Category: Notifications & Regulations

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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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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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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This notification recalls the provisions of article 82 of the Income Tax Law which compels physical or legal persons resident in Lebanon and who earn and/or derive income from foreign movable capital, when this income is paid to or collected abroad, directly or through intermediaries, to declare said income before March 1^st of each year and pay the tax due before April 1^{st of} the following year.

Failure of taxpayers to comply with the aforementioned obligations falls within the definition of the concept of tax evasion provided for in Article 1 of the Law on Tax Procedures (Law No 44 dated 11/11/2008 and modified bt article 57 of the Budget Law No 144 dated 31/7/2019) and constitutes a criminal offense liable to penalties in accordance with the request of the Ministry of Finance and thus, according to Decree-Law No. 156 dated 16/09/1983.

In light of the foregoing, the Ministry of Finance warns the concerned taxpayers of the necessity to comply with the above mentioned obligations in order to avoid their exposure to penalties provided for by the law on tax procedures and their criminal prosecution before the competent courts.

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The Ministry of Finance has issued and published the notification below No. 440/1 dated 25/02/2020, relating to the payment of the tax stamp duty that applies to invoices and receipts in cash

 

This notification recalls that companies and individual enterprises can settle the stamp tax duty of 250 L.L. that applies on invoices numbered in cash, in accordance with article 43 of the law relating to the tax stamp duty and thus, before their use.

 

Indeed, in order to benefit from the provisions of the aforementioned article 43, companies as well as individual enterprises should settle the tax stamp duty equivalent to 250 L.L. for each invoice or cash receipt before the relevant departments of the Ministry of Finance of Beirut and other governorates (محافظات) before the issuance of said invoices or receipts, according to the following mechanism:

 

1. Presentation of a request to the tax authorities including:

• the number of invoices or receipts for which the stamp tax will be paid in advance;
• the numerical order of invoices or receipts to be issued on the basis of the fixed number;
• the total value of the tax stamp duty to be paid.

 

In this regard, it should be noted that the request should be accompanied by a copy of each invoice or receipt issued.

 

2. Following the payment of the tax stamp duty, the company or the enterprises should write the expression “tax stamp duty paid in cash” on each invoice or receipt issued in the numerical order for which the tax was previously paid.

 

3. The company or the enterprise should settle the tax stamp duty according to the same mechanism before exceeding the number for which the tax has been already paid.

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Circular No.105/S1 issued by the Ministry of Finance on 15/01/2020 (hereinafter), has modified the direct estimations subject to the property tax for dwellings occupied by non-tenants and non-occupied dwellings as of 01/01/2019.

Whereas the decision No. 616/1 dated 08/20/2019 relating the modification of direct estimations subject to the property tax for dwellings occupied by non-tenants has provided for a 20% decrease of the estimations that occurred as of 01/01/2015 until 31/12/2018 in order to cope with the urgent increase of real estate prices which was marked by a general nature and thus, in accordance with article 39 of the Law relating to the property tax which provides that the effect of direct estimations could be extended for a period of three years by virtue of a decision issued by the Minister of Finance in case of a stable economic situation and stability of rents. However, according to said article, insofar as the urgent change in economic conditions is of a general nature, the extension could be extended and the previous estimations could be adjusted on the basis of general rates.

 

Besides, it should be mentioned that article 36 of the Property Tax Act stipulates that in order to estimate the net income, the following principles should be taken into account:

1- The value of the rent agreed upon by the lessor and the lessee should be adopted as the basis of estimation, whenever such value could be known and validated.

2- Failing that, the net income is estimated in comparison to other similar leased buildings under similar circumstances.

3- In case of failure of comparison, the estimations of the net income should be effected on the basis of the basic elements affecting the property’s rental value: surface area, region, condition of the building, building complements as well as on the basis of other elements; provided that the building guarantees its owner at least 5% (five percent) of its value as a rent.

 

This being said, the financial units in charge of the property tax are required to maintain the decrease of 20% for the estimations occurred as of 01/01/2019 in parallel with the decreased estimations that occurred as of 01/01/2015 until 31/12/2018 for dwellings occupied by non-tenants as well as for non-occupied dwellings.

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The Ministry of Finance (MoF) has recently issued a new decision #58/1 dated 18th February 2020 (here below) on the application of the Article 49 of the Law #144 dated 31st July 2019 (Budget Law 2019) related to the exceptional revaluation of fixed assets.

According to this 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 from the date this law was published till the 31st March 2020 (extended for six months by the latest Budget Law 2020), 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 or who had benefit from a previous exceptional revaluation law.

The fixed assets that may be revalued according to the Article 49 of the Law #144/2019 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 2019, knowing that their revaluation should be based on their market value as at 31st March 2020. 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 3% 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 3% 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 3% 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.

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The Ministry of Finance (MoF), has issued and published the here below Decision No. 54/1 dated 7^th February 2020 relating to the implementing provisions of paragraph (2) of article 29 of the Law No. 144 dated 31/07/2019 (General Budget and annexed budgets for the year 2019).

According to this decision, as of 01/08/2019 and until the achievement of an electronic connection between the department of notaries and the department of the Ministry of Finance, notaries shall deposit before the Ministry of Finance a copy of each notarized sales contract of real estate and each irrevocable proxy organized before them, relating to the acquisition of built or unconstructed (land) real estate, without requiring any tax on said copies.

Notaries shall organize periodic declarations relating to the aforementioned sales contracts and proxies and deposit them along with copies of said contracts and proxies, before the Tax Compliance Department of the Directorate of Revenues or coordinate with said department in order to deposit these declarations and copies by an electronic mean, according to the following dates:

 

• Notaries in Beirut and Mount Lebanon:

A bi-monthly declaration, no later than the end of the month (for the first half of the current month), and no later than the 15^th of each month (for the second half of the previous month).

• The Notary Public in other governorates (Mohafazas):

A monthly declaration within fifteen days of each month (for the previous month).

 

The tax compliance department of the Directorate of Revenues must:

• Receive the bi-monthly and monthly periodic declaration prepared by the notaries, accompanied by copies of the notary sales contracts and irrevocable proxies relating to the acquisition of build or unconstructed real estates, in paper or electronic form, and sign the receipt or confirm the receipt electronically by an electronic mean.
• Include these declarations and copies in the tax system (sigtas), according to the mechanism and regional financial interests in the governorates.

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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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