L1: Lebanon

International Succession Laws

Edited by:  Nicola Saccardo and Piers Master, Charles Russell Speechlys LLP

Publisher: Bloomsbury Professional

Publication Date: December 2024

Authors: Carine Tohme and Nour Abi Rashed 

This chapter was last updated in November 2024.

• Introduction and general principles
• Intestate succession and forced heirship
• Testamentary succession: Lebanese and foreign wills
• Overview of administration procedures
• Trusts, foundations, and other planning structures
• Taxation

 

Introduction and general principles

Introduction and background information

L1.1

Lebanon has a unique intercommunal system that is deeply rooted in its history and reflected in its legal practice. The country is known for its diverse religious and ethnic communities that transformed the legal and judicial systems into hybrid systems, combining elements of both civil and religious law.

The civil law system includes, inter alia, commercial, civil, criminal and public law, and is based on the French legal tradition; it is therefore governed by civil laws and subject to the jurisdiction of national courts. By contrast, personal status matters, such as marriage, divorce and inheritance, are, in principle, governed by religious laws and fall under the jurisdiction of religious courts, each catering to specific religious communities. The main religious courts include Christian courts (for different Christian denominations), Sunni courts, Shia courts and Druze courts.

Inheritance matters and succession planning reflect the complex interplay between civil and religious legal systems in Lebanon. As an exception to the principle according to which the religious system governs inheritance matters, the inheritance of all nonMohamadi is governed by a civil inheritance law, that of 23/06/1959 (Official Gazette No 31/59, 24 June 1959) and falls under the jurisdiction of national civil courts.

Based on the above, this publication will provide information on the basic rules of succession and recognition of trusts in Lebanon in accordance with the civil inheritance system applicable to non-Mohamadi, which falls under the scope of the law of 23/06/1959 excluding the religious system governed by Sharia.

General principles of succession and rights of inheritance Place and time of opening of the inheritance

L1.2

Under Lebanese law, succession is opened at the moment of death (or presumed moment of death) of a person. The assets constitute the inheritance and encompass all rights which are not extinguished with death, movable and immovable assets, debts and credits.

Governing law

L1.3

The law governing inheritance under Lebanese international law is determined by the nationality of the deceased rather than their place of residence. This principle is established in article 10 of Decree No 60/1936 and is further reinforced concerning real estate assets in article 231 of the Immovable Property Code (Decree No 3339/1930).

Competent jurisdiction

L1.4

The competent jurisdictions for non-Mohamadi’s inheritance procedures are the civil courts, which exercise territorial jurisdiction based on the situs of the deceased's last domicile.

In principle, the unique judge of the civil court (specifically, the chamber ruling on personal status matters) is the competent court to request the issuance of an inheritance certificate (Hassr Erth) as will be further detailed below, provided such action remains gracious (ie non-disputed) and does not involve any dispute pertaining to the identification of heirs or the allocation of inheritance shares. The jurisdiction remains for the unique judge if a dispute occurred involving personal claims and claims related to movable or immovable property that do not exceed a value of LBP 100 million. For similar claims exceeding the said amount, the chamber of the first instance court will take over the jurisdiction.

Inheritance incapacity

L1.5

In general, any person can inherit from a Lebanese national. However, the Lebanese civil law on inheritance states some cases of inheritance incapacity as follows:

First, in theory, foreigners can be called upon to inherit from a Lebanese national under the same conditions as another Lebanese national would inherit. However, this principle recognises an exception based on the idea of reciprocity: non-Lebanese nationals may only inherit if and to the extent that a Lebanese national could inherit from them.

Additionally, religious differences are not, in principle, a cause of inheritance incapacity; nevertheless, this principle is also tempered by the principle of reciprocity: any person whose religion forbids the deceased from inheriting, is subject to a similar incapacity.

Moreover, the Lebanese civil law on inheritance excludes from succession ‘adulterous’ and ‘incest’ children. The ‘adulterous’ child is one who was born out of the union of two non-married individuals, where one or both of them are married to a third party, while the ‘incest’ child is one who was born out of the union of two individuals who are related in blood.

With regard to ‘natural’ (discriminatorily denominated 'illegitimate' in the law), and adoptive children, the civil law sets forth special provisions applicable to their inheritance, elaborated further in para L1.17 below.

Inheritance estate

L1.6

In principle, the inheritance estate comprises all movable and immovable assets owned by the deceased at the time of death. The estate includes:

• movable assets: cash, personal belongings, vehicles, etc;
• immovable assets: real estate properties, land, etc;
• debts and liabilities: any debts owed by the deceased, and which must be settled before distributing the estate to heirs.

Matrimonial property rights on death

L1.7

Lebanese law does not foresee any matrimonial regime that shall govern marital property. In the absence of such regime, the principle of separation of property applies to the assets of two married individuals, even if such assets were acquired by one of the spouses during their marriage.

Consequently, in the case of demise of one of the spouses, each spouse maintains the full ownership of his/her own estate and participates as an heir in the inheritance of the deceased spouse, as will be detailed further below.

L1.8

Intestate succession takes place when an individual passes away without having made a will or when the will is revoked. In both these situations, including the situation where a will exists without specifying how the deceased's assets should be distributed, the succession will be governed by the statutory rules of intestacy. Under Lebanese law, there is no differentiation between movable and immovable property in matters of intestate succession; both are processed in the same manner.

Intestate succession

L1.9

According to the civil inheritance law applicable to non-Mohamadi, upon the demise of the deceased the estate shall first be allocated to satisfy the following order of payments: (1) that which is necessary to conduct the funeral of the deceased; (2) the deceased's debts; and (3) what the deceased included in a will (if any, within the extent permissible by law). The remainder shall be allocated to the deceased's heirs as determined by the law according to a three-class division:

• The first class is made up of the descendants of the deceased: his children and grandchildren.
• The second class is made up of the deceased’s father and mother, and their descendants (sisters, brothers, nieces, nephews).
• The third class is made up of grandparents and their descendants (aunts, uncles, cousins).

Each of these divisions prevails over the one that follows it. Heirs who belong to the second class cannot inherit when they are in competition with the heirs of the first class, and the heirs of the third class cannot inherit when they come into competition with the heirs of the second and first classes.

There are exceptions to this rule of class, namely an exception for the benefit of parents surviving the death of a child and for the benefit of the surviving spouse. Both would inherit anyway.

In addition, succession is subject to the principle of equality which excludes any gender discrimination. Similarly, the equality of the maternal branch with the paternal branch applies. Practically, the inheritance will be divided into two masses: one mass granted to the paternal branch and the other mass granted to the maternal branch while respecting the rule of the class.

Statutory allocation

L1.10

The application of the intestacy rules in accordance with the Lebanese civil inheritance law shall lead to a certain allocation of the estate's assets, which depends on the class of the surviving heirs, as well as the cohabitation of the classes of heirs.

The first class of heirs, that is, the inheritor's children and their descendants, shall inherit equally without any gender discrimination between males and females. If there is a deceased child among the first class of heirs, the latter's descendants shall replace him/her in the inheritor's estate and shall receive the same part that should have been allocated to his/her surviving parent; this part shall be divided equally among them.

A sixth of the estate shall be allocated to the deceased's surviving parents, or one of them, whenever the deceased has descendants. If both parents are living each one gets onetwelfth. If one of them is deceased, the other gets the whole sixth.

If the first class of heirs does not exist, the estate shall be allocated to the inheritor's parents in equal parts. If one of the parents is deceased, his/her part of the estate shall be allocated to his/her descendant(s) in equal parts. If the deceased parent does not have any descendants, the latter's part of the estate shall then be allocated to the other surviving parent. If both parents were deceased before the demise of the inheritor, the descendants of each of the parents should inherit equally the part of the estate that should have been allocated to their parent if he/she was alive.

If the deceased does not have any surviving descendants, nor any parents or descendants thereof, the estate shall then be allocated to the grandparents. If one of the grandparents is deceased, then his/her descendants should equally inherit his/her part of the estate; otherwise, and in the absence of any descendants, his/her part of the estate shall be allocated to the other surviving grandparent.

The inheritor's surviving spouse shall inherit a quarter of the estate in the presence of heirs from the first class; half of the estate in the presence only of the inheritor’s parent(s) or sibling(s); and five-sixths of the estate in the presence only of the inheritor’s grandparents.

In the event that the inheritor's spouse is the only surviving heir out of the three classes of heirs listed above upon demise, the full estate shall then be allocated to this spouse.

Only if none of the heirs listed above has survived the inheritor's demise will the estate be fully allocated to the State.

Forced heirship

Forced heirship principle and its application

L1.11

The Lebanese civil inheritance law applicable to non-Mohamadi provides for a 'forced heirship' rule according to which a portion of an individual's estate is reserved to certain heirs in certain proportions. The said rule is applicable irrespective of the terms of the deceased's will and is considered part of Lebanese public order. That said, any will that surpasses the use of the disposable estate shall be reduced in proportion to the statutory reserved portions if contested by any of the forced heirship rights' holders.

The protected heirs under Lebanese civil inheritance law are the inheritor's descendants, parents, and spouse. In the event that the contemplated will breaches the forced heirship rule, only the protected heirs (or any of them), their successors, or representatives, are entitled to request the reduction of the will in accordance with the reserved portions.

For the purposes of the application of this rule, the estate shall include the net assets of the deceased after deducting any debts thereof, in addition to all assets gifted during his/her lifetime, the value of which shall be estimated at the moment of their donation.

Reserved portions according to the forced heirship rule

L1.12

The reserved portions of the protected heirs, being the inheritor's ascendants, spouse, and parent(s), are determined as a percentage of the deceased's estate, depending on whether such heirs survive the inheritor's demise individually or together with other protected heirs.

Treatment of lifetime gifts in calculating inheritance rights

L1.13

Lifetime gifts and donations are regulated by the Lebanese code of obligations and contracts that sets forth the obligation of registration before the Lebanese land register, the donation of real estate or real property rights.

As detailed above, the estate includes the net assets of the deceased, from which any debts should be deducted. For the sake of calculating the reserved portion only, such portion also includes the assets gifted during the deceased’s lifetime which are valued at the moment of their donation. However, some accounts of the deceased transacted during his/her lifetime will not be deducted as detailed subsequently in paras L1.14–L1.16 below.

Survivorship accounts and payable on death accounts

L1.14

Survivorship accounts and payable on death accounts do not form part of the inheritance estate and are not calculated as inheritance rights.

Payable on death insurance accounts

L1.15

Generally, in the event that an insurance is contracted for the benefit of a third party(ies) without a determination of beneficiaries, or for the benefit of the insurer's heirs or successors, the insured accounts shall then be considered as part of the deceased's estate. Otherwise, and if insurance is contracted for the benefit of a determined beneficiary, the accounts payable thereof upon the demise of the insurer shall not constitute part of the deceased's estate. The beneficiary shall be considered entitled to such accounts as of the date of the execution of the insurance contract. Furthermore, insurance accounts do not form part of the estate, in the sense that neither insurance payable accounts nor the insurance instalments paid by the insurer during his/her lifetime shall be considered for the calculation of the reserved portions in application of the forced heirship rule.

If the nominated beneficiaries also happen to be statutory heirs and no indication as to the allocation of the accounts is made by the insured, the beneficiaries shall benefit from the payable amounts according to their respective portions of the estate. Their right as beneficiaries of the payable on death insurance accounts remains unchanged, even if they waive their inheritance right. The condition to be able to benefit from such a right is for the beneficiary(ies) to be alive when the payable accounts become due, unless expressly provided otherwise in the insurance contract.

Survivorship accounts

L1.16

Joint bank accounts have had a special status vis-à-vis inheritance law since the enactment of the Lebanese law on bank joint accounts in 1961. According to this law, in the case of the demise of a co-holder of the joint account, the surviving co-holder is entitled to dispose of the joint account unilaterally and in full.

In this situation, the bank shall not disclose any information relating to the contemplated account to the heirs of the deceased co-holder, unless expressly provided otherwise in the contract governing the joint account. This said, and in principle, the liquidity of the joint account does not form part of the deceased's estate nor the deceased's lifetime donations, unless expressly stipulated otherwise in the documents of the joint account opening.

In contrast, the attitude of Lebanese banks towards heirs is completely different when it comes to an individual account, in which case, the bank shall freeze the account until the issuance of the certificate of inheritance determining the heirs of the deceased and their respective portions of the estate, based on which the bank shall then transfer the remainder of the account to the nominated heirs.

Other categories of heirs

L1.17

The Lebanese civil law on inheritance sets forth special provisions applicable to ‘natural’ (discriminatorily denominated 'illegitimate' in the law) and adoptive children, who shall inherit from their ascendants, but in lower portions compared with the first class of heirs, and under certain conditions as detailed hereunder.

The natural child contemplated by the provisions of the inheritance law is a child born from the union of two non-married individuals, who are not related in blood in a way that precludes their marriage and neither of whom is married to a third party.

A natural child may be entitled to a portion of the inheritance only if the child's filiation to his/her inheritor parent has been acknowledged and declared, either willingly by the parent or by virtue of judicial proceedings as detailed further in L1.30–L1.32 below.

Where the natural child is entitled to the inheritance, his/her inheritance portion shall be determined as follows:

• a quarter of the portion the child would have been entitled to if he/she was legitimate, if there are surviving legitimate descendants of the inheritor;
• half the portion the child would have been entitled to if he/she was legitimate, if there are no legitimate surviving descendants, but only ascendants or legitimate siblings of the inheritor or their legitimate descendants;
• three-quarters of the estate if none of the above heirs survived the inheritor's demise; and
• the full estate if there are no other surviving heirs.

The same principles shall apply to the inheritance of an adopted child with respect to the child's rights and portions in the intestate inheritance of the adoptive child's deceased parent. The same portions of rights are also applicable in the case of the deceased parent's will for both the natural and adoptive child. The law is, nonetheless, not clear on this matter, and case law has not had enough opportunities to develop it further.

It is therefore assumed by most doctrinal theses that the natural child and adoptive child have the same aforementioned portions applicable to their reserved parts in the will of their deceased parent.

It is worth noting that same-sex marriages are not allowed under Lebanese law, and therefore, all the categories of heirs provided for under the law are meant to be related to legally conventional marriages only.

Furthermore, the civil inheritance law applicable to non-Mohamadi does not foresee any inheritance rights in the situation of a multiplicity of spouses as polygamy is not allowed under civil law.

L1.18

There is testamentary succession when the deceased has left a valid will. As long as the testator has testamentary capacity at the time of executing the will, the testator may include provisions regarding the distribution of his/her assets, provided it respects the forced heirship rule as specified above in para to avoid annulment or reduction (see L1.11–L1.12).

Formalities and validity conditions

Form of the will

L1.19

A valid will executed in Lebanon can take the form of either an official deed or a holographic document. The official deed of a will is construed and executed before a notary public, whereas a holographic will, handwritten by the testator, must be signed and dated by the testator and then personally deposited by the testator or his/her legal representative at the notary public. The holographic will must be deposited in a red waxsealed envelope, and the sealing must be ratified by the notary public. A reference to the existence of the will must be made by the notary public in a special record.

The will of a Lebanese national executed abroad may be construed and ratified in the same way as detailed above or in accordance with the laws and regulations set forth in the foreign country under the system of which the will is being executed. A holographic will executed by a Lebanese national abroad is subject to the same conditions of deposit before a notary public or, as the case may be, a Lebanese consul.

Revocation of the will

L1.20

The revocation of a will is possible through the execution of a subsequent will in the official or holographic form, provided it is deposited at the notary public in the same conditions detailed in para L1.19 above, whereby the testator declares the revocation of the previous will.

In the event that the subsequent will does not incorporate an express withdrawal of the previous will, it shall implicitly annul and replace all the provisions of the previous will that are contrary or inconsistent with the provisions of the new will.

An implicit revocation of a will also occurs when the testator disposes before his/her demise of the asset(s) that had been bequeathed in the will.

Acceptance and refusal of the will

L1.21

The explicit or implicit acceptance of a will shall make the will binding following the demise of the testator, noting that the will can only be either fully accepted or fully refuted by the beneficiaries. It can also be accepted by some of the beneficiaries and refuted by others. The effects of the acceptance can only take place after the demise of the testator, and any refusal or waiver from benefiting from the will occurring prior to such demise shall not have any effect.

Validity of the will

General conditions of validity

L1.22

Generally, a valid will must be construed and executed by the testator individually and is invalid if it was construed by more than one person.

A will is considered null and void if it provides for impossible or prohibited conditions, or for conditions that are contrary to public order (ordre public) and social morality, such as financing terrorist activities. If such conditions are not the main motive for the execution of the will, then only these conditions shall be annulled while the will remains valid. A will that has the effect of freezing assets is considered invalid unless it incorporates a wakf (as detailed in para L1.41 below), in which case it shall be governed by the regulations applicable to the wakf creation.

Conditions concerning the testator

L1.23

The testator must be sane, have full capacity to transact a donation and be above the legal age (ie 18 years old).

Conditions concerning the legatee/beneficiary

L1.24

A will is valid for any person, whether belonging to the pool of heirs or not, as well as to a foetus born alive, provided that the legatee is not statutorily considered as incapable of inheriting, in which case the clause benefiting that person shall be annulled.

The beneficiary of a will shall be determined by the testator personally; otherwise, any clause of the will that is executed for the benefit of a legatee who is unable to be determined upon the testator's demise is invalid and shall therefore be annulled. The legatee can legitimately be a religious entity, charity or other public entity that has legal capacity.

If the beneficiary is non-Lebanese, the reciprocity principle shall apply, validating the will merely to the extent that the law of the beneficiary's foreign country allows the execution of a testament in favour of a Lebanese national.

Enforcement

Enforcement of a domestic will through an executor

L1.25

The testator may appoint one or more executor(s) to enforce the will, provided such executor enjoys full legal capacity and civil rights.

The testator may also determine the role of the will's executor. Otherwise, the executor’s role shall be to manage the estate, pay its debts and distribute its assets as recommended by the testator, and within the extents permissible by law.

The executor shall be liable for his/her negligence and for the damages incurred by the estate due to his/her work. The general rules of an agent's liability shall apply to the executor.

A valid will that complies with the aforementioned requirements is regarded as an official document and may be executed directly at the procedure department without the necessity of a transaction intended to confer executive force, such as an executive formula or the issuance of a ruling based on the right.

As for the request for execution, this is done through a petition submitted by the legatee or the executor of the will, and the prior mentioned department relies on taking the necessary measures to implement the will.

Enforcement of foreign wills in Lebanon

L1.26

Lebanon is not currently party to the Convention of 5 October 1961 on the Conflicts of Laws Relating to the Form of Testamentary Dispositions; therefore, the provisions of the Lebanese civil procedure code shall be applicable to the enforcement of foreign wills in Lebanon.

According to applicable laws, for foreign judgments and decisions to produce their full effect in Lebanon, they must be subject to a special procedure requesting their 'exequatur' before Lebanese courts. The request for exequatur must be submitted by one of the legatees of the will to the court of appeal of his/her place of residence or of the place of localisation of the assets gifted in the will, or otherwise, to the President of the court of appeal in Beirut, who would issue a decision approving or refusing the requested exequatur.

The decision to grant an exequatur for a foreign will to be recognised and enforced in Lebanon depends on the fulfilment of several conditions. These conditions pertain to: (1) the validity of the will's form, either under the laws of the country where it was construed or under Lebanese laws; and (2) the validity of its content, which must be compliant with Lebanese public order, provided in all cases that the condition of reciprocity between Lebanon and the country where the will was formed be fulfilled whenever the testator is not Lebanese.

Among the main reasons for the court to refuse granting an exequatur to a foreign will is its violation of the forced heirship rule detailed above, which constitutes a breach of Lebanese public order.

As for a will drawn up in foreign countries and deposited with the Lebanese consul, this will be equivalent to a will drawn up in Lebanon, and is executed directly at the procedure department.

Information publicly known after death

L1.27

In contrast to many other countries, Lebanon does not have any record or register of wills to which reference may be made if searching for a will or testament. However, in practice, if potential heirs of a deceased person doubt that the latter left a will, it is possible to solicit the Minister of Interior who can request the information across all the notaries in Lebanon. Such situations are rare as, upon demise, the notary public, the will’s executor, and/or the deceased’s lawyer will disclose the existence of a will, if any, to the inheritors.

Administration of the estate

L1.28

As previously mentioned under courts’ jurisdiction (see para L1.4), the courts of the last residence of the deceased shall have jurisdiction to administer the deceased’s estate. This remains the case regardless of the place of situation of the inherited assets, as the inheritance procedures under Lebanese law are deemed to be subject to a universality principle. Furthermore, Lebanese courts have jurisdiction over the process of inheritance whenever the deceased is a Lebanese national, even if the demise occurred outside Lebanese territory.

The administration of the estate includes movable and immovable assets, without any statutory distinction as to the treatment of both types of assets.

Any heir can voluntarily waive his/her right to the estate of the inheritor. However, such a waiver can only be full (covering all the estate) and can only produce its effect if it occurs following the demise of the inheritor as pacts on future succession are prohibited by law. Furthermore, the withdrawal of inheritance is required to be clear, express, and declared by virtue of the certificate of inheritance as detailed subsequently.

The administration of the estate can only be started by requesting the issuance of a certificate of inheritance before a competent judge.

Certificate of inheritance

L1.29

The certificate of inheritance (Hassr Erth) under Lebanese law is a judgment issued by the first-instance court – a single judge of the place of the last residence of the deceased. It has the function of officially declaring the death of the individual and stating its legal consequences, specifying the heirs of the deceased as well as their respective portions in the inheritance. This certification grants the heirs authorisation to dispose of the estate's assets after payment of inheritance taxes, in accordance with their respective shares, and therefore to enforce and register the transfer of assets before the relevant entities (eg banks) and authorities (eg real estate registrar).

Any of the legal heirs or their legal representatives (duly appointed by a general power of attorney) can file a request for the issuance of the certificate of inheritance.

It is worth noting that, under Lebanese civil law, there is no room for the appointment of an executor or administrator when intestacy rules apply; the heirs shall then administer the inheritance process and execute any transfer of ownership under the supervision of competent courts.

The heir(s) requesting the issuance of the said certificate must provide the courts with the following documents:

• family record extract (ekhraj kayd aa'ili) issued by the local authority of the deceased's main residence or origin;
• death certificate (wathikat wafat) issued by the local authority of the place of demise;
• inheritance declaration statement (ifadat hassr 'erth) issued by the local authority of the deceased's residence (requires an individual record extract for each heir);
• copy of the deceased's identity card; and
• financial and rights declaration form – transfer fee (namouthaj tasrih bi al'amwal w alhoukouk – rasm al'entikal), representing an inventory of all the deceased's assets and rights. This inventory can include one of the assets only at this stage of submission of the certificate request. It must be completed later on during the valuation phase following the certificate issuance (see para L1.44–L.46).

Once issued, the certificate of inheritance has a value of a first-instance 'gratuitous decision' (decision issued without any dispute). This can be challenged by any damaged party or third party to the decision before the same court that issued it within eight days of notification, or within the duration of the general statute of limitation (ten years from the date of issuance) in case no notification was made.

A third party damaged by the decision of the inheritance certificate shall also be able to file for an annulment of such a decision for breach of law, within 30 days of being duly served a notification of the decision, or otherwise, for the whole duration of the time limit on his/her rights.

Opposition on a will

L1.30

There is a possibility to file an objection to the will by an interested party such as an heir, claiming the invalidity of the will, or its violation of the forced heirship rule. After scheduling a hearing, the court will issue a ruling on the validity. If upheld, the will shall be executed as written; if invalidated, the estate will be distributed according to intestate succession laws. If either party disagrees with the court’s decision, they have the right to appeal to a higher court within a specified time frame.

Action for affiliation

L1.31

The contemplated civil law on succession provides for the possibility to recognise paternity and maternity for the ‘natural’ child, referred to in the law as the ‘illegitimate child’. The recognition of the paternity of an illegitimate child can be established either willingly by the parent or by virtue of judicial proceedings.

Voluntary recognition

L1.32

The voluntary recognition should, in principle, take the form of a notarial deed, and may be included in a will. It can only produce effect if it occurs before the child reaches 18 years of age.

It is important to note that, the voluntary recognition has effect only in relation to the person who issued it. In other terms, the acknowledgment act of one parent, does not produce any effect regarding the child’s filiation to the other parent.

Judicial declaration of paternity or maternity

L1.33

The provisions of the contemplated law pertaining to the judicial action for affiliation do not determine which courts have jurisdiction to rule on such action; they merely mention the term ‘competent courts’ without naming them.

Consequently, and as the Law dated 2 April 1951 on the Determination of the powers of religious authorities of Christian and Israeli communities provides under its article 4 that the actions on affiliation fall under the jurisdiction of religious authorities (along with the legitimacy of children and its effects, adoption and custody matters), the case law had produced contradictory decisions on the subject matter leading to the issuance of judgments in affiliation actions from both civil and religious courts, each reserving their respective jurisdiction on the matter.

In an enlightening decision of the Court of Cassation dated 3 January 1991, the court explained that the enumeration stated in article 4 of the aforementioned law regarding the matters for which religious courts have jurisdiction is restrictive rather than enumerative. This decision was complemented by another comprehensive decision of the court of cassation (59/2009) dated 30 July 2009, which further clarified that, as long as the judicial action seeks merely to acknowledge the affiliation of the child to one of the parents whereby the ‘illegitimate’ quality of the child is undisputed for its occurrence outside the frame of a marriage, the jurisdiction of religious courts is excluded and the subject matter shall fall within the general jurisdictional scope of civil courts.

No trusts and no foundations

Lebanese law is silent on trusts and foundations

L1.34

Lebanese legal jargon does not include the terms 'trust' or 'foundation'. Neither construct is governed by any law in Lebanon and they are not recognised as such for succession planning purposes, which means that they are rarely used by Lebanese individuals, especially those individuals and families who only have assets within Lebanese territories.

Under the civil law system, Lebanese legislation expressly prohibits the conclusion of any agreement whose object pertains to a future succession of a living individual based on article 188 of the Lebanese COC, and also, as noted earlier, forbids a will from producing the effect of freezing an asset or making it inalienable in respect of the provisions of article 51 of the Lebanese civil inheritance law (except within the limits of wakf).

Such principles as well as the absence of a legal framework for this type of succession planning make it harder for Lebanese individuals to consider the trust and foundation as mechanisms for structuring and planning within Lebanese territory; although trusts and foundations are and can be used in several situations for planning.

Treatment of foreign trusts and foundations

L1.35

Over the past few decades, interest in creating foreign trusts and foundations abroad has been growing among Lebanese nationals.

As Lebanon has not ratified the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition (‘HCCH 1985 Trusts Convention’), the country is placed 'off the map' of international trusts' recognition and makes it difficult to achieve clear and objective guidelines on trust enforcement in Lebanon.

The outcome of cases related to trusts and foundations before courts, will largely depend on the judge’s qualification and classification of a trust or a foundation. Additionally, some Lebanese authors erroneously qualify trusts as ‘fiduciary acts’ or ‘succession contracts’ and assimilate foundations to charitable associations, due to the fact that these constructs do not exist in Lebanese law.

What is beyond doubt is that if a trust or a foundation would produce effects that violate Lebanese public order, this would lead to their annulment and non-recognition.

There are specific legal provisions and public order principles that clearly cannot be violated, as noted below.

Breach of the statute governing the acquisition of real estate property by non-Lebanese persons

L1.36

Legislative Decree No 11614 dated 4 January 1969 and its amendments (notably Law No 296/2001) set forth prohibitions and limitations to the acquisition by non-Lebanese persons of real estate rights in Lebanon. According to the said decree, non-Lebanese persons (physical and legal entities) are not allowed to acquire, whether directly or indirectly (through companies), more than 3,000m2 across the total surface of Lebanon without special permission.

Above this ceiling, the acquisition by non-Lebanese persons of real estate property in Lebanon requires a presidential decree. However, the law does not stipulate any objective conditions for obtaining such a decree, the issuance of which remains at the discretion of the President of the State.

Consequently, a foreign trustee aiming at owning real estate property situated in Lebanon must abide by the aforementioned limitation in force. Any structure that violates these principles will not be recognised or enforced in Lebanon and can trigger criminal sanctions.

Violation of Lebanese public order

L1.37

A typical example of a public order rule in succession law is unequivocally the forced heirship rule set forth in the civil inheritance law applicable to non-Mohamadi. This has been endorsed by Lebanese courts as a mandatory rule, the violation of which, by any means, shall prevent the recognition and enforcement of the related mechanisms by Lebanese courts, if challenged.

In practice, if the structure of a foreign trust or foundation reduces the rights of the heirs protected by the forced heirship rules to less than their statutorily reserved portions, the heirs shall have the right to raise their right to ownership before courts and object to the enforcement of the contemplated structure.

Finally, Lebanon does not offer any legislative tools specific trustees' liability, for protecting the prejudiced interests of beneficiaries or for enforcing sanctions where necessary. The general principles of liability included the Lebanese Code of Obligations and Contract might apply on a case-by-case basis.

The only recognised trustee duty: a fiscal obligation

L1.38

Although Lebanese legislation does not govern the legal construct of a trust, nonetheless, it foresees a fiscal obligation for Lebanese residents who act as trustees for trusts created outside Lebanon.

The only Lebanese law currently in force that mentions the term 'trust' is Law No 74 dated 27 October 2016, according to which, any individual residing in Lebanon and carrying out, on a professional basis or otherwise, a trustee activity for a foreign trust, regardless of its nature or type, shall declare his/her activity and pay taxes on the income generated by the trustee's activity.

Available planning structures and techniques

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The structures made expressly available by Lebanese legislation for wealth planning and management are, on one hand, the fiduciary, reserved however for banks and financial institutions and subjected to restricted conditions, and on the other hand, the wakf, a construct inherited from the Ottoman era and kept in place for specific purposes. These tools are permissible without prejudice to the rooted principle of prohibition of pacts pertaining to future successions.

Fiduciary

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The fiduciary contract was introduced in Lebanon for the first time in 1996 by virtue of Law No 520 entitled 'Development of the Financial Market and Fiduciary Contracts'. The relatively newly established fiduciary is merely financial, aiming, as its title indicates, at developing financial markets rather than serving as an estate-planning tool.

According to the said law, only banks, financial establishments, and other establishments regulated by the Central Bank have the authority to act as fiduciary agents. The conveyance of assets to a fiduciary entails the transfer of the ownership of such assets, which the fiduciary has to keep separate from his/her/its personal estate. The investor may act as either the grantor or the beneficiary in this arrangement.

The fiduciary shall act on behalf of the beneficiary, and the latter shall bear responsibility for the economic decisions that the former takes. Additionally, the decisions taken by the fiduciary shall always be for the benefit of the beneficiary and not for his/her/its personal gain. It remains the case that fiduciary contracts shall be void if they do not abide by Lebanese public order.

Wakf

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As noted above, the wakf is an Ottoman-inherited construct that manifests itself in the perpetual immobilisation of an asset, with a revenue that is allocated for charitable purposes. The wakf can be either religious (wakf Khairi), whereby the property is immobilised for the benefit of a charitable institution that receives all the income deriving therefrom, or domestic (wakf ahli, zirri), attributed to a certain category of beneficiary determined by the settler for a certain period. The period shall be limited to two family generations, after which the immobilised property shall be transferred to a charity or be affected to the public interest.

The wakf is a legal person created by virtue of a unilateral act that shall have the effect of immobilising a property/properties owned by the settler when executing such an act. The executed act will then have the effect of making the property inalienable, nontransferable among living individuals, non-transmissible upon death and protected from any mortgage. The wakf is represented and managed by an administrator. It is irrevocable and can only take effect upon its registration before the real estate registrar to which the property is affiliated. One of the major advantages of establishing a wakf is benefiting from statutory tax exemptions, as detailed under paras L1.34–L1.38 below, provided that the wakf remains in conformity with its limited purpose and does not compete with commercial enterprises.

The wakf is not a practical construct for estate planning because its enforcement is not clear in law nor protected by courts; thus, it is not currently a common practice in Lebanon, except to a certain extent by some religious orders and a few families through structures conceived decades ago.

Alternative legal vehicles used for estate planning

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In the absence of a variety of legal constructions for estate planning and structuring in the Lebanese legal environment, Lebanese nationals have created some conventional means of using general legal tools for the purpose of planning and structuring, such as agencies, companies and bank accounts under the joint-account bank regime detailed in para L1.16 above.

Territoriality and residence

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In principle, inheritance taxes in Lebanon are levied on all movable and immovable assets situated in Lebanon and transmitted by a Lebanese or non-Lebanese person upon demise, regardless of the inheritor's usual place of residence or domicile, but without prejudice to contrary dispositions of tax treaties. Inheritance taxes are also due on all movable and immovable assets situated outside Lebanon and transmitted upon the demise of a Lebanese or non-Lebanese person who was resident in Lebanon prior to such demise, again without prejudice to contrary dispositions of tax treaties.

That said, tax liability upon inheritance relies on both territoriality and the residence principle, with priority for the latter, without prejudice, however, to contrary provisions of bilateral tax treaties.

The criteria of 'residence' for the purpose of levying inheritance taxes are defined in Decree No 2827/1959. According to the decree, residents for inheritance tax purposes are deemed to be deceased individuals who were residing in Lebanon prior to their demise, or had an enterprise in Lebanon where they are used to carry out an activity. In 2016, an amendment to article 1 of Law No 44/2008 with respect to the definition of 'tax residency in Lebanon' added that any individual is considered tax resident in Lebanon, in addition to the aforementioned criteria, if one:

• has an abode in Lebanon permanently available to one's family members (ie spouse and dependent children); or
• is present in Lebanon for more than 183 days in any given 12-month period.

Inheritance and gift taxes Inheritance tax

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Several steps are required for the determination of the taxable amount pertaining to inheritance and the calculation of the tax due.

First, an inventory of the deceased's assets shall be established, as well as the debts of the inheritance. It will then be possible to determine the portion of inheritance of every heir on which a progressive and linear tax rate shall be applicable, following the application of deductions and allowances depending on the personal and social status of each heir.

The valuation of assets pertaining to inheritance is determined by the administration. The assets transferred through inheritance are valued at their real market value captured at the day of the demise, the date upon which inheritance tax becomes due.

According to Legislative Decree No 146/1959, which determines the taxes applicable to gift and inheritance, taxes apply to certain assets including, in addition to the assets mentioned in paras L1.34–L1.38 above:

• all movable and immovable assets transferred during the two years preceding the demise of the inheritor, whether directly or through a nominee/agent, to an heir or legatee having such quality at the moment of the transaction;
• the financial securities and other assimilated assets (shares, titles, funds, etc) that are given and/or registered under the name of an heir or legatee and transferred by the inheritor during the year preceding the demise; and
• the amounts and securities deposited in joint or collective bank accounts, or in safe-deposit boxes, which shall be considered as equally owned by all the holders of the account or the safe, unless the contrary was proved.

Although it might seem difficult for the fiscal administration to establish concealment pertaining to the value of inherited assets, tax inspectors benefit from a wide variety of verification tools to control the price and valuation of an asset. Such tools include carrying out investigations through field visits or via comparison with recent similar transactions.

Gift tax

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Even though Law No 520/1996 is silent with respect to tax liability, gift tax might apply to certain fiduciary transactions carried out under fiduciary Law No 520/1996 detailed above, notably when such transactions operate a free transfer of an asset or a movable right constituting the fiduciary fund to a third-party beneficiary, through the fiduciary or trustee.

Gift tax is also relevant for manual donations, which traditionally pass from hand to hand. Practically, some manual donations pertaining to certain tangible and movable assets (eg jewellery, stones, furniture and similar objects), or tangible securities escape any taxation for lack of detectability despite the clarity of legal provisions requiring the declaration of such donations to tax authorities and imposing a tax right on these assets. In fact, the tax administration is not capable of detecting the existence of these assets nor of tracing their transfer from one person to the other. Therefore, it remains very difficult for tax authorities to establish an inventory of manual donations and to include them in the inheritance mass of the deceased in order to impose taxes.

Calculation of inheritance and gift tax

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Once the certificate of inheritance and other documents required are deposited before tax authorities, the tax administration will evaluate the succession file and proceed with additional verifications or valuations, if needed, in order to reach a final valuation of assets based on which the taxes are calculated. A tax notice will then be delivered separately to each heir. Therefore, if one or more heir(s) do(es) not pay the tax due on his/her portion of the inheritance, the inheritance process shall not be blocked for the other heirs according to the principle of the autonomy of each inheritance portion.

Taxes levied on inheritance are of two types: (1) a fixed tax rate of five per thousand due on the gross inheritance portion of each heir; and (2) a progressive tax rate that varies depending on the class of heirs and which applies to the net value of each heir's portion of the estate after relevant deductions.

The fixed tax rate is five per thousand for all movable and immovable assets transmitted to the heirs, after the deduction of LBP 200 million from the gross value of such assets.

The progressive tax is levied on the net inheritance portion transmitted to an heir or transferred to a recipient, according to the rates detailed in the table above and after operating the deduction of relevant exemptions detailed thereunder.

The payment of inheritance tax can be made in five equal instalments, with interest of 1 per cent per month. In this case, the public treasury has a priority creditor right on the mass of assets transmitted and can proceed with the inscription of such a right before the real estate registrar for property, as well as before the commercial registrar in respect of corporate structures.

Inheritance tax and gift tax deductions and exemptions

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Once the valuation of the inheritance is established, tax authorities will be able to determine the value of the tax base out of which inheritance taxes shall be levied. They will then apply the multiple exemptions and deductions set forth by the law.

Deductible charges

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Tax is levied on the net value of the transmitted inheritance portion after the deduction of certain charges, such as the debts due on the estate and supported by documents of proof, including funeral expenses and the fixed tax rate of five per thousand and other types of debts previously contracted by the deceased.

Exemptions

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Some exemptions on inheritance taxes pertain to the inherited assets, while others are personal, and depend on the personal and social status of each heir.

Exemptions pertaining to the transmitted assets include:

• retirement pensions and termination indemnities, including all amounts paid in relation thereto;
• the value or securities exonerated by virtue of a special legal provisions;
• portraits and sculptures representing the deceased and/or his/her family members, and considered as personal objects; and
• libraries, works of art, old books, stamps and other collections, as well as furniture existing in the domicile of the deceased within the limit of a maximum of LBP 40 million.

Personal exemptions are applied on the tax due on the net inheritance portion of each heir not exceeding:

• LBP 600 million for the descendants, spouses, the father and the mother of the deceased;
• LBP 240 million for the ascendants other than the deceased's parents, as well as for his/her siblings; and
• LBP 120 million for the other heirs.

The following also apply to the value of the exonerated portion of the deceased's children:

• LBP 360 million in case the child suffers from a permanent disability rendering him/her unfit to work;
• LBP 24 million on the year or fraction of the year preceding the 18th year of age of the minor child;
• LBP 240 million when the heir handles the expenses of a spouse; and
• LBP 120 million for every child that has not reached 18 years of age (for a maximum of three children).

As for gifts, the amounts exempted from tax rights include the following:

• aids and subventions offered by a public fund;
• any gift and the part of the gift not exceeding LBP 14.4 million; and
• any donation or portion of a donation for a caritative, religious, cultural or sports charity not exceeding LBP 900 million.

Taxation of trust, foundation and wakf transactions

Taxation of a trust

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Lebanon does not have a law governing a trust as such; neither does it offer any particular tax regime for a trust. Consequently, trust transactions concerning Lebanese assets or Lebanese individuals will be analysed and characterised on a case-by-case basis and assimilated to a certain existent tax regime. The choice of the applicable tax regime will depend, inter alia, on the nature of the settlor’s legal person (company or individual), his/her/its residence, the location of the assets and the nature of the trust (revocable or irrevocable), and hence on the characterisation of the transaction as a gift or will.

Based on Lebanese tax principles and foreign comparative laws (notably France and Luxembourg), there are reasons to believe that as long as the trust is revocable (ie the settlor has the right to revoke the trust or have all, or a portion, of the trust property returned to him/her), the designation of different classes of beneficiaries in the trust deed by a settlor resident in Lebanon or for Lebanese-located assets will not itself trigger tax consequences, as for instance liability for a gift tax.

Hence, tax will not, in principle, be due out of the mere creation of the trust nor the transfer of Lebanese assets from Lebanon to a trust account abroad. This analysis is supported by the opinion of some respected tax advisors in Lebanon but is yet to be practically confirmed by legislative texts or fiscal authorities.

In the event that the trust becomes irrevocable due to the settlor's demise, two scenarios should be considered:

• If the settlor is not a Lebanese resident upon demise, Lebanese authorities would not have the power to impose any taxation in this regard.
• If the settlor is residing in Lebanon upon his/her demise, the integral value of the trust fund would probably be imposable under Lebanese inheritance tax, in accordance with the principles stated above.

Conversely, an irrevocable trust designating heirs or third parties as beneficiaries (irrespective of the class of beneficiaries) can constitute, as some eminent Lebanese tax advisors believe, a donation that would be subject to gift tax in Lebanon upon the creation of the trust, and subject to declaration within 90 days of the establishment of the trust in accordance with the provisions of the aforementioned Legislative Decree No 146 dated 12 June 1959 and its amendments.

Another tax liability triggered by the trust is that of Lebanese-resident beneficiaries. If the beneficiaries of any trust are tax residents in Lebanon, they are liable to tax on income generated and distributed from the trust's assets.

According to the Lebanese Income Tax Law, income from movable assets is treated independently from business revenue or wages and salaries. Under the said law, any income from movable assets (interest, dividends, arrears, bonds, etc) whether derived in Lebanon or reverting to a Lebanese resident (local and foreign proceeds) is considered as liable to the local (Lebanese) tax.

Practically, the tax liability of capital gains on movable revenue is due on the beneficiary's worldwide income at the rate of 10 per cent whenever deemed residing in Lebanon; except as specified in a double taxation treaty (if any) and provided that such revenue is effectively distributed or paid to the beneficiary and not capitalised or carried forward.

The declaration and payment by the beneficiary of the tax on revenue from movable assets is possible under two procedures:

• If the payment is made by or through any Lebanese-resident person entitled to withhold tax payments (mainly banks and similar), the latter will be bound to withhold the applicable tax of 10 per cent and remit it to the Treasury at the end of each semester.
• In the event that the beneficiary of the foreign shares/bonds and movable assets, domiciled in Lebanon, collects abroad, personally or through an agent, proceeds deriving from the said shares/bonds or movable assets, the beneficiary will be compelled to file a declaration (tax return) of the said taxes before 1 March each year showing the total amount of earnings collected during the preceding year and pay it to the Treasury before 1 April.

The last tax liability generated by the creation of a trust is that of a Lebanese resident trustee. Based on Law No 74 dated 27 October 2016 detailed in para L1.43 above, a Lebanese resident carrying out trustee activities for a foreign trust is liable to the declaration and payment of income tax in Lebanon, based on the real profit tax regime, on the totality of income generated out of such activities. The rate of income tax will depend on whether the trustee is a legal entity, in which case the Corporate Income Tax (CIT) rate will be applicable, or an individual, in which case the personal income tax (PIT) rate will be applicable.

Taxation of a foundation

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Since foundations are not governed by Lebanese laws nor by any specific tax regime, the applicable tax regime for the creation of foundations will be assimilated into an existing regime, depending on the characterisation applied by judges or authorities to such a foundation.

If characterised as an association (the most common scenario, as previously explained), the foundation will be exempt from CIT, as well as capital gains tax (in the case of a transfer of property) and will only be liable for gift taxes on funds received, with an exoneration amounting up to LBP 900 million on funds received, provided the foundation remains in compliance with the association principles and avoids generating commercial revenue.

Taxation of wakf

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Religious wakf (wakf Khairi) is subject to the fiscal regime applicable to public authorities, exempt from any direct and indirect tax, and any tax assimilated thereto. Domestic wakf (wakf ahli) is subject to the fiscal regime of associations, as detailed above, provided its scope of activity remains limited to charitable objectives and that it does not compete with private corporations.

International taxation: framework for double taxation treaties and measures against tax evasion

Double taxation treaties (DTTs)

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Lebanon currently has 29 DTTs with foreign jurisdictions as follows: Armenia, Algeria, Bahrain, Belarus, Bulgaria, Cyprus, the Czech Republic, Egypt, France, Iran, Italy, Jordan, Kuwait, Morocco, Malaysia, Malta, Pakistan, Poland, Qatar, Romania, Russia, Senegal, the Sultanate of Oman, Syria, Tunisia, Turkey, the United Arab Emirates, Ukraine and Yemen. These DTTs mainly eliminate double taxation on income such as income derived from dividends, salaries, capital gains, interest gains and royalties. The DTT with France includes further details, such as the method of elimination of double taxation for gift tax and inheritance tax.

Combating tax evasion, exchange of information and Common Reporting Standards (CRS) Standards

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Lebanon has taken many actions to further combat tax evasion and enhance transparency, which is part of the process of equipping tax authorities in Lebanon to be better able to trace and sanction attempts to evade tax.

The adoption in 2015 of Law No 44 on Fighting Money-Laundering and Terrorism criminalised tax evasion by including it as a crime that can be a source of money laundering.

Tax evasion was subsequently defined by the Budget Law of 2019 as the act of 'knowingly and intentionally refraining from declaring and/or paying the taxes and duties due to the State and payable on the income or on the fortune, and/or refraining from paying or remitting the taxes a person has the obligation to withhold at source, and/or declaring lower taxes or withdrawing the declaration and payment in an illegal manner by the use of illegitimate means'.

Lebanon has also signed the Multilateral Competent Authority Agreement (MCAA) for the automatic exchange of financial account information based on the CRS framework. This was ratified and implemented by domestic Law No 55/2016 on the Exchange of Information for Tax Purposes, to facilitate the automatic and non-automatic exchange of information between Lebanon and other participating jurisdictions.

Consequently, Lebanon has committed to implementing the CRS for the automatic exchange of financial account information according to which financial institutions in Lebanon are required to identify and report financial accounts held by tax residents of CRS-participating jurisdictions to the Lebanese authorities, who will then exchange this information with the tax authorities of those jurisdictions on an annual basis. The practical implementation of the automatic exchange of information and CRS is determined by Decree No 1022/2017.