Law No. 11 of 2004 on Income Tax and Its Executive Regulations

Law No. (11) of the year 1372 (2004) regarding Income Tax

The General People's Congress, Having reviewed the resolutions of the General People's Congresses held during their annual and basic sessions;

• In implementation of the resolutions of the General People's Congresses;
• After reviewing the Declaration on the Establishment of the Authority of the People;
• And the Great Green Charter on Human Rights in the Era of the Masses;
• And Law No. (20) of 1991 regarding the enhancement of freedom;
• And Law No. (1) of 1369 regarding the General People's Congresses and Popular Committees;
• And the Civil and Commercial Procedure Law;
• And Law No. (64) of 1973 regarding the issuance of the Income Tax Law and its amended laws; Has enacted the following law:

Chapter One: General Provisions

Article 1 All income generated within the Great Socialist People's Libyan Arab Jamahiriya from any assets, whether tangible or intangible, or from any activity or work, shall be subject to tax. Income generated outside the country shall be subject to tax under the conditions stipulated in this Law.

Article 2 Tax assessment based on a declaration submitted by the taxpayer regarding their income shall be paid based on this declaration after the deadline for submission specified in Article 10 of this Law has elapsed, and until the tax is assessed definitively.

Article 3 Tax shall be assessed definitively on every taxpayer based on the declaration referred to in the preceding article, if accepted by the Tax Authority. The assessment of this status shall be final and not subject to appeal.

Article 4 Without prejudice to the penalties stipulated in this Law, if the taxpayer refuses to submit the declaration referred to in Article 2, or submits it but it is not accepted by the Tax Authority, the Authority may estimate the income as it deems appropriate and assess the tax based on this estimation.

Article 5 In all cases, and subject to Article 3, the Tax Authority must notify the taxpayer of the tax assessment and its payment deadlines. The taxpayer has the right to appeal this assessment before the Primary Committee within forty-five days from the date of notification.

Article 6 The Primary Committees, established by a decision of the Secretary, shall adjudicate appeals submitted by interested parties regarding assessment declarations in application of this Law. Their formation, headquarters, jurisdictions, and members' allowances shall be determined by decision. Each committee shall be chaired by a judge from the Primary Court within whose jurisdiction the committee's headquarters is located, chosen by its general assembly, and shall include two financial sector employees of at least the ninth grade, preferably from the Tax Authority. The formation decision may include alternate members.

Article 7 The Primary Committee shall have jurisdiction to adjudicate all disputes between the taxpayer and the Tax Authority.

Article 8 The appeal shall be submitted via a petition deposited with the Primary Committee's Secretary, against a receipt, accompanied by proof of payment of a fee equal to 0.5% of the disputed tax, provided it does not fall below ten dinars, plus the payment of 20% of the disputed tax, or 30% for taxpayers who fail to submit their declaration within the deadline. The Committee Secretary shall send a copy of the petition to the Tax Authority for its opinion within thirty days of notification. The Committee Chair shall set a hearing date, notifying both parties at least one week in advance. The taxpayer shall recover the paid fee if the Committee rules in their favor, and the Committee shall determine the refundable portion in case of partial victory.

Article 9 The Committee may request the Tax Authority or the taxpayer to provide necessary documents and statements. Authority officials and the taxpayer may appear before the Committee, and the taxpayer may appoint a representative.

Article 10 A committee is only validly constituted with the presence of all its members. Hearings shall be confidential, and decisions shall be made by majority vote, reasoned, and signed by the Chair and members within thirty days of issuance. The Secretary shall notify both parties.

Article 11 Tax shall be due upon notification of the Primary Committee's decision, even if appealed.

Article 12 Both the Tax Authority and the taxpayer have the right to appeal the Primary Committee's decision before the Appeal Committee referred to in Article 13, within fifteen days of notification.

Article 13 The Appeal Committee(s), established by decision of the Secretary, shall adjudicate appeals against Primary Committee decisions. Each shall be chaired by the President of the Primary Court within whose jurisdiction it is located, and include one member of the relevant supervisory body (not below the tenth grade, nominated by the Secretary of the General People's Congress for the Supervisory Body) and one expert in commercial or accounting matters. Alternate members may be included.

Article 14 The appeal shall be submitted via a petition deposited with the Appeal Committee's Secretary, who shall notify the other party within fifteen days. If the appellant is the taxpayer, they must attach proof of payment of a fee equal to 1% of the tax assessed by the Primary Committee, provided it does not fall below twenty dinars. The procedures and rulings for appeals before the Primary Committee apply mutatis mutandis to the Appeal Committee. The Appeal Committee's decision shall be final.

Article 15 The Secretary of each committee shall be an official from the Tax Authority appointed by the Authority's Secretary.

Article 16 Without prejudice to penalties, any appeal or petition by taxpayers against companies and partnerships must be supported by the mandatory books and accounts kept under the law.

Article 17 The burden of proof before the Primary or Appeal Committees lies with the appellant.

Article 18 The Tax Authority may settle with the taxpayer upon request at any time before the Primary Committee's decision on the appeal is issued. The Authority's Secretary shall form settlement committees of three officials, excluding those who conducted the initial assessment. If settlement is reached, the appellant is deemed to have withdrawn their appeal, and the competent committee shall be notified.

Article 19 Assessment shall be final and conclusive if accepted by the taxpayer, not appealed within the deadline, or if appeals are exhausted. However, if the Authority discovers the taxpayer submitted a false or incomplete declaration, concealed activity or documents, provided false data, used fraudulent means to evade tax, or concealed taxable amounts, it may conduct an additional assessment without prejudice to penalties. The Authority may also modify the original assessment ex officio or upon request in case of estimation or calculation errors. The Authority must notify the taxpayer of any modifications, stating the basis and reasons. Additional assessments are appealable like original ones.

Article 20 Except where otherwise provided, tax shall be collected in a lump sum if it exceeds one hundred dinars; otherwise, it shall be collected in four installments, due periodically from the 10th to the 25th of each month of Spring, Summer, January, and December. Tax or the first installment shall be paid on or before the mentioned deadlines following the due date.

Article 21 Without prejudice to other penalties, delay in paying or submitting tax shall incur a fine of 1% of the due tax for each month or part thereof exceeding fifteen days, capped at 12%. This fine is collected simultaneously with the tax.

Article 22 Tax debt is due at the Tax Authority's office without need for demand.

Article 23 The tax year is the twelve-month period starting from the first of January each year. However, if the taxpayer's financial year differs due to the nature of their activity and accounts are regular, the Authority's Secretary may approve using the financial year for tax assessment.

Article 24 If the taxpayer is prevented from managing their activity or assets or is non-resident, the manager or holder of assets shall act as their representative for applying this Law.

Article 25 Upon the taxpayer's death, tax becomes due. Heirs or estate liquidators must submit a declaration up to the date of death and pay the tax within six months of death, before any estate distribution.

Article 26 The State's right to claim amounts due under this Law is extinguished after the lapse of the period.

Article 27 The taxpayer's right to claim refunds of overpaid amounts is extinguished after three years from the payment date, unless the right is claimed after Authority actions, in which case the limitation period starts from notification. The period is interrupted by a registered letter requesting refund.

Article 28 Courts may award interest on amounts ordered to be refunded to taxpayers.

Article 29 The Authority may enforce the sale of the taxpayer's assets, taxable activity, or part thereof, or any other disposition relinquishing rights to such assets or activity, provided it is documented by an official deed. In all cases, if strong evidence indicates a transaction aims to evade tax, the Authority may disregard it.

Article 30 Tax shall be assessed annually after the end of the tax year, unless otherwise provided. However, if the Authority fears tax evasion, it may estimate taxable income during the year, assess, and collect tax, without prejudice to penalties.

Article 31 If public treasury rights are threatened, the Authority's Secretary may, exceptionally, issue a seizure order for assets to satisfy tax, regardless of possession. Assets are seized provisionally and cannot be disposed of unless the seizure is lifted by court order, Authority decision, or after six months without notifying the taxpayer of the assessed amount.

Article 32 Tax and other state dues under this Law enjoy a priority lien on all debtors' assets, ranking after alimony and judicial expenses.

Article 33 For application purposes, notification is valid if signed by the addressee or legal representative, sent via registered mail with receipt, or delivered to an agent or employee. If the employee is absent, incapacitated, or refuses, it must be certified by another person, copies given to police, and a registered letter sent. If no known address, the document shall be posted on the Popular Committee's bulletin board for eight days, certified by the Basic Popular Conference.

Article 34 The following are exempt from tax:

1. Income of public legal entities, religious bodies, and other entities engaged in charity, social reform, or sports, recognized by the State.
2. Income from savings accounts in banks.
3. Income from charitable waqf (endowments).
4. Insurance life payouts upon death or after a fixed term, exceeding twenty thousand dinars.
5. Student income from scholarships or grants for study.
6. Compensation to families of martyrs, missing persons, or permanently disabled persons, exceeding twenty thousand dinars.
7. Income from authoring books, studies, and research in culture and science.
8. Agricultural activity income for ten years from the law's effective date.
9. Export activity income as defined in the Executive Regulations.
10. Income of public business units in popular sectors and the state's share in companies applying the "partner-worker" model.
11. Any other income exempt by law, treaty, or international agreement.

Chapter Two: Taxes on Individuals and Partnerships

Section One: General Provisions

Article 35 Subject to Article 72, this Chapter applies to income subject to corporate tax and to distributions of such income to shareholders.

Article 36 A specific tax shall be levied on the following incomes:

• Agricultural income (subject to Article 34.8).
• Commercial, industrial, and craft income.
• Income of partners in units applying the "partner-worker" model.
• Liberal professions income.
• Employment income and its rulings.
• Foreign income of residents.
• Bank deposit income.

Article 37 Natural persons with annual taxable income exceeding 1,200 dinars (single), 1,800 dinars (married, no dependents), or 2,400 dinars (married, widowed, or divorced with dependents) are exempt from taxes on incomes in Article 36(a-e). Widowed or divorced women acting as sole breadwinners are treated similarly. Also exempt from taxes on Article 36(a-e) incomes:

• Life insurance premiums for spouse or dependents, max 600 dinars/year.
• Accident or robbery insurance premiums for the taxpayer, max 420 dinars/year. Exemptions are prorated if the tax period is less than a year. Exemption applies only once per tax year. If multiple income sources exist, the exemption is deducted from the lowest-taxed source.

Article 38 Changes in marital or family status affect tax entitlement from the following month.

Article 39 Subject to Articles 55-63, every taxpayer must submit a written declaration of taxable income to the Authority within sixty days of the tax year's end, on prescribed forms and rules. If the year ended with a loss, the declaration must state the loss, supported by documents. Rules on declaration, loss calculation, cessation, and transfer apply to Articles 40-46.

Article 40 Subject to Articles 53-60, tax is determined annually based on net income during the tax year. Taxable income is based on operational results after deducting proven costs incurred to generate income, specifically:

• Depreciation of equipment, machinery, buildings, and all income-producing assets. Rates are set by Executive Regulations, capped at one-eighth of acquisition cost.
• Bad debts proven worthless during the accounting period, provided they are within business accounts or arise from business-related lending. Recovered amounts are taxable income.
• Social security contributions or equivalent systems, up to 10% of total employee remuneration.
• Taxes and fees paid due to the activity, excluding tax under this Chapter.
• Donations to recognized charitable entities, up to 2% of net income.

Article 41 Start-up costs necessary to commence activity are deductible as expenses at annual rates set by Executive Regulations. The following are NOT deductible:

• Other depreciation charges not in Article 40.
• Capital expenditures for asset improvement or enhancement (may be added to asset value and depreciated per Article 40).
• Personal or family expenses.
• Salaries or bonuses paid to the taxpayer, spouse, or minor children for their work.
• Reserves for losses, price drops, doubtful debts, or other purposes, or amounts contingent on conditions or future dates.

Article 42 Amounts added to profits or allocated to increase capital are taxable if previously deducted from gross income under Article 40. They are considered realized income in the year of distribution or transfer.

Article 43 If a year ends with a loss, it is carried forward to the next year and deducted from profits. If profits are insufficient, the remainder is carried forward to subsequent years up to the fifth year.

Article 44 If a taxpayer ceases an income-generating activity (permanently or temporarily), tax is collected on income up to the cessation date. The taxpayer must notify the Authority within sixty days and submit documents for tax liquidation.

Article 45 In case of total or partial transfer of activity, both parties must notify the Authority within sixty days. They are jointly liable for taxes due up to the transfer date for that tax year. The transferee may request a tax liability statement from the Authority, which must provide it within sixty days. Joint liability is limited to the stated amount, without prejudice to the Authority's rights against the transferor. If notified within the period, the transferor is discharged.

Article 46 Profit from selling the activity or any tangible or intangible asset is taxable. Profit is the difference between sale price and cost, excluding depreciation or Authority-estimated depreciation if accounts are regular. If sale price is below market value, market value applies. Changing the legal form of the activity, including merger, is treated as a sale.

Section Two: Agricultural Income Tax

Article 47 Tax applies to net income from pure agricultural exploitation of land, planted or not, without prejudice to Article 49. Income from landowners allowing others to use the land is not considered agricultural income.

Article 48 Tax rate is 5% annually.

Section Three: Commercial, Industrial, and Craft Income Tax

Article 49 Tax applies to income from commercial, industrial, or craft activities, even incidental to a profession, and to income from other sources subject to specific taxes, unless specifically exempted. Commercial activities include:

• Land subdivision and sale after preparatory works.
• Management and operation of fixed or movable productive or service properties by others.
• Brokerage of any kind.
• Exploitation of agricultural land by owners per Article 47(2). Executive Regulations shall specify collection methods, deadlines, and required declarations.

Article 50 Annual tax rate on commercial profits:

• First 10,000 dinars: 20%
• Next 10,000 dinars: 25%
• Next 10,000 dinars: 30%
• Excess: 35%

Article 51 Annual tax rate on industrial and craft profits:

• First 10,000 dinars: 15%
• Next 10,000 dinars: 20%
• Next 10,000 dinars: 25%
• Excess: 30%

Article 52 Tax on partnerships applies to the partner's share of partnership income. If the partnership contract grants a partner a fixed amount or share before distribution, it is considered part of their partnership income. The partnership management is responsible for submitting the declaration per Article 39. Partners must submit a declaration with the partnership return stating they do not claim the exemption in Article 37 for other taxable income, or they forfeit the right.

Section Four: Partners in "Partner-Worker" Units

Article 53 Income of all partners in units applying the "partner-worker" model is subject to tax.

Article 54 Annual tax rate:

• First 10,000 dinars: 10%
• Next 10,000 dinars: 15%
• Excess: 20% Tax is assessed definitively for each part of the year where taxable income is established, per Executive Regulations.

Article 55 All economic units applying the "partner-worker" model must remit tax to the Authority with a schedule listing partners and their income, per deadlines in Executive Regulations.

Section Five: Liberal Professions Income Tax

Article 56 Tax applies to income from independent liberal professions where labor is the primary element.

Article 57 Annual tax rate:

• First 10,000 dinars: 15%
• Next 10,000 dinars: 20%
• Next 10,000 dinars: 25%
• Excess: 30%

Section Six: Employment Income Tax

Article 58 Tax applies to employment income and related benefits from any service or position, permanent or temporary, including:

• Remuneration, allowances, commissions, bonuses, benefits, representation allowances, and all periodic or non-periodic cash or in-kind payments by public authorities or entities to any person, resident or non-resident. For government-funded entities, tax is withheld directly from the entity's budget.
• Remuneration, allowances, commissions, bonuses, benefits, representation allowances, and all periodic or non-periodic cash or in-kind payments by companies, entities, or individuals for services rendered to the Jamahiriya by persons residing inside or outside it, or for services rendered outside the Jamahiriya if the income obligor has a separate foreign organization with separate accounts.
• Allowances, commissions, bonuses, benefits, representation allowances, and all periodic or non-periodic cash or in-kind payments by foreign governments or international organizations for services rendered to the Jamahiriya, unless exempt by law or treaty. This tax does not apply to:

1. Social security or equivalent system contributions by the taxpayer.
2. Actual expenses incurred by the taxpayer to perform their work.
3. Deductions resulting from disciplinary penalties.