SR_CORRUP_COM_asset recovery feasibility #248

Decision No. 273/1 dated 14/07/2020 concerning the adoption of forms relating to the reimbursement of the deductible tax surplus further to the acceptance of the request relating for the cancellation of the VAT registration

The Minister of Finance, has issued and published the here below Decision No. 273/1 dated 07/14/2020, concerning the adoption of the following forms relating to the reimbursement of the deductible tax surplus further to the acceptance of the request relating to the cancellation of the registration:

Form Symbol of the form Number of pages
·  Request of the reimbursement of the fiscal surplus further to the acceptance of the cancellation of the registration according to article 30 of the Law No. 379/2001 (VAT) modified by virtue of article 51 of the Law No. 66/2017 (Budget Law 2017)

 

 

 

 

 

S 4-4

 

 

 

 

 

1

·  Modification of the request of the reimbursement of the fiscal surplus further to the acceptance of the cancellation of the registration according to article 30 of the Law No. 379/2001 (VAT) modified by virtue of article 51 of the Law No. 66/2017 (Budget Law 2017)

 

 

 

 

 

S 4/4-4

 

 

 

 

1

The forms adopted and established by the competent administration shall be submitted on papers and/or by electronic means along with the documents relating thereto.

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SR_CORRUP_COM_asset recovery feasibility #248

MoF Decision No. 293/1 dated 20/07/2020 relating to the mechanism for applying the provisions of the Double Tax Treaties (DTT) related to dividends, interests, royalties and services or works paid to a foreign resident of a country that has signed a DTT with Lebanon.

The Minister of Finance (MoF) has issued and published on July 20, 2020 the here below Decision No. 293/1 determining the mechanism for applying the provisions of the Double Tax Treaties (DTT) related to dividends, interests, royalties and services or works paid to a foreign resident of a country that has signed a DTT with Lebanon.

According to this MoF Decision, the Lebanese taxpayer should obtain from the foreign resident it/he/she is dealing with, a certificate of tax residence from its local tax authorities and an undertaking proving that it/he/she doesn’t have a permanent establishment in Lebanon according to the definition set in the DTT. Moreover, the Lebanese taxpayer should address to the Lebanese Tax Authorities a letter within one month from the date of this decision (for those who had a business relation ongoing before the issuance of this decision) or within a month from the beginning of the business relation, mentioning the names of the foreign companies or persons, their country of residence, the nature of the business relation and the tax treatment adopted by the Lebanese taxpayer with regards to the payment of the dividends, interests and royalties together with the supporting documents mentioned above. The Lebanese Tax Authorities will then verify the proper tax treatment applied by the Lebanese taxpayer to the amounts paid to a foreign company or person resident in a country having a DTT with Lebanon and notify the Lebanese taxpayer of any wrong tax treatment to be adjusted.

It should be noted in this regard that this information should be updated on an annual basis in case of any change by notifying the Ministry of Finance, before the 31st January of the following year, knowing that the non-compliance with these notification procedures will entitle that the Lebanese taxpayer is not applying the provisions of the DTT and should therefore apply the Lebanese tax rules and regulation by withholding the non-resident from any payment made to a foreign company. However, the Lebanese taxpayer has the right at his initiative or at the request of the foreign resident to claim back these taxes from the Lebanese Tax Authorities according to the provisions of the DTT.

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SR_CORRUP_COM_asset recovery feasibility #248

Decision of the Minister of Finance No. 272/1 dated 07/14/2020 relating to the tax treatment of the income deriving from foreign movable capital generated by physical or legal persons resident in Lebanon

The Minister of Finance (MoF) issued and published on July 14th, 2020 the here below Decision No. 272/1, determining the tax treatment of the income deriving from foreign movable capital generated by physical or legal persons residing in Lebanon, inasmuch :

 

  • This income is paid to these persons through a resident in Lebanon, who is legally obliged to withhold tax, declare it and pay it to the Treasury.
  • This income is transferred and/or collected abroad, directly or through intermediaries.
  • These revenues are paid to the same entities residing in Lebanon which are obliged to withhold taxes on the revenues that are returned to their customers.

 

  1. Regarding the income deriving from foreign movable capital generated by physical or legal person resident in Lebanon through another person resident in Lebanon and legally bound to withhold the tax:
  2. The obligations borne by the (paying) resident person in Lebanon bound to withhold the tax:

The said party resident in Lebanon is legally bound to withhold, declare and settle to the Treasury the due tax provided for in Chapter 3 of the Income Tax Law at the rate of 10% of the value transferred to its customers within the delays provided for in section 81 of the Income Tax Law. i.e.:

  • Before 01/08 of the year for the income generated during the first half (semester) of the year.
  • Before 01/02 of the following year for the income generated during the second half (semester) of the previous year.

Failure to comply with the aforementioned obligations, late payment penalties provided for by the Law on Tax Procedures will be due.

  1. The procedures that must be implemented for the application of the provisions relating to the income deriving from foreign movable capital provided for in tax conventions aiming to avoid double taxation
  • Insofar as this income is derived from a State which have signed double taxation treaties (DTT) with Lebanon aiming to avoid double taxation  allowing this State to withhold tax:

The natural or legal person from which income the tax was withheld in Lebanon, may request from the tax administration directly or through the party having withheld the said tax, to eliminate the double taxation by virtue of a written letter to which is attached documents justifying the nature and the amount of this income which was subject to the foreign tax and the amount of the due tax on this income, provided however (i) that the amount of the foreign tax is calculated on all the income and the tax in Lebanon is deducted from the net value of this income after deducting the foreign tax, (ii) to convert the amount of the foreign tax into Lebanese Pounds on the basis of the official exchange rate, on the date of the withholding of the Lebanese tax, (iii) that the adopted tax rate by the other State to withhold the tax does not exceed the rate determined in the treaty if the rate in accordance with its national law is higher than this rate, taking into consideration however that, if the rate according to its legislation is lower than the rate determined in the treaty, the tax will be calculated on the basis of the rate determined in the internal legislation of the said State and (iv) that no penalties are due on the foreign paid tax.

  • Insofar as this income is derived from a State which didn’t sign a double taxation treaty (DTT) with Lebanon aiming to avoid double taxation or from a State which signed a double taxation treaty (DTT) with Lebanon aiming to avoid double taxation but which doesn’t allow the said State to withhold the tax:

The natural or legal person whose tax has been withheld from their income cannot recover the foreign tax (in case it exists).

 

  1. Regarding the income deriving from foreign movable capital generated by natural or legal persons residing in Lebanon and which are transferred or collected abroad directly or through intermediaries:
  • Insofar as this income is derived from a State which have signed with Lebanon a double taxation treaty (to avoid double taxation) allowing this State to withhold the tax at a rate equal to or higher than the Lebanese tax rate:

Concerned natural or legal persons must declare this income before 01/03 of each year for the income earned during the previous year and attach to the declaration the documents justifying the nature and amount of the income and the withheld foreign tax.

In case of violation, late payment penalties provided for by the Law on Tax Procedures shall be due.

  • Insofar as this income is derived from a State which have signed with Lebanon a double taxation treaty (to avoid double taxation) allowing this State to withhold the tax and whose tax rate provided for in the treaty is lower than the tax rate provided by the Lebanese Law:

Natural or legal persons must declare this income before 01/03 of each year for the income earned during the previous year and pay before 01/04 the tax difference due on this income resulting from the amount of the Lebanese tax calculated at the rate of 10% on the basis of all income before deduction of the foreign tax and the value of the foreign tax.

In case of violation, late payment penalties provided for by the Law on Tax Procedures will be due.

  • Insofar as this income is derived from a State which didn’t sign with Lebanon a double taxation treaty (to avoid double taxation) or from a State which have signed with Lebanon a double taxation treaty that does not allow this State to withhold:

Natural or legal persons must declare this income before 01/03 of each year for the income earned during the previous year and pay before 01/04 the due tax difference on these revenues at the rate of 10% on the basis of all income before deduction of the foreign tax (if any).

In case of violation, late payment penalties provided for by the Law on Tax Procedures will be due.

 

  • Concerning the income deriving from foreign movable capital generated by the same party required to withhold taxes from the income of its customers:
  1. The obligations borne by the said taxpayers:
  • Insofar as this income results from fixed assets generated by the said party (taxpayer):

The due tax on this income shall be the tax provided for in Chapter 3 of the Income Tax Law, and the said party must declare before 01/03 of each year the income earned during the previous year and pay the due tax before 01/04 of each year.

  • Insofar as these revenues are generated by the exercise of the profession of the said party :

The due tax on this income shall be the tax provided for in Chapter 1 of the Income Tax Law (business and corporate income tax), and this authority must combine this income to its annual income and declare it during its annual declaration within the deadlines provided for by the Law.

 

  1. Concerning the procedures that must be implemented for the application of the provisions relating to the income deriving from foreign movable capital provided for in the tax conventions aiming to avoid double taxation.
  • Concerning the income deriving from foreign movable capital resulting from fixed assets located in a Stated which have signed with Lebanon a double taxation treaty:

Natural and legal persons must declare the income earned during the previous year before 1/3 of each year, and pay before 1/4 of each year the due tax difference resulting from the value of the Lebanese tax calculated at a rate of 10% on the basis of the value of all income before the deduction of the foreign tax and the value of foreign tax.

 

  • Concerning the income resulting from the exercise of the profession (business income) derived in a State which has signed a double taxation treaty (DTT) with Lebanon aiming to avoid double taxation:

The percentage that this income constitutes is determined on the basis of the total income, and this percentage shall be applied to the tax on commercial profits (first chapter) which was due to this authority, in order to determine the value of the Lebanese tax due on these revenues.

This value constitutes the maximum amount of tax that can be recovered by this authority.

The tax administration may use this tax to recover any tax or fines that the concerned taxpayer owes to this authority.

  • Concerning the income resulting from fixed assets or from the exercise of the activity in a State which didn’t sign with Lebanon a double taxation treaty allowing this State to withhold the tax:

This authority cannot recover the foreign tax (in case it exists).

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SR_CORRUP_COM_asset recovery feasibility #248

MoF Decision No. 255/1 dated 08/07/2020 relating to the determination of the new deadlines for the tax obligations after the expiry of the suspending period (delays).

The Minister of Finance, has issued and published the here below Decision No. 255/1 dated 08/07/2020 relating to the determination of the new deadlines for the tax obligations after 30/07/2020 in application of the articles 1 and 2 of the Law No. 160 dated 08/05/2020 (suspending the tax obligations between 18/10/2019 and 30/07/2020 without any delay tax penalty). According to this Decision, the tax obligations that didn’t reach their deadline on the 18th October 2019 will still have their remaining period running after the 30th July 2020 (e.g. the VAT declaration of the 3rd quarter of the year 2019 had an initial deadline on the 20th October 2019 with 3 remaining days from the 18th October 2019, thus, the new deadline has been set on the 3rd August 2020 which is 3 days after the 30th July 2020, considering that the 2nd August 2020 is a Sunday).

As for the tax obligations that had their deadline set during the suspension period (i.e. from the 18th October 2019 till the 30th July 2020), their new deadline will start running from the 31st July 2020 with the same periods defined in the tax laws and regulations (i.e. the Partnerships & Establishments annual income tax declarations had to be filled 3 months after the closing date of their reporting period that was initially the 31st March 2020 for the income tax declarations of the fiscal year 2019. Thus, the new deadline for the filling of their 2019 annual income tax declaration is set on the 31st October 2020).

The same rule applies to the fiscal stamp duty that has to be paid within 5 working days from the date of the contract. Thus, the fiscal stamp duty on any contract signed during the suspension period has to be settled before the 6th August 2020 (i.e. 5 days from the 31st July 2020, excluding the Sunday).

Besides, all the deadlines provided for in the article 22 of the Budget Law 2020 that already extended the deadlines of the articles 21, 22, 28, 29, 30 and 32 to 40 of the Budget Law 2019 (i.e. discount on penalties, installment of late payments, extension of the tax objection deadline, real estate registration fees and exceptional revaluation of fixed assets) for 6 months till the 5th September 2020, have been further extended till the 1st February 2021.

This Decision also defines the new deadlines related to the built property tax and registration of rent contracts at the municipalities.

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SR_CORRUP_COM_asset recovery feasibility #248

MoF Decision No. 237/1 dated 29/06/2020 relating to the exclusion from the scope of the property tax of constructions of industrial or commercial enterprises built on public domain and properties.

The Minister of Finance, has issued the here below Decision No. 237/1 dated 29/06/2020 published in the Official Gazette No.28 dated 02/07/2020, determining the implementing provisions of the exclusion from the scope of the property tax of constructions of industrial or commercial enterprises built on public properties in accordance with article 7 of the Law on Tax on Built Properties. The conditions for the said exclusion are as follows:

  • The enterprise should be duly authorized by Decree to the occupy and operate the public domain and properties;
  • The enterprise should be subject to the income tax on the basis of real profit;
  • The constructions should be used by the owners of these enterprises or by their operator for the purpose of the enterprise’s economic activity.

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SR_CORRUP_COM_asset recovery feasibility #248

Memo of the National Social Security Fund (NSSF) No. 19 dated 16/06/2020 relating to determination of the implementing provisions of article 73 of the NSSF Law concerning the re.

The National Social Security Fund (NSSF) # has issued and published the here below Memo No.19 dated 16/06/2020, reminding the companies that the social security contributions (including those related to the end of service indemnity) have to be calculated on the basis of the full salary of the employees that have suffered deductions and not on the reduced salary and thus, according to article 73 of the Social Security Law.

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SR_CORRUP_COM_asset recovery feasibility #248

MoF Decision dated 08/07/2020 defining the new deadlines for the tax obligations after the 30th of July 2020 in application of the articles 1 and 2 of the Law No 160 dated 8th May 2020.

The Ministry of Finance (MoF) has issued an information notice (here below) concerning the Minister decision dated 8th July 2020 which defines the new deadlines for the tax obligations after the 30th July 2020 in application of the articles 1 and 2 of the Law No 160 dated 8th May 2020 (suspending the tax obligations between the 18th October 2019 and the 30th July 2020 without any delay tax penalty).

According to this MoF information notice, the tax obligations that didn’t reach their deadline on the 18th October 2019 will still have their remaining period running after the 30th July 2020 (e.g. the VAT declaration of the 3rd quarter of the year 2019 had an initial deadline on the 20th October 2019 with 3 remaining days from the 18th October 2019, thus, the new deadline has been set on the 3rd August 2020 which is 3 days after the 30th July 2020, considering that the 2nd August 2020 is a Sunday).

As for the tax obligations that had their deadline set during the suspension period (i.e. from the 18th October 2019 till the 30th July 2020), their new deadline will start running from the 31st July 2020 with the same periods defined in the tax laws and regulations (i.e. the Partnerships & Establishments annual income tax declarations had to be filled 3 months after the closing date of their reporting period that was initially the 31st March 2020 for the income tax declarations of the fiscal year 2019. Thus, the new deadline for the filling of their 2019 annual income tax declaration is set on the 31st October 2020).

The same rule applies to the fiscal stamp duty that has to be paid within 5 working days from the date of the contract. Thus, the fiscal stamp duty on any contract signed during the suspension period has to be settled before the 6th August 2020 (i.e. 5 days from the 31st July 2020, excluding the Sunday).

Also, all the deadlines set in the Article 22 of the Budget Law 2020 that already extended the deadlines of the articles 21, 22, 28, 29, 30 and 32 to 40 of the Budget Law 2019 (i.e. discount on penalties, installment of late payments, extension of the tax objection deadline, real estate registration fees and exceptional revaluation of fixed assets) for 6 months till the 5th September 2020, have been further extended till the 1st February 2021.

This information notice also defines the new deadlines related to the built property tax (declaration of vacancy) and registration of rent contracts at the municipalities.

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SR_CORRUP_COM_asset recovery feasibility #248

MoF Instructions No. 1989/s1 dated 29/06/2020 relating to implementation of the exemption of funds and property devolved by donation or by will to religious communities and to legal persons belonging to them from the inheritance tax.

The Ministry of Finance (MoF), has issued the here below Instructions No. 1989/s1 dated 29/06/2020 published in the Official Gazette No. 28 dated 02/07/2020 relating to the possibility of exempting funds and property devolved by donation or by will to religious communities and to the legal persons belonging to said sects from the inheritance tax.

 

In fact, according to these Instructions, the competent departments in charge of the inheritance tax, and within the framework of the study of the funds and property devolved by will or by donation to a non-heir and in particular to charitable organizations and sports, cultural or artistic or charitable associations are required – in accordance with the provisions of article 16 of the Inheritance & Gift Tax law (Legislative-decree No 146 dated 12/6/1959 with its amendments) – to exempt any donation or will up to /100,000,000/LBP and ensure concomitantly that any amount exceeding this value after deduction is subject to the inheritance & Gift Tax according to the rate provided for to the third category (ascendants other than parents, brothers and sisters) of taxpayers subject to the inheritance tax provided for in the table annexed to the Decree Law No. 146/59. The result of this is that funds and property devolved by donation or by will to religious communities and to legal persons belonging to the latter are therefore liable to the tax in the conditions than those stipulated herein.

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SR_CORRUP_COM_asset recovery feasibility #248

MoF Decision No. 236/1 dated 29/06/2020 relating to the principles of adjustment of penalties for tax infringements incurred between 01/08/2019 until 17/10/2020 (inclusive):

The Minister of Finance, has issued the here below Decision No. 236/1 dated 29/06/2020 published in the Official Gazette No. 28 dated 02/06/2020, relating to the implementing provisions of the Law No. 662 dated 04/02/2005 allowing the Minister of Finance to carry out the adjustment of penalties for tax infringements incurred between 01/08/2019 and 17/10/2020 (inclusive).

This Decision grants taxpayers that are subject to penalties of collection rebates covering all tax infringements related to income tax, VAT, built property tax, inheritance tax and indirect taxes and fees that occurred until 30/09/2020 (inclusive).

The said penalties are reduced from the date of publication of this Decision till 30/09/2020 as follows:

  • Variable penalties are reduced by 85%,
  • Lump sum penalties are reduced by 60%.

 

It should be mentioned in this regard that the variable or the lump sum tax penalties of collection cannot be less than /50.000/LBP in any case after reduction.

The adjustment of any penalty with a value exceeding One billion Lebanese Pounds after reduction is subject to the prior approval of the Council of Ministers.

Besides, this Decision also grants taxpayers that are subject to penalties for delay in payment rebates covering all tax infringements related to either direct and indirect taxes and fees, including fiscal stamp duty and VAT, that are due or that shall be due within the implementation period of this decision, whether the delay in payment occurred before or after the entry into force of this decision or related to fiscal periods that the declaration deadline expired before 17/10/2020 (inclusive).

The delay in payment penalties are reduced for all tax infringements incurred during the above mentioned period by 75%.

The recovery services in charge of rebates of penalties of recovery and collection rebates shall proceed with the reduction upon the payment of the due amounts by the taxpayers and thus, according to recovery programs; provided however that said services shall organize monthly declarations related to the reduced penalties and submit them before the regional financial service.

Thus, according to this decision, the tax penalties rebates are applicable to all tax adjustments settled before 30/09/2020.

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SR_CORRUP_COM_asset recovery feasibility #248

MoF Decision No. 228/1 dated 22/06/2020 relating to the installment for payment of taxes withheld at source and value added tax (VAT).

The Minister of Finance, has issued the here below Decision No. 228/1 dated 22/06/2020 published in the Official Gazette No. 28 dated 02/07/2020 (here below), relating to the installment for payment of taxes withheld at source and value added tax (VAT) due to taxpayers until 31/12/2018 in addition to the due fines and penalties. According to the said Decision, the first installment should represent at least 15% of the due taxes and the installment period should not exceed three (3) years.

Thus, the taxpayer is entitled to submit a tax installment request to the tax authorities, provided however that the value of the amount to be installed shall be greater than /1.000.000/LBP (One Million Lebanese Pounds) for individuals and individual enterprises and /3.000.000/LBP (Three Million Lebanese Pounds) for companies and thus, until 05/09/2020. In case of a failure to pay an installment, all the installments with their interest will be due in addition to a fine (late interest) of 12%.

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