Municipal Rental Value Fees in Lebanon and Their Relationship to the Built Property Tax

Many property owners and tenants in Lebanon confuse the municipal fee on rental value with the built property tax collected by the Ministry of Finance.

Although both may be based on the annual rent or assessed rental value of a property, they are separate obligations. They differ in terms of the collecting authority, the liable taxpayer, the calculation method, assessment procedures, and appeal process.

1. Legal framework governing municipal fees

The principal legislation governing municipal fees in Lebanon is Law No. 60 of 12 August 1988 on Municipal Fees and Surcharges, published in the Official Gazette on 18 August 1988.

This law should be read together with:

• Legislative Decree No. 118 of 30 June 1977, known as the Municipalities Law, as amended;
• the Built Property Tax Law issued on 17 September 1962, as amended;
• annual Budget Laws that may amend minimum amounts, penalties, deadlines, and collection procedures;
• implementing decrees, decisions, and circulars issued by the Ministries of Interior and Municipalities and Finance;
• Council of State jurisprudence concerning assessments, exemptions, municipal charges, and appeals.

A distinction must be made between an amendment to the statutory rate itself and an amendment to minimum amounts, penalties, payment mechanisms, or collection procedures. Not every financial or budgetary amendment automatically increases the municipal fee rate.

2. What is “rental value”?

Rental value is the estimated annual value of the benefit provided by a built property, whether the property is:

• rented under a lease agreement;
• occupied by its owner;
• occupied by a member of the owner’s family;
• made available to another person free of charge or for a nominal amount;
• furnished or supplied with additional services and benefits.

Under Article 5 of the Municipal Fees Law, rental value is not necessarily limited to the basic rent. It may also include:

1. the basic rent;
2. charges for services provided by the landlord;
3. the value of benefits received by the landlord from the tenant;
4. the rental value of furniture and equipment;
5. expenses legally payable by the landlord but assumed by the tenant.

Consequently, the amount assessed by the municipality may differ from the basic rent written in the lease, particularly for furnished apartments, chalets, residential compounds, and properties supplied with additional services.

3. Municipal fee rates

Article 12 of Law No. 60/1988 provides for the following basic rates:

Depending on their actual use, non-residential premises may include shops, offices, warehouses, factories, professional premises, and certain commercial or tourism establishments.

The fact that a property is situated in a tourist or summer resort village does not automatically make the applicable rate 8.5%. The principal consideration is the property’s actual use: Is it a house or apartment used for residential purposes, or is it operated as a commercial, hotel, or tourism establishment?

Other legally authorised charges or service fees may result in a higher total appearing on a municipal bill. In such cases, the basic rental-value fee should be separated from every surcharge, with the legal basis for each amount clearly identified.

4. Who is responsible for paying the municipal fee?

As a general rule, the municipal rental-value fee is imposed on the occupant of the property, meaning:

• the tenant when the property is rented;
• the owner when the owner occupies the property;
• the actual beneficiary when the property is occupied free of charge or by permission of the owner.

This is an important distinction. The built property tax collected by the Ministry of Finance is principally imposed on the property owner or recipient of the property income, whereas the municipal rental-value fee is generally associated with the occupant.

A lease may provide that the landlord or tenant will bear particular taxes or fees. Such an agreement governs the relationship between the contracting parties but does not necessarily change the identity of the person legally liable to the public authority.

5. How does the municipality determine the annual rent?

A. When a registered lease exists

Where a genuine lease has been registered with the municipality, the annual rent stated in the agreement normally constitutes the starting point for determining rental value.

For example:

• Annual rent: USD 10,000
• Property use: Residential
• Preliminary basic municipal fee:

10,000×5%=500 USD10,000 \times 5\% = 500\text{ USD}

Payment would be made in the legally accepted currency and according to the official payment mechanism applicable at the time.

However, registration does not necessarily bind the municipality to the declared amount if it finds that:

• the contract is fictitious;
• the declared rent is nominal or unrealistic;
• the rent is clearly inconsistent with prevailing market values;
• the contract conceals furniture, services, or additional benefits;
• the property’s actual use differs from its declared use.

B. When no registered lease exists

Article 7 of the Municipal Fees Law permits a direct assessment in cases including:

• the absence of a registered lease;
• doubts concerning the authenticity or validity of the contract;
• owner occupation;
• free occupation or occupation in return for nominal rent.

The assessment committee established under Article 8 inspects the property and compares it with similar properties rented under comparable conditions. It must then prepare a report explaining the basis of its assessment.

The committee’s composition varies according to the category of municipality and may include municipal representatives, a Ministry of Finance representative, an engineer, or a local property expert.

6. Is rental value identical to the contractual rent?

Not necessarily.

Contractual rent is the amount agreed upon between the landlord and tenant. Rental value is the taxable base adopted by the competent authority.

The two amounts may be identical when the lease is genuine and reflects prevailing market conditions. They may differ when the assessment committee concludes that the contract does not represent the property’s actual rental value.

Lebanese Council of State jurisprudence has indicated that contractual rent is an important component of rental value but is not necessarily the only one. Furniture, services, benefits, and expenses assumed by the tenant may also be taken into consideration.

7. Built property tax payable to the State

In addition to municipal fees, built properties are subject to the built property tax collected by the Ministry of Finance under the law issued on 17 September 1962, as amended.

This tax differs from the municipal fee in several important respects:

The built property tax is calculated separately. Deductions, exemptions, progressive brackets, and other rules may apply according to the property’s nature, use, income, and the legislation applicable during the relevant tax year.

It should therefore not be calculated automatically by applying the municipal rate to the annual rent.

8. Relationship between a municipality-registered lease and the Ministry of Finance

Registering a lease with the municipality does not merge the municipal fee with the State’s built property tax. Nevertheless, it creates an official document that may be used by both administrations.

The relationship can be summarized as follows:

1. The lease proves that a rental relationship exists.
   It identifies the owner, tenant, duration, rent, and intended use of the premises.
2. The municipality initially considers the declared rent.
   It may nevertheless conduct a direct assessment if the amount is unrealistic or the contract appears fictitious.
3. The Ministry of Finance may rely on the lease.
   The Ministry may use it when determining the owner’s income subject to built property tax.
4. The declared figures should be consistent.
   An owner should not declare one rent to the municipality and a different rent to the Ministry of Finance without a lawful and factual justification.
5. The municipal assessment may not automatically bind the Ministry of Finance.
   Each authority exercises its own statutory assessment and audit powers, although information and assessments may be exchanged between them.
6. Municipal registration does not replace the tax declaration.
   The owner must still fulfil the applicable declaration and payment obligations before the Ministry of Finance.
7. Failure to register does not eliminate the liabilities.
   It may instead lead to direct assessment and penalties for late registration, non-declaration, or late payment.

9. Can a municipality increase the statutory rate by its own decision?

A municipal council cannot independently alter a fee rate fixed by law.

Under the principle of legality of taxation, the creation of a fee, the determination of its rate, and the identification of the liable person must have a legal basis.

Within the limits established by law, a municipality may:

• adopt its budget;
• organise collection procedures;
• conduct assessments through the competent committee;
• impose fees expressly authorised by legislation;
• adjust certain charges within legally permitted limits.

However, it cannot increase the residential rate from 5% to 8.5% merely because the municipality is located in a tourist village.

If an assessment appears to equal 8.5%, the taxpayer should request a detailed statement identifying:

• the adopted annual rental value;
• the basic fee rate;
• every additional fee or surcharge;
• the legal provision authorising each addition;
• the assessment year;
• any outstanding amounts or penalties.

10. Legislative updates and amendments

Budget Laws and other financial legislation addressing matters such as:

• minimum municipal charges;
• penalty amounts;
• declaration, assessment, and collection deadlines;
• settlement of outstanding liabilities and reductions of penalties;
• payment procedures following the depreciation of the Lebanese pound;
• revaluation of charges previously fixed at nominal amounts in Lebanese pounds;
• objections to assessments and municipal bills;
• exchange of information between municipalities and State authorities.

These amendments do not automatically repeal or replace the basic rule contained in Article 12.

For each financial year, the following should therefore be reviewed:

1. the updated and consolidated version of Law No. 60/1988;
2. the Budget Law applicable to the relevant year;
3. any law suspending deadlines or allowing settlement of penalties;
4. duly approved municipal decisions, where applicable;
5. the detailed municipal assessment statement;
6. the Ministry of Finance’s built property tax assessment.

11. Practical example

Assume that a residential apartment is rented under a genuine, municipality-registered lease for USD 6,000 per year.

Preliminary municipal fee

6,000×5%=300 USD6,000 \times 5\% = 300\text{ USD}

The amount would be paid according to the legally applicable currency and payment rules.

If the apartment is furnished and includes additional services, the municipality may assess its total rental value at USD 7,000. The fee would then be:

7,000×5%=350 USD7,000 \times 5\% = 350\text{ USD}

The built property tax would not automatically equal 5%. The Ministry of Finance would separately determine the taxable income, applicable deductions, and relevant tax rate or bracket.

12. Objecting to an assessment

If a taxpayer considers that the assessed rental value is excessive or that the property has been incorrectly classified, the taxpayer should:

• obtain a copy of the detailed municipal bill;
• request access to the assessment committee’s report;
• verify the property’s area and recorded use;
• submit the registered lease and payment receipts;
• lodge a written objection within the statutory deadline;
• retain proof that the objection was formally submitted;
• avoid relying solely on a verbal complaint to a municipal employee.

An objection to a municipal fee must be distinguished from an objection to the Ministry of Finance’s built property tax assessment. Each has separate procedures and deadlines.

Conclusion

The municipal rental-value fee and the State’s built property tax are separate obligations, even though both are connected to the rental value of a property.

Under Article 12 of Law No. 60/1988, the basic municipal rates are generally:

• 5% for residential premises;
• 7% for non-residential premises.

An 8.5% rate does not apply merely because a property is situated in a tourist or summer resort village. If that percentage appears on a municipal bill, the taxpayer should request a detailed breakdown to determine whether it includes another charge, surcharge, arrears, or penalty.

Finally, registering the annual rent with the municipality does not relieve the owner of obligations toward the Ministry of Finance. It also does not prevent either authority from reassessing the rental value when the declared rent is fictitious, nominal, or inconsistent with prevailing market conditions.

Legal notice: This article is provided for general informational purposes, based on legislation available up to September 2026. It does not constitute individual legal advice. The applicable Budget Law, updated consolidated legislation, and specific assessment notice should be reviewed before paying or formally challenging any fee or tax.