The Ministry of Finance (MoF) issued on the 12th March 2025 the decisions # 338/1, 339/1 and 340/1 (attached scanned copies) in application of the article 2 of the Law # 330 published on 5/12/2024 related to the Exceptional Revaluation of Fixed Assets, Inventory and Foreign Exchange adjustment of the LBP Devaluation effect on receivables, payables and cash & bank accounts from the year 2022 till the 31st December 2026.
1) The MoF decision # 338/1 related to the Adjustment of the LBP devaluation effect on receivables, payables and cash & bank accounts:
Companies and taxpayers holding accounting books have the obligation to adjust their accounting books to correct the effect of the LBP devaluation starting from the end of the year 2022 till the 31st December 2026 by applying the Effective exchange rate at the end of each year on the classes 4 and 5 accounts (i.e. receivables, payables and cash & bank accounts). Positive and negative differences of exchange resulting from this adjustment [i.e. the difference between the effective exchange rate and the rate previously used by the taxpayer] should be excluded from the taxable income, except the differences of exchange related to salaries.
The effective exchange rate was 42,000 LBP/USD as at year-end 2022 and 89,500 LBP/USD as at year-end 2023 & 2024 according to this MoF decision.
This MoF decision has clarified that the Fiscal Year 2023 should be the first year to apply this foreign exchange adjustment on the accounting books of the taxpayers. The adjustment on the accounts of the fiscal year 2022 should be done at the opening of the fiscal year 2023. According to the article 5 of this decision, the taxpayers who have already submitted their annual corporate income tax returns for the fiscal year 2023 have the obligation to submit an amended tax return for this year after having adjusted their accounts, and pay any difference in tax, if any, or will benefit from a tax credit if they paid taxes in excess for this adjusted fiscal year.
The positive difference of exchange resulting from these adjustments is exempted from the 17% income tax while the negative difference exchange is not deductible from the taxable income. However, the positive difference of exchange is subject to the 10% distribution tax for the corporate taxpayer and is considered as distributed dividends (i.e. subject to the 10% distribution tax) for the branches of foreign companies.
2) The MoF decision # 339/1 related to the Exceptional revaluation of Fixed Assets:
Companies and taxpayers subject to real profit (including those who have already undertaken previous revaluations) have the option to revalue their fixed assets (Properties, Plants and Equipment as well as Financial assets such as equity participations in subsidiaries and affiliates) every year starting from the end of the year 2022 till the 31st December 2026 to adjust the effect of the devaluation of the Lebanese Pound (LBP) on the value of these assets, provided that the revalued amount doesn’t exceed the fair market value of this asset. The revaluation of the fixed assets as at year-end 2022 should be recorded in LBP at the effective exchange rate (mentioned above) as an opening entry in 2023 and should be depreciated starting from this year. The revaluation variance [in LBP] should be recorded in a separate equity account (account # 103).
The revaluation of real estate properties should be done through a sworn real estate expert while the remaining fixed assets can be revalued by an auditor member of the LACPA. The revaluation should be submitted to the Ministry of Finance (MoF) for approval, partial amendment or refusal. The MoF has one year to reply, otherwise the revaluation will be considered tacitly accepted.
The revalued amount should replace the existing net book value of the related fixed asset and should be depreciated at the same depreciation rate over the remaining useful life of the asset while totally depreciated fixed assets subject to revaluation cannot be further depreciated. In case of disposal of the revalued fixed asset at a price higher than the net revalued amount, the capital gain is subject to 15% tax while any loss resulting from this disposal is not tax deductible and the difference should be deducted from the revaluation variance in the equity.
The revaluation variances resulting from this Exceptional Revaluation are not subject to tax and can be used either to cover accumulated losses (in the limit of non-prescribed tax losses), increase the capital of the company or distributed as dividends. The distribution as dividends of these revaluation variances is subject to 10% distribution tax if done within 5 years from the revaluation submission date and is exempted from this distribution tax if done after the period of 5 years. If the company is liquidated for any reason other than bankruptcy within the period of 5 years, the revaluation variance is also subject to the 10% distribution tax.
3) The MoF decision # 340/1 related to the Exceptional revaluation of Inventory:
Companies and taxpayers subject to real profit (including those who have already undertaken previous revaluations) have the option to revalue their inventory every year starting from the year 2022 till the 31st December 2026 to adjust the effect of the devaluation of the Lebanese Pound (LBP) on the value of the inventory. The request for revaluating the inventory of the year 2023 should be submitted to the MoF within 2 months from the application date of this Law and one month after the closing date for the following years. The previously set deadlines have been extended in accordance with the Law #328 and the MoF decision #328/1 on the suspension of the tax deadlines.
The revaluation of inventory should be done through an auditor member of the LACPA. The MoF has one year to reply, otherwise, the revaluation will be considered tacitly accepted. The inventory should be revalued based on its cost in the currency it was initially purchased and the Effective Exchange rate at the end of the related year. The revaluation variance [in LBP] is added to the inventory from one side and is recorded in a separate equity account (account # 103) from the other side.
The taxpayer should make available to the MoF a list of supporting documents mentioned in the Law together with a statement showing the initial cost of the inventory items and the revaluated value accepted by the MoF.
The revaluation variances resulting from this Exceptional Revaluation are not subject to tax and can be used either to cover accumulated losses (in the limit of non-prescribed tax losses), increase the capital of the company or distributed as dividends. The distribution as dividends of these revaluation variances is subject to 10% distribution tax if done within 5 years from the revaluation submission date and is exempted from this distribution tax if done after the period of 5 years. If the company is liquidated for any reason other than bankruptcy within the period of 5 years, the revaluation variance is also subject to the 10% distribution tax.
The taxpayers who didn’t file for their income tax returns for the years 2020, 2021 and 2022 are not allowed to benefit from this exceptional revaluation. The taxpayers, who recorded their transactions related to inventory at an exchange rate different from the Effective Exchange rate and recorded the related differences of exchange in their P&L account, have the obligation to adjust their accounting records at the Effective Exchange rate and adjust their income tax declarations for the related years before submitting a request for an exceptional revaluation of their inventory.
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