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The Law #79 (Budget 2018) was published in the Official Gazette appendix #18 dated 19th April 2018 (here below) and includes some major tax amendments and discounts on penalties as well as a tax amnesty (article 26) that was invalidated afterwards along with 6 other articles (14, 35, 43, 49, 51 and 52) by virtue of the decision #2/2018 of the Constitutional Council dated 14th May 2018.
The main provisions encompassed in Chapter 3 of this Budget Law 2018 are summarized hereinafter:
- Article 17: DISCOUNT ON PENALTIES: 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 on past due tax adjustments made by the Ministry of Finance. Besides, 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. before the 19th October 2018).
- Articles 18 to 22: ADDITIONAL DISCOUNTS & EXEMPTIONS: 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. before the 19th October 2018). 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: ADDITIONAL DISCOUNTS & EXEMPTIONS: 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.
- Article 23: EXTENSION OF THE TAX OBJECTION DEADLINE: on 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. before the 19th October 2018) 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.
- Article 25: INSTALLMENT FOR PAYMENT OF TAXES WITHHELD AT SOURCE AND VALUE ADDED TAX (VAT): on 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.
- Article 32: AMNESTY ON INCOME TAX AND VALUE ADDED TAX (VAT) ADJUSTMENTS HELD AT THE OBJECTION COMMITTEES is 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.
- Article 28: BUILT PROPERTY TAX: The residential tax allowance has been increased from LBP 6 million to LBP 20 million starting from the fiscal year 2018 for each residential apartment occupied and owned by a natural person or partner in the ownership based on his percentage of ownership and up to a maximum of two apartments only for those that have the higher rental values (amendment of the article 52 of the Built Property Law dated 17/9/1962.
- Article 29: Amendment of the scales and brackets on the BUILT PROPERTY TAX: Starting from the fiscal year 2018, the annual net income per property will be subject to the following built property tax brackets (amendment of the article 54 of the Built Property Law dated 17/9/1962):
- 4 % from LBP 0 to LBP 40 million
- 6% from LBP 40 million to LBP 80 million
- 8% from LBP 80 million to LBP 120 million
- 11% from LBP 120 million to LBP 200 million
- 14% for more than LBP 200 million
- OTHER AMENDMENTS & INCENTIVES: this Law also includes some important other amendments and incentives summarized as follows:
- Article 27: The Lebanese Government shall bear the Social Security contributions in all its schemes and for a period of 2 years for all the employees hired during the period extended from the publication date of this law until 31st December 2019, if the employee was hired for the first time, was previously unemployed of left his previous work six months prior to the publication date of this law, provided that his annual salary does not exceed LBP 18 million (i.e. USD 1,000 per month).
- Article 30: Decrease of the registration fees on residential properties owned by Lebanese individuals from 5% to 3% on the part that does not exceed LBP 375 million while the amount exceeding this threshold remains subject to the 5% rate.
- Article 31: Exemption from fees on pledge and pledge cancellation on residential loans up to the ceiling defined by “Banque de l’habitat” and the amount exceeding this ceiling would be subject to 1% upon certain considerations.
- Article 37: VAT on built properties rent activities for non-residential purposes for which not VAT was not collected from its lessees will not be due (i) if one of the parties of the contract belongs to a sect (i.e. religious entity or any of related entity), or public administration or institutions, or municipalities until the end of the second quarter of the year 2018 (ii) in all other cases and until the end of the second quarter of the year 2014.
- Article 38: Lebanese passports can be delivered with a validity of 10 years.
- Articles 39 & 40: Work and residency permits for foreign labors can be delivered for a validity of 2 years for twice the amount of the permit fees.