MoF Answerback No. 425/S2 dated 12/05/2020 relating to the implementation of certain provisions of the Decree No. 3692/2016 determining the implementing provisions of the non-residents’ tax.

With reference to the Decree No. 3692 dated 22/06/20216 adopted by the Council of Ministers determining the implementing provisions of the non-residents’ tax, and the confusion left by the taxation of non-residents dealing with residents in Lebanon, the Lebanese Association of Certified Public Accountants has submitted a written request on January 14th, 2020 to the Ministry of Finance in order to clarify its position on the aforementioned issue. The Ministry responded by considering that:

A non-resident person dealing with resident persons in Lebanon (with the exception of petroleum companies) is subject to the provisions of articles 7 and 8 of the abovementioned Decree No. 3692/2016. In other words, non-resident persons carrying out pubic or civil works’ activities in Lebanon for more than six months, or services of various types for more than three months, in a successive period of twelve months, are required to register near the Ministry of Finance and must comply with the obligations imposed on the persons at the time they proceed with the activities, in accordance with the provisions of article 32 of the Law on Tax Procedures and articles 38 to 47 of the Decision No.453/1 dated 22/4/2009.

The tax treatment of persons carrying out activities or rendering services on behalf of companies subject to the Law No. 57/2017 (tax provisions relating to petroleum activities) differs from the tax treatment of non-resident persons in Lebanon dealing with taxpayers subject to the provisions of the Income Tax Law. This distinction manifests in three points:

1- No distinction is made between works and services with regard to the duration of continuity of these works and services in order to consider the work executor or the service provider as a resident in Lebanon, whenever this duration exceeds 183 days, while according to the Decree No. 3692/2016 it is 6 months for works and three months for services.

2- The profit percentage and the tax rate at which persons subject to the provisions of the Law No. 57/2017 are as follows:

– 15% of the whole income to determine the deemed profit taxation for the work, and a tax at the rate of 20%;

– 50% of the whole income to determine the deemed profit taxation for services and a tax at the rate of 20%.

However, the tax rate according to the Income Tax Law is 15%.

3- The deadline for declaring and settling tax is quarterly, within 20 days following the end of the quarter, while the deadline for declaring and settling the tax for taxpayers dealing with non-residents is within the deadline of their annual declaration.

As for the non-occasional and repetitive expression provided for in article 2 of the aforementioned Decree No. 3692, it fits in the context of natural persons resident in Lebanon carrying out occasional work, and not in the context of non-residents; in other words, it has no incidence on the fact that the executor of the work or the service provider will be considered as a resident in Lebanon whenever its activity exceeds the two aforementioned periods.

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