MoF Decision #514/1 dated 17th April 2018 on the application of article 49 of the Law #66 dated 3rd November 2017 (Budget Law 2017) related to the exceptional revaluation of fixed assets
The Ministry of Finance (MoF) has issued the decision #514/1 dated 17th April 2018 (here below) on the application of article 49 of the Law #66 dated 3rd November 2017 (Budget Law 2017) in connection with the exceptional revaluation of fixed assets.
According to the said MoF decision, an Exceptional Revaluation of Fixed Assets is allowed for one time only to any taxpayer subject to the real profit taxation (companies and establishments) within a period of 12 months from the date this law was published (before the 8th November 2018), with the exception of the real estate companies (incorporated according to the article 21 of the Legislative-Decree #69 dated 9/9/1983) and the taxpayers who benefit or used to benefit from an income tax exemption or not subject to the income tax or subject to income tax but for fixed assets not related to their activity.
The fixed assets that may be revalued according to the Article 49 of the Law #66/2017 are those defined in the Article 1 of the application decision #111/1 dated 22/2/1982 (Lebanese Chart of Accounts) and its appendix n˚2, including lands, buildings, general installations, vehicles, equity participations, bonds issued by companies and other similar tangible and financial assets registered in the accounting books of the company before the 1st January 2016, knowing that their revaluation should be based on their market value as at 31st December 2015. The intangible assets (e.g. Intellectual Properties or licenses, whether bought or internally developed by the company) and the current assets (e.g. properties or stock available for sale) are excluded from this exceptional revaluation.
The exceptional revaluation of fixed assets should be done by a Certified Public Accountant or by a sworn expert or many experts of the taxpayer’s choice. The revaluation report of the CPA or sworn expert should be submitted to the MoF together with the advance payment notice (S1 form) for the payment of the related tax.
The revaluation variance resulting from this exceptional revaluation is subject to 5% tax and should be paid together with a request for approval from the Ministry of Finance who has the right to refuse this revaluation. According to the MoF assessment of the revaluation variance presented by the taxpayer, any addition on the revaluation amount will subject the taxpayer to an additional 5% tax on this amount that will be notified to the taxpayer who will have one month to settle this additional tax adjustment from the notification date.
Should the taxpayer dispose totally or part of the revalued fixed asset within a period of 3 years from the revaluation date, the capital gain resulting from the disposal of this fixed asset will be subject to the 15% capital gain tax set in the Article 45 of the Income Tax Law modified by the Article 17 of the Law #64/2017. However, the 5% tax paid on the revaluation variance of this disposed fixed asset would be refunded to the taxpayer. Any delay or default or understatement in the declaration of the disposed fixed assets will subject the taxpayer to the penalties set in the Tax Procedures Law (Law #44/2008).
The exceptional revaluation variance can be added to the acquisition cost of the revalued asset and depreciated over its useful life according the depreciation rates set by the MoF, while the counterpart of this exceptional revaluation variance accounted in the net equity of the company remains subject to the 10% distribution tax (Chapter III tax) if it is distributed to the shareholders or partners.