in article 36. The Implementing Regulation shall determine the manner of collecting the tax on such income, the dates of payment thereof and the required statements and declarations.

For the application of this tax, it shall be considered as a commercial act.

1. parcelling of land and the sale of same after carrying out the necessary leveling.

2. Sub-leasing of non-agricultural land and furnished or unfurnished buildings.

3. Commission business of any kind.

Chapter 5 Tax on income from Liberal Professions

Article 66” The tax shall be chargeable upon incomes from liberal professions independently exercised by the taxpayer ,the basic element of which being work.

The taxpayer shall be exempted from this tax for the first two years of his practice. this period includes the period during which the taxpayer practices his profession outside the Libyan Arab Republic.”

Chapter 6 tax on wages salaries and the like

Article 70 “The tax shall apply to the wages, salaries and similar incomes derived from any service or employment whether permanent or temporary, including:

1. Salaries, wages, allowance, commission, bonuses, advantages, representation allowance and all periodical and non-periodical payments in cash or in kind payable by the Government or public juristic persons, to any person whether resident in the Libyan Arabic Republic or abroad.

2. Salaries, wages, allowance, commission, bonuses, advantages, representation allowance and all periodical and non-periodical payments in cash or in kind payable by companies, bodies and individuals for services rendered in the Libyan Arabic republic, to any person whether resident therein or abroad, or for services rendered outside the Libyan Arabic republic if the payer, in this case, has no independent foreign organization abroad with separate accounts, undertaking such payments.

3. Salaries, wages, allowance, commission, bonuses, advantages, representation allowance and all periodical and non-periodical payments in cash or in kind payable by the foreign Governments and international bodies for services rendered in the Libyan Arab Republic, unless exempted by a law or an international agreement.

The following shall be excluded:

1. Subscription made by the taxpayer to the Pension or Social Insurance Scheme or to any other scheme substituted therefor and approved by the Minister.

2. Amounts received by the taxpayer in return for actual expenses incurred by him in the performance of his work.

3. Amounts paid by a taxpayer as a results of a disciplinary penalty, by way of deduction or fine.

4. End of service indemnities granted to employees or workers upon termination of their services.

Chapter 7 Tax on residents’ income from abroad

Article 78 “Shall be subject to tax any kind of income derived from abroad by Libyan or foreign residents.

Wages salaries and the like, payable to persons referred to in the preceding paragraph, for work performed by them abroad shall, however, be excluded from this tax.”

Chapter 8 Tax on interest of bank deposit and savings accounts.

Article 83 The following shall be subject to tax:

1. Interest of bank deposits of whatever term.

2. Interest on savings accounts with banks, in excess of the exemption limits provided in article 2 (2) hereof.

PART III

From article no 86 to article no 92, which explain rules of general tax on income

Article 86” The general tax on income shall be charged yearly upon the income of natural persons, whether Libyan or foreigners.

The tax shall be paid on the first of January of every year in respect of income realized by the taxpayer during the previous year. However, the tax shall fall due upon the death of the taxpayer or upon his departure from the country.

PART IV

From article no 93 to article no 104, explaining rules of tax on companies

Article 93 “the tax shall be charged upon the incomes derived from the Libyan Arab republic and abroad, by companies and branches of foreign companies whatever their activity or purpose may be.

For the application of this law <companies > means the companies subject to the Libyan Commercial law, including public companies with the exception of general partnerships.

<Branches of foreign companies > means the activities and capital invested by foreign companies in the Libyan Arab Republic, whatever their organization or legal formation may be.

PART V

From article no 105 to article no 114, which mentioned all kinds of penalties.

PART VI

From article no 115 to article no 130 for final provisions.