Category: Notifications & Regulations

The Ministry of Finance (MoF), has issued and published the here below the Decision No. 46/1 dated 04/02/2020 relating to the implementing provisions of clause (6) of article 47 of the Law No. 44 dated 11/11/2008 and its modification (Law on tax procedures).

Indeed, this decision specifies that the expression “controlled fiscal period” means that a general field inspection has been carried out, that a tax declaration has been issued for said period and that the taxation has not been issued based on the estimation of the taxpayer’s income.

 

This expression does not include the controlled fiscal period by virtue of an informal desk inspection or an inspection upon request.

 

Besides, according to the said decision, the expression “new information received” provided for in the same clause (6) of the aforementioned article 47 means the following:

 

– That the information should be related to the controlled fiscal period or to the fiscal period(s) prior to the said period and that the information should be notified to the tax administration or discovered by the latter following the publication of the tax notification. The information may be related to a transaction initiated by the taxpayer during the controlled period or during previous tax periods which are not prescribed and which are not recorded in the taxpayer’s registers or which are not sufficiently apparent.

 

The expression “affects the method of calculation of the tax” means:

• That it should be likely to modify the tax administration’s results following the control during the controlled tax period, modification has resulted in an increase of the value of the tax or of consequences on the tax calculation of subsequent tax periods.
• That it has a substantial impact on the method of calculation of the tax which could be deducted or refunded, whether for the controlled tax period or for previous or subsequent tax periods.

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The Ministry of Finance (MoF), has issued and published the here below the Decision No. 17/1 dated 13 January 2020 relating to the implementing provisions of Law No. 662 dated 04/02/2005 allowing the Minister of Finance to carry out the adjustment of penalties for tax infringements incurred prior to 31/07/2019 (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 31/07/2019 (inclusive).

 

The said penalties are reduced from the date of publication of this decision till 29/02/2020 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 LBP 50,000 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 indirect taxes and fees, 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 31/07/2019 (inclusive).

 

The delay in payment penalties are reduced for all tax infringements incurred until 29/02/2020 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 the 29^th February 2020 (extended afterwards)

 

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The Ministry of Finance (MoF) has issued the Decision No. 990/1 dated 28/11/2019 (here below) which determines the transfer mechanism of bearer shares and promissory shares in the name of the Lebanese State. This decision specifies indeed that the ownership of bearer shares and promissory shares that have not been replaced by nominative shares as required, within two years from the entry into force of Law No. 75 dated 27/10/2016 related to the cancellation of bearer shares and promissory shares, are henceforth automatically transferred in favor and in the name of the Lebanese State (Lebanese Treasury) and their administration is entrusted to the administration of the Treasury of the Ministry of Finance in accordance with the following.

 

The Revenue Department establishes a list containing the names of the companies which have not replaced bearer shares and promissory shares by nominative shares in compliance with the foregoing, including the number of shares and their value, a copy of which is deposited by the Treasury Department.

 

Each company whose shares still contain bearer shares and promissory shares should:

• Issue registered nominatives shares in the name of the Lebanese treasury, instead of bearer shares and promissory shares, and to submit them to the treasury department of the Ministry of Finance,
• Record the minutes of the general meeting which decided to issue new registered (nominative) shares in the name of the Lebanese State before the commercial register,
• Modify the information before the tax administration in accordance with the Law on tax procedures.
• Inform the Finance Department of any decision regarding the distribution of dividends within 15 days from the date of said decision, while specifying the dividends’ value due to the Lebanese State, and submit to the Department of the General Directorate of Finance a check in the name of the Central Treasury equivalent to this value.

 

The Ministry of Finance remits thereafter the original shares to Midclear by virtue of a written letter issued by the Treasury Department and signed by the Minister of Finance provided that a copy of said letter is notified to the Treasury Department (Department of Accounting and funds) as well as to the General Accounting Department (Financial Accounting Department), provided that certified copies of these documents signed by the Financial Director should be kept before each of the concerned units of the Ministry. The Ministry of Finance notifies in fine the Council of Ministers of the companies’ names and the number of shares which have been transferred in the name of the Lebanese State in order to take the appropriate decision in this regard.

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The Ministry of Finance (MoF) has issued the Decision No. 990/1 dated 28/11/2019 (here below) which amended article 19 of the Decision No. 517/1 dated 17/04/2018 relating to the implementing provisions of article 45 of the Legislative-Decree No. 144/1959 (Income Tax Law) as follows:

• Capital gains resulting from the transfer of a real estate property or part of it or units or shares of said property situated in Lebanon and held by the persons mentioned in article 18 of said Decision are subject to a tax of 15%, and thus, for transfers executed as of October 27, 2017.
• The capital gain resulting from the transfer of a real estate property or part of it or units or shares of said property is defined as the difference between the acquisition price and the selling price, thereafter, and in order to determine the taxable base, a deduction of 8% of the capital gain shall be applied per year from the date of acquisition to the transfer date and no other deduction shall be applied.

Consequently, the capital gain shall be exempted from tax in the event that the real estate property is held by the transferor for more than twelve (12) years, even if the transfer occurred at the beginning of the thirteenth year.

• In order to calculate the capital gain referred to in clause 2, and consequently determine the taxable base, the following shall be adopted:

1. The date of acquisition shall be determined according to the following:

• Concerning real estate properties or units or shares of real estate properties transferred by inheritance: The date of death of the deceased is considered to be the date of acquisition by the heir, unless there is a legal dispute relating to the determination of the heirs, in such case the date of the judgment determining the heirs will be considered the date of acquisition.
• Concerning real estate properties or units or shares of real estate properties transferred by gift: The signature date of the gift by the donor and the donee before a notary is considered to be the date of acquisition by the donee if the contract was not recorded on the certificate of the land register or the date of registration in the land register if the contract was thereto registered.
• Concerning real estate properties or units or shares of real estate properties transferred by will: the date of the judgment attesting the death and execution of the will is considered to be the date of acquisition by the legatee.
• Concerning real estate properties or units or shares of real estate properties transferred by virtue of notary sales contracts: In the event of a legal dispute over the acquisition: the date of the judicial judgment attesting the acquisition is deemed to be the date of acquisition.

1. The acquisition price is determined based on the following:

• If the acquisition results from an inheritance (will, gift, etc.), the acquisition price is equal to the estimated valuation for the purpose of completing the inheritance file before the units in charge of the inheritance tax.
• If the acquisition results from a purchase, the acquisition price is equal to the value recorded on the certification of the land register or the date set in the purchase contract if the latter is not registered in the land register.

 

 

 

• If the property is built by the owner at a later date than the date of acquisition, a distinction shall be made in this context between the situation in which the owner does not have justification documents supporting the construction cost, whereby the capital gain resulting from the transfer is subject to a tax of 15% tax of the selling price; While for the situation in which the owner does have justification and supporting documents, the construction cost is added to the property’s price in order to determine the acquisition price, and the taxable base shall be determined after a deduction of 8% of the capital gain (difference between the selling price and the acquisition price) that should apply per year from the date of the last document certifying the construction cost till the date of the transfer agreement.

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The Ministry of Finance (MoF) issued the Decision No. 942/1 dated 15/11/2019 (here below), published in the Official Gazette No 55 on 28/11/2019, related to the determination of the taxation treatment of liberal professions’ income derived by Lebanese residents from activities implemented in foreign countries which have signed double taxation treaties (DTT) with Lebanon. This Decision has implicitly enshrined the principle of superiority of international treaties which prevail over Lebanese applicable laws or principles to the contrary in accordance with the provisions of article 2 of the Code of Civil Procedures and article 3-2 of the Code of Tax Procedures. Indeed and in compliance with this Decision, the professional revenues derived by Lebanese residents from activity implemented in a country that have signed a DTT with Lebanon are subject to the income tax in Lebanon and should be combined in consequence with the other income and revenues generated in Lebanon and subject to the tax (whether on the basis of the actual profit, or by application of the rates of the flat-rate profit according to the rate relating to the concerned activity). The provisions of the DTT shall be taken into account in applying this Decision, to the extent that they authorize the State in whose territory such profits were generated to tax such profits in that State. The Decision will apply as for the revenues of the fiscal year 2019.

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The Minister of Finance issued the Circular No. 3244 /S1 dated November 29, 2019, published in the Official Gazette No 52 on 7/11/2019, referring to the previous Circular No. 125 /S1 dated 01/02/1997 under Law No. 366 dated 01/08/1994 which was applied as from the beginning of 1993 and has on the one hand, considered that the built property tax is linked to effective beneficiary of the revenues which may be either the owner or the investor or alike or any person representing the aforementioned persons; and, on the other hand, has imposed a tax at a progressive rate on each and every property the taxpayer owns or invests within the same governorate Mohafaza) .

In this respect, it should be noted that the principal proportional tax on the real estate under the Law No. 366 dated 01/08/1994 at a fixed rate of 4% of the income derived by the real estate was abolished by the Law No.583 dated 23/04/2004 that has applied a unique progressive tax, ranging from 4% up to 14% of the real estate’s revenues, on each real estate separately.

On the other hand, the taxation of different units (of the buyer) by virtue of sales agreements in the non-divided building should not be due on the basis of the revenues’ brackets of each unit but is related to the whole real estate’s revenues and not on the revenues generated by each unit separately.

The Circular has as well reminded that penalty of collection and penalties of recovery were due in connection with the preceding issues in addition to the due taxes. In this regard, it would be legally impossible to divide the taxes due on the entire non divided property as well as the penalties, on the units of said property. Therefore, it was very important to be very precise, cautious, and accurate  in determining the beneficial owners of the revenues of the non-divided properties and the different units of the divided buildings, especially since the reality has shown the possibility of a long period separating the tax’s date of entry into force and the date of final registration of said real estate in the name of the buyers in the certificate of the land register.

Consequently, the financial departments in charge of the built property tax have been required by virtue of the Circular to comply with the following:

• To reject requests for taxation of the buyer of the undivided or divided building’s units of any kind whatsoever by virtue of a provisionary measure, regardless of the document attached to the request and even though submitted by error in breach of the foregoing; provided that the buyers whose applications for taxation were accepted shall remain taxable.

 

• The buyer of all the entire undivided properties and the various units in the divided buildings into units for which title deeds have been issued shall be taxable upon the owner’s request provided to comply with the following:

 

• The buyer’s request for taxation (Form K10) should be submitted by the principal owner or by one of the principal owners or by any person representing the said persons or by the legal representatives, to which should be attached a copy of the notarized sale agreement for which the fiscal stamp has been duly paid or the irrevocable proxy which shall include a recognition of the real payment of the full price as well as a copy of the title deed or a copy of the cadastral attestation.
• The previous years’ taxation shall be corrected, considering that the tax is vitiated by a material error for a non-due tax.
• The primary owner whose name is registered on page of the land register should continue to guarantee the payment of taxes and penalties in case the buyer refuses to pay.

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The Ministry of Finance (MoF), has issued and published (Official Gazette N47-101019) the here below notification No. 3045/1 dated October 4th, 2019 relating to the statement 18 regarding the Beneficial Owner and thus, in accordance with the Decision of the Ministry of Finance No. 1472/1 dated 27/09/2018 (kindly refer to the folder Notifications & Regulations, MoF Decision NO. 1472/1 dated 27/09/2018 with respect to the mechanism of defining the “Beneficial Owner” (Law No. 74/2016)).

This Notification recalls the mechanism of defining the “Beneficial Owner” and specifies that the Beneficial Owner who exercises an activity within a moral entity, should be determined in accordance with the following three criteria:

• Direct or indirect ownership of a natural person of 20% and above of the equity capital of said moral entity.
• Ownership of a natural person of the majority of the voting rights or the majority of the basic decisions-making rights of said moral entity.
• Occupation by a natural person of a senior management position in said moral entity.

 

Whereas taxpayers must submit the statement M18 (statement concerning the beneficial owner) within the legal deadlines for the annual declaration of their activities’ results, and whereas the statement M18 included instructions which have raised confusion regarding taxpayers’ requirements, the aforementioned decision has clarified the following matters:

First, taxpayers with an electronic account before the Ministry of Finance must submit the statement 18 concerning the Beneficial Owner, except for those exempted from the income tax and who must declare it through Liban Post offices; provided however that in the event of any modification regarding the submitted Form 18, the latter should be submitted once again either electronically or through Liban Post offices, according to the mechanism of the primary declaration method of the first statement. Besides, taxpayers should keep a special register regarding the beneficial owner electronically or in paper form, in which shall be recorded all relevant information related to the beneficial owners along with a table showing the percentage of direct or indirect ownership as well as the means of calculating the percentage of indirect ownership; provided that all relevant documents shall be kept therewith.

 

 

 

 

 

 

 

 

 

Furthermore, this notification clarifies the following:

 

I- Concerning moral entities:

• According to the criterion of direct or indirect ownership of 20% of the moral entity’s capital, regardless of its legal form:

The statement M18 should be filled by the moral entity according to the following:

• In the first column, should be filled the name of the natural person or legal entity owning 20% and above of the moral entity’s capital; whereas the second, third and fourth columns should be filled according to their headings (in addition of the percentage of direct ownership in the fourth column).
• Any natural person or moral entity who owns less than 20% of the capital shall not be mentioned in the first column, unless said natural person has any of the above criteria 2 and 3.
• Any moral entity which doesn’t have indirectly a beneficial owner in the statement provider’s capital should not be mentioned in the first column, even if the ownership of said moral entity constitutes 20% and above of the statement provider’s capital.
• In order to calculate the percentage of ownership of shares or parts, the percentage of ownership of the husband, wife and minor children should be added as if they were a single person. In such case, the names of said persons should be mentioned in the first column and the names of the husband and wife should be recorded in the fifth column on a separate line.

The name of children without legal capacity should be listed in the first column, each name on a line, and the name of their guardian in the fifth column.

• In the fifth column entitled “Name of the Beneficial Owner”, should be mentioned:
• The beneficial owner’s name, direct owner, towards the name of the natural person listed in the first column as the owner, which can be either the same person whose name is mentioned in the first column, or another natural person; provided however that in the latter case his TIN (taxpayer identification number) shall be recorded in the last column.
• In the event that the beneficial right is owned by several natural persons or moral entities, the full name of each of the owners of such right should be recorded on a separate line with all details mentioned on a separate line.
• The name of the natural person who owns a percentage of the moral entity’s capital recorded in the first column, makes him indirectly the owner of 20% and above of the capital of the moral entity providing the aforementioned statement.

The percentage of indirect ownership in the capital shall be determined by multiplying the percentage of ownership of the natural person by the moral entity’s ownership in the moral entity providing the statement. Such method shall also be used in the case of multiple shareholdings or participations.

 

 

 

In the event that the bare ownership of the shares belongs to a natural person and the usufruct of such shares to another natural person, and that the bare owner holds a percentage of 20%, the name of the latter should be mentioned in the first column and the name(s) of the usufructuary(ies) in the fifth column along with the fiscal number of each of said persons. Hence, the name of each of the usufructuary(ies) shall be recorded on a separate line even if the contribution of each one of them is less than 20%.

• In the event that the natural person owns 20% or more of the capital of the moral entity providing the statement, and is at the same time a director or a board member or the chairman of the board of said moral entity, said person should be determined in the category “capacity” as a “partner and manager” or “shareholder and manager”.

 

• In the event that the natural person owns directly 20% or more in the capital of the moral entity providing the statement and owns, at the same time indirectly 20% or more in the capital of the same moral (legal) entity, the name of said person shall be mentioned on two consecutive lines, a line for the direct ownership and a second line for the indirect ownership. Moreover, the name of the natural person who owns, at the same time directly and indirectly 20% and more of the moral entity’s capital providing the statement, should be mentioned on two consecutive lines as well.

 

• Concerning branches of foreign companies operating in Lebanon:

Whenever the entity providing the statement is a branch of a foreign company in Lebanon, the said foreign’ s company name (Mother Company) should be recorded in the first column, whereas the name and fiscal number of each natural person owning directly or indirectly 20% and more of the foreign’ s company capital in the fifth column.  The name of the branch’s director and his fiscal number should be mentioned thereto as well.

• Regarding the criterion of ownership of the voting rights’ majority or basic decisions-making rights’ majority:
• The name of each of the Chairman and the Board of Directors’ members should be listed in the first column and the capacity of each of said persons should be specified in the second column regardless of whether they own or not shares or parts in the capital of the moral entity providing the statement; provided that the same name should be mentioned in the fifth column along with the fiscal number of each of the aforementioned persons.
• The percentage of shareholding or participation should be recorded whatever its value is. However, in the event of absence of any shareholding or participation, the mention of “0%” should be recorded.
• In the event that the moral (legal) entity is a member of the Board of Directors and its ownership’s percentage of the moral entity’s capital providing the statement is less than 20%, its name should be mentioned in the first column, whereas the name of the Chairman of the Board of such entity or its authorized signatory should me mentioned in the fifth column.

 

• Regarding the criterion of occupation of a senior management position:
• This criterion includes the General Director of the company, the Deputy General Managers and the authorized signatories.
• The full name, the TIN (taxpayer identification number) and the capacity of each of the aforementioned persons should be listed in the first, second and third columns, regardless of whether they own or not shares or parts in the moral entity’s capital providing the statement. The same names should be recorded in the fifth column along with the fiscal number.
• The percentage of shareholding or participation should be recorded whatever its value is. However, in the event of absence of any shareholding or participation, the mention of “0%” should be recorded.

II- Concerning moral entities other than companies and individuals:

 

• The name of each of the Chairman and the members of the board of the NGO shall be listed in the first column, and in the fourth column, it should be mentioned that there are no contributions and thus, by mentioning 0% percentage. The second and the third columns shall be filled according to their headings.
• The name of the natural person owner of such right shall be recorded in the fifth column, provided that the latter could be either the same person whose name is recorded in the first column or another person; in the latter case, his full name and TIN (taxpayer identification number) should be mentioned in the last column. In the event that the said person does not have a fiscal number, he shall be identified and obtain a fiscal number.
• In the event that the Lebanese NGO is affiliated to a foreign NGO, the name of the representative appointed by the foreign institution for the management of the Lebanese NGO shall be mentioned in the category “beneficial owner”.

 

III- Concerning Investment Schemes according to the Laws 705/2005 and 706/2005:

• The certificate holders’ names owning a percentage of more than 20% of the fund’s assets (issuances) as provided for in the form S21 should be listed in the first column. The second, third and fourth columns should be filled according to their headings.
• The name of the natural person owner of such right should be mentioned in the fifth column; provided that said person could be either the same person whose name is recorded in the first column or another person. In the latter case, his full name and his TIN (taxpayer identification number) should be recorded in the last column.
• The name of the person assigned by the director of the fund (the bank or the financial institution) to manage the operations of the fund should be recorded in the first column, his capacity in the second column, and his name should be also recorded in the fifth number (as mentioned in the first column) along with his fiscal number.

 

VI- Concerning the Trust:

The names of the below mentioned persons shall be listed in the first column according to the following:

– The settlor

– The trustee

– The protector

-The beneficiary.  In the event that the beneficiary is not identified, the categories of persons for   whom the legal arrangement was established shall be recorded.

-Each natural person controlling effectively the trust through a direct or indirect ownership or through other means.

The second and the third columns should be filled according to their headings and in the fourth column (percentage of shares or parts), it should be mentioned that there are no other shareholding or participation (as the case may be) with the mention of “0%”.

The name of the natural person owner of such right should be mentioned in the fifth column; provided that the latter could be either the one whose name is mentioned in the first column or another person; and in the latter case, the full name and the TIN of said person should be filled in the last column.

VI- Concerning individual and professional institutions:

• The name of the owner of the institution or the profession should be mentioned in the first column, and in the fourth column the participation of 100%. The second and the third columns should be filled according to their headings.
• In the fifth column, should be mentioned the full name of the natural person owner of such right, who could be the same person whose name is mentioned in the first column or another person; and in the latter case, his full name and his TIN should be recorded in the last column.

The aforementioned taxpayers -regardless of their legal form- that are bound to submit the form M7 relative to the non-exercise of activity, have the obligation to submit the statement M18 related to the beneficial owner annually, unless said persons are exempted from submitting said statement.

Besides, taxpayers under liquidation are required to submit the statement M18 as long as the obligation to submit the periodic declarations is still required.

Concerning persons who are exempted from submitting the statement M18:

• Public administrations and institutions, municipalities, associations of municipalities and other public law persons.
• Any company of which more than 80% of its capital belongs to a person from the foreign public law.
• Any company of which more than 80% of its capital belongs to a person from the Lebanese public law.
• Any company which distributes more than 80% of its capital to a person from the foreign or Lebanese public law.
• Any company of which more than 80% of its capital belongs to a religious authority.
• Representation offices, diplomatic missions, mutual funds, endowments, religious authorities, syndicates, international organizations, chambers of commerce, industry and agriculture and their federations.
• Associations of property owners.
• Owner of liberal professions that are bound to join a syndicate in order to practice such profession, and that are not obliged to register an establishment to practice said profession, unless they have a second individual activity.
• Taxpayers that are based on the estimated profit.
• Taxpayers who declared their bankruptcy.

 

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The Ministry of Finance has issued three notifications dated 30/08/2019 published in the Official Gazette on 05/09/2019 (below): the first relating to the obligations charged to the establishments required to withhold the tax on salaries and wages, the second concerns the obligations placed on the load of establishments held to retain the tax of Article 51 of Law No. 497/2003 as amended by Law No. 144 dated 31/07/2019, to declare it and to pay it to the Treasury and the third notification (No. 2487 /s1) concerning the fight against tax evasion operations. The three notifications were issued to notify and alert taxpayers that the Ministry of Finance will tighten the necessary legal measures to combat tax evasion, including the lifting of bank secrecy the existence of such evasion will be proven to the Ministry, as well as the imposition of criminal sanctions provided for by the relevant laws.

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The Ministry of Finance (MoF) has published an announcement on the 6^th august 2019 (here below) related to the payment of the smoking license fees by touristic entities that meet sanitary and legal requirements (hotels, restaurants, bars, nightclubs, etc…) for the 5 remaining months of the year 2019 according to the provisions of article 58 of the law No. 144 (budget Law 2019).

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The National Social Security Fund (NSSF) has issued the notification No. 620 dated 20/09/2019 related to the reduction in the social security penalties according to the provisions of article 37 of the Law No. 144/2019 (Budget Law 2019). Accordingly, the social security penalties are reduced by 100% for all delayed contributions due before the year 2000 and by 85% for all delayed contributions due from 01/01/2001 till 31/12/2018 if these contributions and their related reduced penalties are paid before the 31/12/2019. These contributions can be paid by instalments over 5 years with a first payment of 20% of the amount due and yearly interest rate of 5%.

 

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