Author: citylog

The Law No. 110 dated 30th November 2018 (hereinafter), published in the Official Gazette No 52 dated December 6, 2018, has extended till the 31st January 2019 the discounts on the tax penalties and the objection deadlines set in the Budget Law 2018 which provides for the following:

 

DISCOUNT ON PENALTIES

Article 17: 100% discount on penalties on (i) failure to maintain accounting records for taxpayers taxed on estimated profit basis and (ii) issuance of invoices not compliant with the tax law and regulations.

90% discount on all other tax violations provided that the taxes and the discounted penalties are paid within 6 months from the publication of this law (i.e. now before the 31st January 2019).

 

Articles 18 to 22: 90% discount on late payment penalties due to government entities, including Municipality fees, Mechanic fees and National Social Security Fund (NSSF) provided that the late payment duties and fees as well as the discounted penalties are paid within 6 months from the publication of this law (i.e. now before the 31st January 2019). However, the unpaid NSSF contributions and their related discounted penalties can be paid by installments to the NSSF over 5 years with an interest rate of 5% per year provided that 20% of the late payment and the discounted penalties are paid within 6 months from the publication of this law. In case of a failure to pay an installment, all the taxes will be due in addition to 12% interest.

 

Article 24: Total exemption on penalties due by taxpayers concerned by the application of the Article 53 of the Income Tax Law (i.e. taxpayers who work in several places or are self-employed at the same time that should fill and declare the R8 tax form) for violations occurred till the year 2016 provided that the taxes are paid within 6 months from the publication of this law. This exemption doesn’t cover the penalties already paid before the publication of this law.

 

 

EXTENSION OF THE TAX OBJECTION DEADLINE

Article 23: The taxpayers who have been notified of a tax adjustment after the 1st January 2009 and who did object this tax adjustment within the deadline set by the Tax Procedures Law (Law #44/2008) or whose objection were rejected in form at the level of the tax administration or the objection committee while they didn’t fully pay the adjusted taxes as of the publication of this Law, will be granted 6 months from the publication of this Law (i.e. now before the 31st January 2019) to file their objection towards the tax administration or the objection committee provided that 10% of the adjusted taxes and duties are paid prior to submitting such objection. The tax administration will have one year from the publication of this law to conclude on these tax objections.

 

INSTALLMENT FOR PAYMENT OF TAXES WITHHELD AT SOURCE AND VALUE ADDED TAX (VAT)

Article 25: Unpaid taxes withheld at source (i.e. tax on interest, tax on dividends, etc.) and Value Added Tax (VAT) related to the fiscal periods up to 31 December 2016 can be installed based on a written request submitted to the tax administration within 6 months form from the publication of this law provided that 15% of the taxes due is settled within this period of 6 months. In case of a failure to pay an installment, all the taxes will be due in addition to 12% interest.

 

AMNESTY ON INCOME TAX AND VALUE ADDED TAX (VAT) ADJUSTMENTS HELD AT THE OBJECTION COMMITTEES

Article 32: An amnesty equal to 50% of the amounts of the objected tax adjustments (excluding late declaration and payment penalties) held at the objection committees but not yet concluded by the latter as of the publication of this Law for income tax adjustments covering years up to 2012 (inclusive) and Value Added Tax adjustments covering years up to 2016 (inclusive). To benefit from such amnesty, the taxpayers should submit a written request to the relevant tax department and pay the discounted amount due as per this amnesty within 4 months from the publication of this Law. The taxpayer has also the option to pay 25% of the discounted amount due within the 4 months period mentioned above and settle the remaining balance over 3 consecutive yearly installments subject to the interest rate set in the Tax Procedure Law. In case of a failure to pay an installment, the remaining balance will be subject to 12% interest. The taxpayer is not allowed to benefit from such amnesty on part of the objected tax adjustment. This amnesty covers all points of the objected tax adjustment. The objection committees will stop deliberating on any tax objection covered by this amnesty.

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The Law No. 108 (hereinafter), published in the Official Gazette No 52 dated December 6, 2018, has suspended the application of Article 29 of the Budget Law No. 173 of 14/02/2000 and its amendments, relating to the Lump Sum Tax, for a period of three years as of the enactment of this Law. As a matter of fact, the flat rate tax is in contradiction with the tax fairness principle, as it only applies to a certain class of taxpayers and it does not make any distinction between the taxpayers who generate profits and those who incur losses.

 

Moreover, in compliance with the tax fairness principle, taxpayers who have already paid the flat rate tax are entitled to recover the said tax. The recovery mechanism will be determined by virtue of a decision to be adopted by the Minister of Finance within one (1) month as of the publication date of this Act.

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The Law No. 106 of 30/11/2018 (hereinafter), published in the Official Gazette No 52 dated December 6, 2018, has defined the “beneficial owner” as follows: a Beneficial Owner is any natural person, who actually and ultimately owns or controls, directly or indirectly, an activity implemented by any natural person or legal entity on the Lebanese territory, regardless of his place of residence.

 

Under this law, public authorities, public institutions and municipalities, as well as private sector authorities are required to cooperate with the tax authorities and to provide them with the information they request.

 

Moreover, taxpayers subject to actual, fixed and estimated profit regime, as well as taxpayers exempted from income tax but subject to VAT, should keep a special register related to the beneficial owners. These taxpayers have also the obligation to preserve the documents certifying the ownership structure of the legal entity and thus, for a period of 10 years, even after the loss of the status of beneficial owner or even after cessation of the activity by the concerned legal entity.

 

The law also requires the following:

– Any declaration of beginning of activity must specify the name of the beneficial owner.

-Any change or modification of the information related to the beneficial owner must be reported to the tax authorities.

 

However, one of the most important provisions of the said law remains in the sanctions and penalties imposed on any person who fails to disclose information relating to the beneficial owner of the shares of a corporation or members’ shares of a partnership or the beneficial owner of any activity. These penalties apply to both persons who act for the benefit of the beneficial owner and to those who are responsible for completing and submitting the declarations provided for by the laws in force to the tax authorities.

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