Law 163-2020

Decision No. 193/1 dated 01/06/2020 relating to the determination of the implementing provisions of article 51 of the Law No. 497/2003 (income from movable capital).

The Ministry of Finance (MoF), has issued the here below Decision No. 193/1 dated 1/6/2020 published in the Official Gazette No. 25 dated 11/06/2020 defining the implementing provisions of article 51 of the Law No. 497/2003 modified by virtue of Laws No. 64/2017 (article 17), No.79/2018 (article 36) and No.144/2019 (article 31).

According to this Decision, are subject to the Income Tax Law and to the tax provided for by Chapter 3 of the said Law, interest and income from movable capital resulting from:

  1. 1-  Creditor accounts opened with banks operating in Lebanon, including savings accounts.
  2. 2-  Bank deposits and commitments regardless of their currency, including those belonging

    to non-residents. Such commitments include particularly:

  •   Deposit certificates issued by the Banque du Liban.
  •   Deposit certificates and debt securities issued by banks operating in Lebanon.
  •   Loans granted to banks operating in Lebanon, including those held by the Banque du

    Liban.

  •   Documentary Credit insurance and guarantees.
  1. 3-  Fiduciary accounts and investment portfolio management, including those established by virtue of Law No. 520 dated 6/6/1996 (development of the financial market and fiduciary contracts) or Law No. 234 dated 10 / 6/2000 (relating to the regulation of the financial intermediation profession)
  2. 4-  Bonds and Debt securities issued by Lebanese Joint-Stock Companies.
  3. 5-  Treasury Bonds in Lebanese currency, including those to which the Banque du Liban has

    subscribed.

Thus, interest and income of movable capital derived by fiduciary accounts and investment portfolio management provided for in either clause 3 of paragraph 1 of article 51 of Law No. 497/2003 and its modifications, Laws No.520/1996 and No. 234 dated 10/6/2000, include inter alia the amounts resulting from the operations provided for in article 1 of the Law No. 520/1996 and article 2 of the Law No.234/2000 as well as the decisions rendered by the Central Bank (Banque du Liban) in this regard which are executed and implemented by banks, financial institutions and financial intermediation institutions for the benefit of their clients.

It should be noted in this regard that the following are exempted from the tax:

 Debtor accounts opened with banks operating in Lebanon on behalf of the Lebanese Government, municipalities and public institutions.

 Debtor accounts opened with banks operating in Lebanon on behalf of foreign diplomatic and consular missions.

 Interbank deposits which constitute deposits whose term does not exceed 15 days as from the date of their deposit by the deposited bank with the depositary bank.

The adopted rates relating to the calculation of the tax of all net income subject to the tax of article 51 of Law No. 495/2003 are as follows:

  

7% until 07/31/2019 (included).
10% as from 08/01/2019 and until 07/31/2022 (included).

7% as from 08/01/2022.

However, income from movable capital which is not subject to the tax provided for in article 51 of the Law No. 497/2003 and its amendments remains subject to the general tax at the rate of 10% as provided by article 72 of the Income Tax Law. However, revenues falling within the scope of this article but derived abroad by a Lebanese resident will be assimilated to the revenues from foreign movable assets (proceeds from foreign shares and debentures) in compliance with the provisions of article 77 of the Income Tax Law and subject to the tax at the general rate of 10%. .

Interest and income from movable capital subject to the tax provided for in article 51 of the Law No. 497/2003 and its amendments belonging to taxpayers subject to the income tax on the basis of real profit, remain subject to the tax provided for in article 51. This tax is however deductible from the net profit but the revenue should be added to the profit of the company subject to corporate income tax.

Concerning interest and income from movable capital subject to the tax provided for in article 51 of the Law No. 497/2003 and its modifications belonging to taxpayers subject to the income tax on the basis of deemed profit taxation (lump sum profit) according to article 44 of the Income Tax Law, such interest and income will be subject to the tax provided for in the said article 44 (i.e. it is considered as part of the taxable income subject to deemed profit taxation) after the deduction of the paid tax.

It is to note however that in order to avoid double taxation, it has been set forth that, in the assumption that a tax has been already withheld at source on the investments of the fiduciary accounts and investment portfolio management, the revenues distributed by the said structures to the beneficiaries will not be taxed again as regards to the tax of article 51 of the Law No. 497/2003. Besides, it should be highlighted as well that no set-off or compensation may occur between the revenues subject of the aforesaid article and any realized loss on other investments and transactions of movable assets.

Before paying the interest and capital income subject to the tax provided for in article 51 of the Law No. 497/2003, all institutions are required to withhold the due tax, declare this tax and pay it to the Treasury within fifteen days following the end of the month during which the withholding tax was effected, under penalty of being held responsible for the unpaid amounts in addition to a penalty for late payment provided for by the Law on Tax Procedures.

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Law 163-2020

MoF Decision No. 171/1 dated 2705/2020 relating to the extension of deadlines provided for the exchange of information for tax purposes

The Ministry of Finance (MoF) owing to the COVID 19’ circumstances, has issued and published the here below Decision No. 171/1 dated 27/05/2020 relating to the extension of deadlines provided for the declaration and sending of the required information by virtue of the Decree No. 1022 dated 07/07/2018 and its modifications relating to the exchange of information for tax purposes. Indeed and on the one hand, the deadlines provided for the declaration and sending by the financial institutions and banks of the information provided for in clause (3) of article 5 Decree No. 1022 for the year 2019 are exceptionally extended until September 30, 2020 instead of June 30 initially.

On the other hand, the deadlines provided for the transmission by the Ministry of Finance of information to the Partner States to which Lebanon is committed to automatically exchange financial account information (for the year 2019) provided for in clause (3) of article 5 of the Decree No. 1022 are also extended exceptionally until December 31, 2020 instead of September 30.

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Law 163-2020

MoF Decision No. 111/1 dated 17/03/2020 relating to the taxpayers’ obligation covered by the provisions of article 82 of the Income Tax Law to declare the income of foreign movable capital by electronic means.

The Ministry of Finance (MoF), has issued and published the here below Decision No. 111/1 dated 17/03/2020 relating to the declaration (tax return) of foreign movable capital’s income electronically. Indeed, all taxpayers (physical or legal persons) covered by the provisions of article 82 of the Income Tax Law, must exclusively declare, by electronic means and within the deadlines provided for in the aforementioned article, foreign movable capital income generated during the year 2019 and beyond (the years that follow).
Besides, taxpayers who do not have an account before the website of the Ministry of Finance (www.finance.gov.lb) can submit requests to obtain such account, by connecting to the aforementioned website, by filling the adopted registration form and submitting it electronically.
Similarly, the central department of taxpayers’ information and services, as well as the departments and branches of taxpayers’ services affiliated to the Revenues Directorate, shall provide taxpayers with electronic personal keys (username, password, code) which will entitle taxpayers to use the electronic declaration service.
Liban Post offices will stop receiving declarations on paper (form w4/c) relating to the income from foreign movable capital generated during 2019 and beyond, as of the entry into force of this Decision.

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Law 163-2020

MoF Decision No. 125/1 dated 22th March 2020 relating to the suspension of tax obligations and delays.

The Ministry of Finance (MoF), has issued and published the here below Decision No. 125/1 dated 22/03/2020 relating to the suspension of tax obligations. Indeed, according to this Decision, the deadlines related to the taxpayers’ obligations and to taxes and fees collected and recovered by the Public Finance Departments, which have not been extended by virtue of decisions and whose deadlines expire between 03/03/2020 and the date of issue of a decision taken by the Ministry of Finance ending the general mobilization and thus, are suspended until the issuance of said decision.
The abovementioned suspension relates to the deadlines in connection with the following:

Concerning the deadlines related to taxpayers’ obligations:
The start of activity;
The modification of information;
The cessation of activity;
The submission of periodic and annual declarations related to all types of taxes and fees;
The payment of taxes and fees;
The recovery penalties charged to taxpayers who are not subject to a self-adjustment and self-reporting.

Concerning the deadlines related to the rights granted to taxpayers:
The response to the preliminary results assessment;
The objection to the tax adjustment before the Tax Administration;
The objection before the Objection (Appeal) Committee;
The filing of an appeal of the Objection Committee’s decision before the State Council.

Besides, the deadlines related to the obligations of the Tax Administration concerning their provided for by the Law on Tax Procedures and by other laws are also suspended, in particular the following:
The deadlines to address final adjustments in response to preliminary results assessment;
The deadlines to decide on the restitution requests submitted before the Tax Administration;
The deadlines to decide on the objections submitted before the Tax Administration;
The deadlines to appeal the decisions of the Objection Committee before the State Council and to prepare a reply.

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Law 163-2020

Decision No. 158/1 dated May 8, 2019 relating to the reportable Partner States

The Ministry of Finance (MoF), has issued and published in the official gazette the here below Decision No. 158/1 dated 08/05/2019 which has updated the list of Partner States to which Lebanon is committed to automatically exchange financial account information of their resident taxpayers for the year 2020 and the following years (CRS/AEOI). Reminding that Lebanon will be entitled to receive same information about its residents once it reaches level 3 of the peer review of the Global Forum. This list includes till this date the following Partner States:

 

Argentina Faroe Islands Japan Pakistan Turkey
Australia Finland Jersey Panama United Kingdom
Austria France Korea Poland Uruguay
Azerbaïjan Germany Latvia Portugal  
Belgium Gibraltar Liechtenstein Russia  
Brasil Greece Lithuania Saint Lucia  
Canada Greenland Luxembourg San Marino  
Chile Guernesey Malaysia Saudi Arabia  
China Honk Kong, China Malta Seychelles  
Colombia Iceland Mauritus Singapore  
Croatia India Mexico Slovak Republic  
Cyprus Indonesia Monaco Slovenia  
Czech Republic Ireland Netherlands South Africa  
Denmark Isle of Man New Zealand Spain  
Estonia Italy Norway Sweden  

 

Law 163-2020

MoF Instructions No. 920/s1 dated 16/05/2020 concerning the penalties for infringements relating to the auditor’s report

The Ministry of Finance (MoF), has issued and published the here below Instructions No. 920/s1 dated 16 May 2020 concerning the penalties for infringements relating to the auditor’s report and thus, in compliance with the provisions of the Law No. 126 dated 29/03/2019 amending several provisions of the Code of Commerce. Thus, according to these Instructions, the competent tax departments are required to impose the penalty provided for by article 109 of the Law on Tax Procedures No. 44 dated 11/11/2008 and its amendments for all infringements incurred until 01/04/2019, date of publication of the Law No. 126, and  relating to:

  • The submission of the auditor’s report signed only by the principal auditor.
  • The submission of the two independent reports of the main and additional auditors, the first being submitted within the deadlines and the second submitted outside the legal deadlines.
  • The submission of the report outside the deadlines modifying the report submitted within the legal deadlines.

Thus, insofar as the first or the second above-mentioned infringement is committed after 01/04/2019 for companies adopting an additional auditor despite the modifications made by virtue of the aforementioned Law No. 126, the competent tax departments are required to consider the auditor’s report as not submitted within the legal deadlines and therefore to impose the penalty provided for by the provisions of article 109 of the aforementioned Law No. 44/2008 and thus, at the rate of 5% of the due tax in accordance with the declarations or the gain fixed by the tax authorities for each month of delay, knowing that the penalties may in no case be less than/750.000/LBP for joint stock companies and not less than /500.000/LBP for limited liability companies as well as for partnerships.

The tax departments are also required to apply the provisions of article 40 of the Law on Tax Procedures and its modifications relating to the modifications of the tax declarations concerning the modification of the auditor’s report, and thus, in accordance with the following:

  • Non-imposition of any penalty in the event that the modification occurred within three months of the expiration date of the deadline provided for the submission of the report and if the modification didn’t have any impact on the declaration entailing the liability of an additional tax exceeding 10% of the amount of the due tax.
  • Imposition of the penalty provided for by the provisions of article 110 of the Law on Tax Procedures at the rate of 20% of the tax difference regardless of the value of this difference, in the event that the modification occurred three months following the expiration date of the initial deadline.

 

 

  • Imposition of the penalty provided for by the provisions of article 110 of the Law on Tax Procedures in the event that the modification resulted in the imposition of an additional tax exceeding 10% of the amount of the due tax, even if the modification occurred within three months of the expiry date of the initial deadline.

Companies that modify the auditor’s report resulting in a tax difference are required to modify their declarations in accordance with the undertaken modification and the penalty provided for by the provisions of article 110 of the Law on Tax Procedures shall be applied.

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Law 163-2020

MOF Decision No. 134/1 dated 31/03/2020 relating to the extension of the deadlines related to the submission of the taxpayers’ tax declarations electronically and the payment of the tax on the income deriving from movable foreign assets earned by physical and legal persons residing in Lebanon

The Ministry of Finance (MoF), has issued and published the here below Decision No. 134/1 dated 31/03/2020 relating to the extension, until the 30th April 2020 (inclusive), of the deadlines related to the submission of the taxpayers’ tax declarations electronically and the payment of the tax on the income deriving from movable foreign assets earned by physical and legal persons resident in Lebanon when this income is paid to or collected abroad.

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Law 163-2020

Decision of the Minister of Labor No. 23/1 dated 04/03/2020 relating to the extension of deadlines concerning the submission of the monthly and quarterly National Social Security Fund (NSSF) contributions

The Minister of Labor Decision of Labor, has issued and published the here below Decision No. 23/1 dated 04/03/2020 relating to the extension of deadlines concerning the submission of the monthly and quarterly NSSF contributions related to the first six months of the year 2020 and thus, for six months from each due date.

Besides, according to this Decision, the deadlines relating to the yearly nominative declaration of the year 2019 has been extended until the 30th September 2020 (inclusive).

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Law 163-2020

MoF Decision No. 125/1 dated 22th March 2020 relating to the suspension of tax obligations and delays.

The Ministry of Finance (MoF), has issued and published the here below Decision No. 125/1 dated 22/03/2020 relating to the suspension of tax obligations and delays. Indeed, according to this Decision, the deadlines related to the taxpayers’ obligations and to taxes and fees collected and recovered by the Public Finance Department (General Directorate of Finance), which have not been extended to date by virtue of decisions and whose deadlines expire between 03/03/2020 and the date of issue of a decision ending the general mobilization (lockdown) and thus, until the issuance of said decision.

The abovementioned suspension relates to the deadlines concerning the following:

 

  • Concerning the deadlines related to taxpayers’ obligations:
  • The start of activity;
  • The modification of information;
  • The cessation of activity;
  • The submission of periodic and annual declarations and tax returns related to all types of taxes and fees;
  • The payment of taxes and fees;
  • The deadlines for recovery penalties charged to taxpayers who are not subject to a self-declaration.

 

  • Concerning the deadlines related to the rights granted to taxpayers:
  • The response to the preliminary results assessment;
  • The objection to the tax adjustment before the Tax Administration;
  • The objection before the Objection (Appeal) Committee;
  • The filing of an appeal of the Objection Committee’s decision before the State Council.

 

  • Besides, the deadlines related to the obligations and rights of the Tax Administration provided for by the Law on Tax Procedures and by other laws are also suspended on the same basis, in particular the following:
  • The deadlines to address final adjustments in response to preliminary results assessment;
  • The deadlines to decide (reply) on the restitution requests submitted before the Tax Administration;
  • The deadlines to decide (reply) on the objections submitted before the Tax Administration;
  • The deadlines to appeal the decisions of the Objection Committee before the State Council and to prepare a reply.

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Law 163-2020

MoF Decisions No. 92/1 and No. 93/1 dated 11th March 2020 relating to the submission of the taxpayers’ tax declarations electronically

The Ministry of Finance (MoF), has issued and published the here below Decisions #92/1 and #93/1 dated 11th March 2020, relating to the submission of the taxpayers’ tax formalities before the Department of the Revenue and Financial Services concerned (including their VAT returns) concerned in the different governorates (Mouhafaza) electronically. In fact, according to these Decisions, taxpayers must submit by email the requests relating to the formalities, procedures and necessary documents to attach to the requests and declarations concerning the different taxes by email according to the following:

  • From their email (electronic email address approved by the Ministry of Finance) in order to send their electronic tax declarations insofar as they are registered in the electronic service or by adopting another email which should be notified to the competent financial service via the e-mail provided for in the abovementioned list.
  • The email adopted by taxpayers who are not registered in the electronic service, provided that that they submit, in addition to the required documents, a copy of the taxpayer’s identity card (the concerned person for natural persons, or the authorized signatory for legal persons or the person duly authorized to this effect).
  • The taxpayer submits the formalities as well as the documents electronically from a “File attachment”.
  • Once the formality and the necessary documents are received by the competent financial department, the system sends an auto reply message of acknowledgment of the request’s receipt.

 

  • Following the foregoing, the competent financial service checks the attached documents, and if it turns out that additional documents are required, an email is sent to the taxpayer to inform him that the sent request has not been registered in accordance with the rules in force and that other documents are required for the completion of the registration procedure; the communication can be made, if it deems necessary, with the person predetermined by the taxpayer in order to coordinate with the administration.

 

  • When the documents are complete, the competent financial service records the request and sends an acknowledgment of receipt to the taxpayer by email and notifies the latter, when it deems necessary, of the original additional documents to be attached upon receipt of the transaction. The request is then deemed to be registered in accordance with the rules in force as from the date of receipt.

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