LIBYA Law and Practice Contributed by: Salaheddin El Busefi, Heba Gedwar and Mahmud Zahaf, Zahaf & Partners
4.5 Employee Representations There is legislation that protects the formation of workers and trade unions to ensure that their members are represented. Such unions and associations are formed to ensure that mem - bers’ rights are protected, raise professional competence and encourage innovative, cul - tural and scientific development. Any interested employee can join an existing union or create a new one as long as it is focused solely on pro - fessional fields. 5. Tax Law 5.1 Taxes Applicable to Employees/ Employers All working persons are subject to income tax which the employer is obliged to file with the tax authority. Workers are subject to tax on the first LYD1,200 of their salary at a rate of 5% and a further 10% on their salary above this. Employ - ers are also required to make mandatory social contribution payments on behalf of any employ - ee with a valid work contract. These contribu - tions are calculated at a total rate of 20.5% of the employee’s salary and are shared among the employee, employer, and the state, contribut - ing 5.125%, 14.350% and 1.025% respectively. Foreign employers pay the same social contri - butions save that they further bear the 1.025% paid by the state for Libyan employers. An addi - tional “Jihad Tax” of 3% on most salaries was recently revoked as unconstitutional by way of a Supreme Court judgment issued by the con - stitutional circuit in February 2025. 5.2 Taxes Applicable to Businesses All national companies and non-national compa - nies that have a presence and operate in Libya are subject to corporate tax at a rate of 20% on net profits annually. The profits generated
from activity outside of Libya are also subject to corporate tax for national companies and non- national companies. There is stamp duty imposed on agreements and all documentary transactions such as administrative invoices, payments made to the tax authority and transfer of title. The rates for stamp duty vary on the value and type of docu - mentary transaction, but are typically between 1%-3% where, for example, contracts to sup - ply services command a 1% stamp duty while transfer of real title can be up to 3%. There is no VAT or sales tax in Libya. Libya is not a member of the OECD and so the two-pillar solution is not applicable. However, as Libyan tax legislation already poses a corporate tax of 20% on all businesses and companies that derive income from Libya, Libya is essen - tially well in line with the Pillar Two initiative and the 15% corporate tax expectation as a global minimum. 5.3 Available Tax Credits/Incentives All working persons and businesses are subject to income tax in Libya. This tax return is filed annually through a self-assessed declaration and work-related expenses are tax-deductible. Certain tax exemptions exist, such as on agricul - tural activity and income from educational mate - rial in scientific fields. Other exemptions on tax include end-of-service remuneration for employ - ees, contributions made to the pension system, income from charitable endowments and legal compensation received for damages. 5.4 Tax Consolidation The tax legislation does not specifically avail any tax consolidation rules and every legal entity is treated separately for the purposes of their tax liability. However, for holding companies and
463 CHAMBERS.COM
Powered by FlippingBook