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Home > Publications > Taxation > Libyan taxation > The new Tax Legislation in Libya (Libyan tax law n° 07/2010).
The new Tax Legislation in Libya
In order to correct the insufficiencies of the former tax law, to reach tax justice, and to encourage local as well as foreign investors to do business in Libya, a new income tax law has been issued on 28th of January, 2010 listed under number (7) of the year 2010. The new laws has come into force as from 28/04/2010, the date of its publishing in Moudawant Al-Tashri'at ( The Official Gazette ) no. 4 of 2010.
This new tax law has a number of advantages which include the following main modifications:
1. Introducing many incentives to encourage investment and production and to achieve positive results in the field of tax outcome by:
A) Decreasing the tax rates of the different specific taxes imposed on the income of individuals as follows: on gross salary brackets of LYD12000 or LYD1000 per month the tax rate is 5 percent; on gross salary brackets of over LYD12000 or over LYD1000 per month, the tax rate is 10 percent.
B) Decreasing the tax rates applied on the profits of local as well as foreign companies to a flat rate of 20% of the net profit.
2. Amendment of the familial exemption limit to accord with the increasing expenditures of those having limited income, in a way to reflect the prevailing economical situations, taking into consideration the social conditions and the familial economic burdens.
This amendment has exempted from taxes imposed on the income resulting from wages and salaries, commerce, industry, crafts, free professions, as well as income of the partners and all concerned sides applying the dectum "partners not wage workers".
Therefore, every natural person whose annual income does not exceed LYD1,800 and single is entitled to such exemption; those who receive LYD2,400 if they are married with no dependents; those exempted also who receive LY2400 plus LYD300 per child per year if the person is married, widowed or divorced and has dependents .
3. The new tax law also provide for other exemptions, the most important of which are:
1- Exemption of Income of public corporate organizations, as well as income of religious bodies, institutions and charity societies recognized by the State along with recreation and sports activity organizations.
2- Exemption of income resulting from depositing in savings accounts with the banks.
3- Exemption of revenue of charity endowments (awqaf.)
4 - Exemption of the amounts paid to those entitled in the contracts for life insurance, whether in death or after the end of a specific period indicated in the contract.
5 - Exemption of income of students within the limits of the stipends and gratuities granted for study purposes.
6- Exemption of the compensations paid to the families of martyrs, lost or missing persons or having injuries causing permanent handicaps during their work.
7- Exemption of authors and researchers from the income tax on their production and researches with the purpose to encourage creative works and scientific research.
8- Exemption of the income resulting from pure agricultural activities to encourage farmers to produce food and to achieve food sufficiency.
9- Exemption of income resulting from export activity, as specified in the executive regulation for this law, so as to improve production and distribution of products
10- Exemption of foreign income of Libyan citizens and foreigners who are resident in Libya.
11- Exemption of pension incomes.
12- Exemption of development projects based on the General Peoples' Committee decisions.
13- Any other income exempted from tax under the Law or on the basis of an international treaty or agreement.
4. Preventing tax evasion, by introducing new rules and amending the old ones to block all gabs that might lead to tax evasion and to oblige all the concerned sides to co-operate with the tax authorities in order to increase the tax outcome.
5. Putting a top limit to the penalties imposed on the delay of tax payment (in case of delay of payment or delivery of the tax in the specified date, a fine of (1%) (one percent) of the value of due tax shall be imposed on each delay for a period of one month or a part thereof not less than fifteen days, at maximum fine of (12%) (twelve percent) of the tax value), Companies need to submit to the Tax Department an annual tax declaration on their income on the relevant form certified by an external auditor (certified accountant) within no later than four months from the end of their fiscal year.
This new tax law has a number of advantages which include the following main modifications:
1. Introducing many incentives to encourage investment and production and to achieve positive results in the field of tax outcome by:
A) Decreasing the tax rates of the different specific taxes imposed on the income of individuals as follows: on gross salary brackets of LYD12000 or LYD1000 per month the tax rate is 5 percent; on gross salary brackets of over LYD12000 or over LYD1000 per month, the tax rate is 10 percent.
B) Decreasing the tax rates applied on the profits of local as well as foreign companies to a flat rate of 20% of the net profit.
2. Amendment of the familial exemption limit to accord with the increasing expenditures of those having limited income, in a way to reflect the prevailing economical situations, taking into consideration the social conditions and the familial economic burdens.
This amendment has exempted from taxes imposed on the income resulting from wages and salaries, commerce, industry, crafts, free professions, as well as income of the partners and all concerned sides applying the dectum "partners not wage workers".
Therefore, every natural person whose annual income does not exceed LYD1,800 and single is entitled to such exemption; those who receive LYD2,400 if they are married with no dependents; those exempted also who receive LY2400 plus LYD300 per child per year if the person is married, widowed or divorced and has dependents .
3. The new tax law also provide for other exemptions, the most important of which are:
1- Exemption of Income of public corporate organizations, as well as income of religious bodies, institutions and charity societies recognized by the State along with recreation and sports activity organizations.
2- Exemption of income resulting from depositing in savings accounts with the banks.
3- Exemption of revenue of charity endowments (awqaf.)
4 - Exemption of the amounts paid to those entitled in the contracts for life insurance, whether in death or after the end of a specific period indicated in the contract.
5 - Exemption of income of students within the limits of the stipends and gratuities granted for study purposes.
6- Exemption of the compensations paid to the families of martyrs, lost or missing persons or having injuries causing permanent handicaps during their work.
7- Exemption of authors and researchers from the income tax on their production and researches with the purpose to encourage creative works and scientific research.
8- Exemption of the income resulting from pure agricultural activities to encourage farmers to produce food and to achieve food sufficiency.
9- Exemption of income resulting from export activity, as specified in the executive regulation for this law, so as to improve production and distribution of products
10- Exemption of foreign income of Libyan citizens and foreigners who are resident in Libya.
11- Exemption of pension incomes.
12- Exemption of development projects based on the General Peoples' Committee decisions.
13- Any other income exempted from tax under the Law or on the basis of an international treaty or agreement.
4. Preventing tax evasion, by introducing new rules and amending the old ones to block all gabs that might lead to tax evasion and to oblige all the concerned sides to co-operate with the tax authorities in order to increase the tax outcome.
5. Putting a top limit to the penalties imposed on the delay of tax payment (in case of delay of payment or delivery of the tax in the specified date, a fine of (1%) (one percent) of the value of due tax shall be imposed on each delay for a period of one month or a part thereof not less than fifteen days, at maximum fine of (12%) (twelve percent) of the tax value), Companies need to submit to the Tax Department an annual tax declaration on their income on the relevant form certified by an external auditor (certified accountant) within no later than four months from the end of their fiscal year.
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