Value Added Tax

A tax named the 'Value Added Tax' is hereby established, to be imposed, paid and collected in accordance with the provisions of this Law. The word 'tax', wherever it appears in this Law, means the Value Added Tax. The expression 'Lebanese territory' or 'Lebanon', wherever it appears in this Law, means the Lebanese land, airspace and territorial waters.

The following are subject to tax: 1- Operations involving the supply of goods and the provision of services for consideration that take place within Lebanese territory by a taxable person. Operations referred to in Articles 8 and 11 of this Law are deemed to constitute a supply of goods or provision of services for consideration. 2- Import operations carried out by any person, whether taxable or not.

1. 1)Any natural or legal person who, in the course of carrying on an economic activity independently, performs taxable supply-of-goods or provision-of-services operations, or operations that are exempt from tax with the right of deduction in accordance with the provisions of this Law, shall be subject to tax, provided that the turnover attributable to a period ranging between one quarter and four consecutive preceding quarters exceeds the sum of one hundred million Lebanese pounds.
2. 2)Any exporter or importer who, in the course of carrying on an economic activity independently, performs taxable supply-of-goods or provision-of-services operations, or operations that are exempt from tax with the right of deduction in accordance with the provisions of this Law, shall be subject to tax regardless of the amount of his turnover.
3. 3)Any person who carries on an economic activity independently that is taxable or exempt from tax with the right of deduction in accordance with the provisions of this Law may request voluntary registration for the tax, provided that his turnover exceeds fifty million Lebanese pounds during a period ranging between one quarter and four consecutive preceding quarters.
4. 4)The detailed rules for applying this Article shall be determined, when necessary, by a decision issued by the Minister of Finance.

The calculation of the turnover referred to in Article 3 of this Law shall include the total of the following amounts: - The value of taxable operations, provided that the amount of value added tax is not included in the calculation of such value. - The value of operations referred to in Articles 19, 20 and 21 of this Law. - The value of operations referred to in Articles 16 and 17 of this Law. The following shall not be included in the calculation of turnover: - The value of disposals of the fixed assets of the enterprise.

Operations involving unbuilt land are not subject to tax. The State, municipalities and other public-law entities are likewise not subject to tax with respect to operations they carry out in their capacity as a public authority, even if they collect fees, charges or subscription payments in return, with the exception of operations relating to the following matters, which remain subject to tax: - Letting of private properties. - Telecommunications. - Water and electricity. - Audio-visual media. - Consumer markets, abattoirs and warehouses. - Tobacco and tobacconists. - Parking facilities. - Ports and airports. - Cooperatives.

A 'supply of goods' within the meaning of this Law means the act by which a taxable person transfers the right to dispose, as owner, of a tangible movable or immovable asset to another party, such as through sale or exchange.

For the purposes of applying this Law, the following are deemed to constitute tangible goods:

1. 1)Electricity, gas, heat and refrigeration.
2. 2)The following real rights referred to in the Real Property Ownership Law: usufruct, long-term lease, disposal right, the option arising from a promise of sale, and the two leaseholds.

The following are deemed to constitute a supply of goods for consideration: 1- The act by which a taxable person withdraws goods or assets from his enterprise, for which the tax payable on his sales was partially or wholly relieved in respect of the tax that affected them, for the purpose of: a) Assigning them to his personal needs or to the needs of his employees, and generally for purposes other than those of his enterprise. b) Providing them to third parties free of charge.

1. 1)The act by which a taxable person assigns, for the purposes of his enterprise, goods or assets that he manufactured, assembled, constructed, acquired or imported in the course of carrying on his activity, which would not have entitled him to full deduction of the tax that affected them had he acquired them from a third taxable person.
2. 2)The act by which a taxable person assigns goods or assets existing in his enterprise for the purpose of carrying on a non-taxable activity, if those goods or fixed assets, or the elements of which they are composed, had entitled him to deduct the tax that affected them upon their acquisition or assignment in accordance with the provisions of paragraph (2) above.
3. 3)The act by which a taxable person or one of his legal successors, after ceasing to carry on the taxable economic activity, retains an asset belonging to the enterprise, if that asset had previously entitled him, upon its acquisition, to full or partial deduction.

Tax shall not be payable on a transfer of the core assets of an enterprise, provided that this transfer enables the transferee to continue the transferor's business, whether with or without consideration, if both the transferor and the transferee are taxable persons.

A 'provision of services' means any operation that does not constitute a 'supply of goods' within the meaning of Articles 6 and 8 of this Law. The following are considered, by way of example, as provision of services: - A transfer of an intangible asset, whether or not that asset is represented by a document. - An undertaking to refrain from performing a specific act or to tolerate its performance.

The following are deemed to constitute a provision of services for consideration:

1. 1)The use by a taxable person of an asset assigned to his enterprise, in respect of which he was previously granted full or partial deduction, for his personal needs or for the needs of his employees, and generally for purposes other than those of his enterprise.
2. 2)The provision by a taxable person of services free of charge for his personal needs or for the needs of his employees, and generally for purposes other than those of his enterprise.
3. 3)The provision by a taxable person of services for the needs of his economic activity of a type that, had they been provided by another taxable person, the tax payable thereon would not have been fully deductible.

A taxable agent who acts in his own name on behalf of his principal in an operation involving the supply of goods or the provision of services shall be deemed to have carried out those operations himself.

A supply of goods shall be deemed to have taken place in Lebanon if the goods are located, at the date of supply, on Lebanese territory.

A provision of services shall be deemed to have taken place in Lebanon if the service is used within Lebanese territory. This is subject to the following provisions: a) The place of provision of services relating to real property is the place where such real property is situated. b) The place of provision of services relating to tangible movable assets is the place where those services are performed.

An import shall be deemed to have taken place when goods are placed in the status of local consumption in accordance with customs legislation.

Tax falls due on the date of supply of the goods or provision of the service. Where payment of the price, in whole or in part, was made prior to the date of supply of the goods or provision of the service, tax falls due on the date of payment, based on the amount received. Where a taxable person issues an invoice prior to the supply of goods or provision of services and prior to receipt of payment, tax falls due on the date the invoice is issued. With respect to imported goods, tax falls due when the customs duty becomes payable in accordance with applicable customs legislation.

1. 1)The consideration received or to be received by the supplier of goods or provider of services for supplying those goods or providing those services shall be adopted as the tax base.
2. 2)With respect to the operations referred to in Article 8 of this Law relating to the self-supply of goods by a taxable person, the purchase price of the goods or similar goods shall be adopted as the tax base; where the price cannot be ascertained, the cost price at the time of carrying out the operation shall be adopted.
3. 3)With respect to the operations referred to in Article 11 of this Law relating to the self-supply of services by a taxable person, the total expenditure borne by the taxable person for providing those services shall be adopted as the tax base.
4. 4)In cases where the consideration cannot be determined, the tax shall be imposed on the basis of the market value of the operation performed. The market value means the price payable on Lebanese territory for a similar operation taking place on the date of execution of the taxable operation between a seller and buyer independent of each other and under fully competitive conditions.
5. 5)Duties and taxes, with the exception of the value added tax, shall be included in the tax base, as shall all ancillary expenses such as brokerage, packaging, transport, insurance and similar costs.

Upon importation, the customs value determined in accordance with the rules for assessing goods at customs shall be adopted as the tax base, to which all customs duties, where applicable, and all other duties originally due thereon shall be added, with the exception of the value added tax itself.

The tax rate is eleven percent (11%). This rate shall apply from the beginning of the quarter following the quarter in which this Law is published. Notwithstanding any other provision, the increase in value added tax beyond 10%, imposed on the consumption of water, electricity, and wire and wireless telecommunications, shall constitute treasury revenue to be collected and paid pursuant to the legal procedures for the collection and payment of value added tax.

The tax due from a taxable person shall be computed at the end of each calendar month. However, the Minister of Finance may, by a decision issued by him, and for reasons arising from the initial phase of adopting this tax or for administrative reasons, amend this period such that the tax is computed on a quarterly basis.

The right of deduction is the right granted to a taxable person to deduct from the gross tax due on a specific operation the value of the tax that previously burdened the price of that operation or any element of the elements that make up the price. A taxable person may deduct from the gross tax he is obliged to pay for a given computation period the total value of the deductible tax for that same period. The right of deduction arises when the deductible tax becomes due for payment.

The deductible tax is the tax that affected goods or services obtained by the taxable person from another taxable person and goods and services that he imported, including fixed assets, for the purpose of carrying out, in the course of his economic activity, one of the following operations:

1. 1)Supply of goods and provision of services subject to tax.
2. 2)Operations relating to exports and similar activities and international transport operations exempt from tax under Articles 19, 20 and 21 of this Law.
3. 3)Also deductible is the tax that affected fixed assets acquired by a taxable person prior to the date of his subjection to tax, which he assigns to the carrying out of taxable operations.
4. 4)'Fixed assets' within the meaning of this Article means tangible assets in the form of machinery and equipment assigned to permanent use in the enterprise as an instrument of ownership or means of investment.
5. 5)The rules and procedures for applying this Article shall be determined by a decree upon the proposal of the Minister of Finance.
6. 6)Also deductible is the tax that affected inventory of goods and raw materials in the possession of the taxable person at the date of commencement of the effect of his registration for the tax, which he acquired at a prior date, provided that he assigns them to carrying out taxable operations and in accordance with rules and procedures determined by a decision of the Minister of Finance.

In order to exercise the right of deduction, a taxable person must hold: - An invoice for goods or services acquired from another taxable person containing the information referred to in Article 38 of this Law, or a document serving in lieu thereof. - Customs documents issued by the competent authorities confirming the validity of the importation and the payment of the tax.

Where the value of the deductible tax exceeds, at the end of a given computation period, the value of the tax due, the surplus shall be carried forward to the following period. A taxable person may, after the end of any financial year and within a period of 20 days, submit a request for refund of the balance of surplus deductible tax at that date, provided that the amount claimed for refund is not less than five million Lebanese pounds. Exporters may, after the end of any tax computation period and within a period of 20 days, submit a request for refund of the balance of surplus deductible tax computed for that period, provided that the amount claimed for refund is not less than five million Lebanese pounds. Any person who has received the administration's approval of his de-registration request may request the refund of surplus deductible tax within 20 days of the end of the tax computation period during which he is notified of the tax administration's approval of his de-registration request. The administration shall issue a decision on the refund request within a maximum period of three months from the date of expiry of the deadline set for submitting refund requests. This period shall be extended once for an equal duration if the tax administration finds it necessary to expand its review of the taxpayer or to place the taxpayer's file in the tax audit programme for periods prior to the refund request. If the administration approves the refund request, wholly or partially, it may refund the due amount to the taxable person; otherwise, interest shall accrue on the unpaid amount at a rate equal to the average interest rate on treasury bonds of one-year maturity, not exceeding 9% per annum, after the expiry of four months from the submission of the request or six months in the event that the period is extended by the tax administration.

Where a taxable person carries out, in connection with the supply of goods or provision of services, operations only part of which entitle him to a deduction, he may deduct a proportion of the tax corresponding to that part. The detailed rules for applying this Article shall be determined by decrees issued upon the proposal of the Minister of Finance.

Deductions previously made shall be reviewed for adjustment purposes where the deduction amount exceeds or falls short of the amount the taxable person should have deducted, as a result of:

1. 1)Material errors.
2. 2)Amendments occurring, at a date subsequent to the tax computation period, to the elements adopted for determining the deduction amount.
3. 3)A person who voluntarily subjected himself to the tax and then requested de-registration within two years of the date of registration must return to the treasury the difference, if any, between the value of the tax he recovered and the value of the tax collected by the treasury, in respect of the period during which he was subject to tax on a voluntary basis.

1- Within Lebanese territory: The tax shall be due from the taxable person in accordance with the provisions of this Law and from his legal successors, provided that the supply-of-goods and provision-of-services operations he carries out are subject to tax. Pursuant to paragraph (1) of Article 40 of this Law, the tax shall be due from the representative of the non-resident person appointed in accordance with the law, or from the person dealing with him if no such representative has been appointed. Pursuant to paragraph (2) of Article 40 of this Law, the tax shall be due from the person resident in Lebanon who uses therein a service acquired from outside Lebanese territory. 2- Upon importation: The tax shall be due from the importer or his representative in accordance with the provisions of applicable customs legislation.

Exceptionally and notwithstanding any other provision, value added tax shall not be imposed on operations involving the letting of built real estate for non-residential purposes on which value added tax was not collected from tenants or occupants, in the following two cases:

1. 1)Where one of the contracting parties is a religious community or a legal entity affiliated therewith, or a public administration, public institution, municipality or municipal union, until the end of the second quarter of the year 2018 inclusive.
2. 2)In all other cases, until the end of the second quarter of the year 2014 inclusive.
3. 3)Taxpayers covered by the provisions of this Article shall not be granted the right to deduct tax relating to operations involving the letting of built real estate for non-residential purposes referred to above, and no penalties shall be imposed for violations directly related thereto, within the time limits referred to above.
4. 4)No penalties directly relating to operations involving the letting of built real estate for non-residential purposes covered by item 2 of this Article shall be imposed for the period following 30/6/2014, in the event of declaration and payment of tax on such operations within a deadline of 31/8/2018 at the latest.
5. 5)Persons who carry out lettings of built real estate for non-residential purposes, exclusively within the scope of item 1 of this Article, who are not registered for value added tax, who are still carrying out those operations, and who meet the conditions for mandatory subjection to the tax as at 30/6/2018, must apply to the Value Added Tax Directorate for registration within a deadline of 31/8/2018 at the latest, failing which they shall be deemed registered by operation of law at the Value Added Tax Directorate as of 1/7/2018.
6. 6)Persons who carry out lettings of built real estate for non-residential purposes not covered by the preceding paragraph, who were not previously registered for value added tax, who were carrying out those operations as at 1/7/2014, and who met the conditions for mandatory subjection to the tax as at 30/6/2014, shall be deemed registered by operation of law at the Value Added Tax Directorate as of 1/7/2014; and as for those in whom the conditions for mandatory subjection arose at a date subsequent to 30/6/2014, they shall be deemed registered by operation of law two months after the fulfilment of those conditions. The Value Added Tax Directorate shall carry out the necessary tax adjustments relating to lettings of built real estate for non-residential purposes for the periods covered by this Article and shall cancel the taxes and penalties issued where applicable, upon a request submitted by the taxpayer within six months of the date of publication of this Law, provided that taxes and penalties paid to the treasury up to 31/1/2014 for operations involving the letting of built real estate for non-residential purposes shall be deemed an irrevocable right of the treasury.
7. 7)Any person who submits a refund request without entitlement, and any person who provides incorrect information, whether the owner or the tenant, shall be penalised with the fines provided for in Legislative Decree No. 156 dated 16/9/1983 (imposing fines for violations of financial laws).
8. 8)The detailed rules for applying this Article shall be determined by a decision issued by the Minister of Finance.

The obligations set out in this Chapter shall apply to: a) The taxable person in accordance with Article 3 of this Law. b) Persons who carry out operations exempt from tax that entitle them to a deduction in accordance with item (2) of the first paragraph of Article 28 of this Law.

Every taxable person must submit:

1. 1)A registration application to the Value Added Tax Administration within a period of one month starting from the last day of the quarter during which the conditions for subjection to tax were met.
2. 2)A de-registration application:
3. 3)a) Within one month of the end of the financial year following the year in which the conditions for subjection to tax ceased to be met.
4. 4)b) Within one month of the date of cessation of activity.
5. 5)Notification to the tax administration of any change in the nature of his activity, his address, his trade name or his legal personality, or any other information contained in the registration application, within one month of the date the change occurred.
6. 6)A periodic return within thirty days of the end of the tax computation period as defined in Article 26 of this Law, containing, where applicable, the amount of tax requested to be deducted.
7. 7)Applications and returns shall be submitted to the competent tax unit using paper and/or electronic forms provided for this purpose.

The manner of keeping books and organising the accounting documents necessary that a taxable person is required to maintain, which allow for the application and monitoring of the tax, shall be determined by a decision of the Minister of Finance. A person subject to income tax on the basis of lump-sum profit or estimated profit, who is subject to value added tax, is required to keep books and organise accounting documents applicable to taxpayers on the basis of real profit, while continuing to declare income tax on the basis of lump-sum or estimated profit.

1- Value-added-tax-registered persons whose turnover for four consecutive preceding quarters is less than 300 million Lebanese pounds, and for so long as their turnover remains below this threshold, with the exception of persons subject to income tax on the basis of real profit, or those mandatorily assessed on the basis of lump-sum profit, as well as non-resident persons subject to value added tax and their agents, are required to maintain an accounting system based on the following books and records: - A journal in which all transactions occurring are mandatorily recorded. - An inventory and fixed assets register. The contents and manner of keeping these books and organising the necessary accounting documents required of the taxable person benefiting from the provisions of this Article shall be determined by a decision of the Minister of Finance. The persons referred to in this Article must number and authenticate the books and records either in the commercial register or before a notary public, prior to commencing accounting entries, and this provision shall also apply to income tax payers concerned by this Article. 2- The persons referred to in item 1 of this Article shall benefit from an annual tax deduction of one million five hundred thousand Lebanese pounds to be deducted from the value of the tax due, for a period of five years from the year in which the effect of their registration with the Value Added Tax Directorate commences.

A taxable person must retain books, invoices and other accounting documents for a period of four years from the end of the financial year during which the tax was incurred.

Every taxable person is required to issue an invoice or any other document serving in lieu thereof upon supplying goods or providing services to any other person. The invoice must contain at a minimum the following: - The name, address and registration number of the supplier of goods or provider of services with the Ministry of Finance. - The name and address of the person for whose benefit the invoice is issued. - The subject matter of the supply of goods or provision of services. - The sequential number and date of the invoice. - The amount due for the supply of goods or provision of services. - The amount of tax due with the tax rate applied.

Tax shall be paid in a single instalment within the deadline for filing the periodic return, i.e. within thirty days of the end of each tax computation period, in respect of taxable operations that occurred during that period after deducting the value of the deductible tax. Where the administration imposes additional or supplementary amounts, the tax shall be paid by means of a specific notice within one month of the date of notification to taxpayers of the obligation to pay such amounts. Tax shall be paid at any of the authorised private banks or their branches operating in Lebanon, in accordance with the rules and procedures determined by the Minister of Finance by a decision issued by him.

1- Every person who does not have a real or elected place of residence in Lebanon must, prior to carrying out any supply-of-goods or provision-of-services operation on Lebanese territory and regardless of the amount of the turnover he achieves, appoint a representative resident in Lebanon, with the approval of the tax administration where conditions are met. Every person resident in Lebanon whose dealings with a non-resident person result in tax becoming due must verify that the latter has a representative in Lebanon, and where no such representative has been appointed, the resident person must pay the tax and applicable penalties to the tax administration, without prejudice to his right to pursue the non-resident person. This representative shall be jointly and severally liable with his principal for the payment of the tax and penalties arising from taxable operations, and shall act on his behalf in fulfilling all obligations imposed on him in accordance with the provisions of this Law and its implementing texts. 2- Every person resident in Lebanon who uses therein a service acquired from a party residing outside Lebanese territory must issue the tax due on that service regardless of its value and pay it to the tax administration, in accordance with procedures determined by a decree adopted by the Council of Ministers upon the proposal of the Minister of Finance.

The same forms and procedures as those set out in customs legislation shall apply to tax declarations upon importation. Tax shall be paid upon the placement of goods in local consumption, in accordance with the procedures set out in customs legislation. The collection of tax shall be suspended by operation of law in the same manner as customs duties in all customs positions suspended for duties, in accordance with the procedures set out in customs legislation.

Travel agencies means any natural or legal person who organises and provides, directly or as an intermediary, and for profit, travel or accommodation arrangements, and who sells travel tickets, hotel stays, meals, and organises trips and visits to archaeological sites and others, and generally any person who sells to travellers services connected with the above operations or derived therefrom. These operations are considered provision of services within the meaning of this Law.

1- Right of access: Officials of the competent tax administration shall have the right to inspect, at every taxable person or any person having a connection with the tax, the records, invoices and other documents that allow them to verify the correctness of the collection of the tax due from him or from the persons dealing with him. Subject to the Law dated 3 September 1956 relating to banking secrecy, no person whatsoever, including official administrations, may invoke professional secrecy to prevent officials of the tax administration from reviewing books, invoices and other documents that allow them to verify the correctness of the collection of the tax due from taxable persons. Where records and documents are kept or stored electronically, officials of the competent tax administration shall have the right to request access to information recorded on electronic documents and to obtain it in the form of digital or paper documents that can be read. 2- Provision of information: Subject to the provisions of the Law dated 3 September 1956 relating to banking secrecy, every person, natural or legal, in Lebanon must, upon written request, allow officials of the competent tax administration to inspect what he holds in the way of records, documents and information that assist in verifying the correctness of the collection of the tax due from him or from others. 3- Monitoring import and export operations: The provisions relating to the powers set out in the Customs Law shall remain in force, as shall, with regard to the particular provisions of this Article, such legal provisions as do not conflict with this Law, with respect to verification, detection, prosecution and settlement of violations relating to the monitoring of import and export operations.

Every person whose duty, powers or competence requires him to be involved in the assessment or collection of the tax or in the examination of objections submitted in connection therewith is bound by professional secrecy and shall be prosecuted for violations pursuant to the provisions of Article 579 of the Penal Code. Professional secrecy may not be invoked in proceedings that affect the interests of the administration or in the exercise by monitoring, verification or collection departments of their administrative functions.

In addition to the penalties set out in Article 48 of this Law, the tax administration may proceed with the direct assessment of tax in the following cases:

1. 1)Where a taxable person fails to file the periodic return for computing the tax for a given period within the prescribed time limits.
2. 2)Where a taxable person fails to comply with the obligations imposed on him by law or the regulations relating to keeping, delivering and retaining books and accounting documents, thereby preventing the tax administration from performing its functions with respect to access to those records.
3. 3)Where a taxable person fails to issue an invoice complying with Article 38 of this Law when this is mandatory, or issues an invoice containing incorrect information.
4. 4)Where a taxable person files an inaccurate periodic return that does not reflect the reality of his actual economic activity, with the aim of evading the payment of tax or with the aim of recovering tax without entitlement.
5. 5)Direct assessment shall be carried out at the value of the tax due for operations taking place during the relevant tax computation period, based on estimated amounts.

1- Collection procedures: The tax unit shall send to a taxable person who has failed to pay the tax and amounts due from him within the statutory time limits a letter informing him of the obligation to pay them within fifteen days of the date he receives the letter. If the taxable person fails to do so, the tax unit shall send him, by registered post, a final personal notice setting a deadline for payment of the amounts due from him within fifteen days of the date he receives the notice. If the taxable person fails to pay what is owed after the expiry of the final notice period, the notice shall be posted on the door of his place of residence or place of business, and the date of execution of this procedure shall be considered the date of his notification. The procedures for the collection of direct taxes and similar duties set out in Legislative Decree No. 147 dated 12/6/1959 and its amendments, whose provisions do not conflict with the provisions of this Law and its implementing texts, shall apply. 2- Late-payment penalty: Where tax is not paid within the periodic-return filing deadline, a penalty of three percent (3%) per month of its amount shall be added thereto. The late-payment penalty shall run from the expiry of the tax payment deadline and shall be computed on the total taxes and audit penalties due, with any fraction of a month counting as a full month. Where it emerges from a review or direct assessment that the tax was paid in an amount less than what was due, a penalty of three percent (3%) per month shall automatically be imposed from the expiry of the payment deadline on the unpaid amount of tax and ancillary penalties legally due. 3- Treasury priority right: The treasury shall have, in respect of taxes, penalties and other amounts due to the State under this Law, a general privilege of first rank over all assets of those obliged to pay them, and a legal compulsory mortgage over all of their immovable assets.

The procedures and rules followed under customs legislation shall apply to the collection of tax upon importation.

1- Late submission or failure to submit a registration application: The following amounts, and no others, shall be imposed on any person who meets the conditions for subjection to tax under this Law and who fails to perform, or delays in performing, the obligations of a taxable person as provided for by law as a result of failing to submit his registration application within the statutory time limit: a) The value of the tax due, computed on the basis of the lump-sum profit margin adopted for income tax purposes, on taxable operations carried out from the date of expiry of the time limit for registration with the Value Added Tax Directorate until the date of commencement of the effect of registration, without the right of deduction referred to in Article 28 of this Law being granted for that period. b) A penalty equal to 10% of the value of the tax due referred to in item (a) for each tax period falling within the period referred to above, provided that the penalty for each tax period is not less than one million Lebanese pounds. Violations committed by the taxable person after the effective date of his registration shall be dealt with in accordance with the provisions of items (2) and following of this Article. 2- Late submission of the periodic return: Where submission of the return referred to in paragraph (4) of Article 35 of this Law is delayed, a penalty of ten percent (10%) of the amount of tax due for each month of delay shall be imposed, with any fraction of a month counting as a full month, provided that the amount of the penalty does not exceed twice the amount of tax due and is not less than 500,000 Lebanese pounds per tax period, in addition to the late-payment penalty on unpaid tax set out in paragraph (2) of Article 46 of this Law. 3- Incorrect return: A penalty equal to twice the undeclared tax shall be imposed on a taxable person who files an inaccurate return that does not reflect the reality of his actual economic activity, excluding material errors. 4- Unjustified refund application: A penalty equal to twice the amount of tax whose refund is sought shall be imposed on any person who, with fraudulent intent, submits an unjustified application for refund of tax, in addition to the application of the provisions of the Penal Code against him. 5- Violations relating to invoices and documents: a) Any amount recorded in an invoice or equivalent document as constituting tax due shall become payable within the statutory time limits, and a late-payment penalty as provided for in this Law shall be imposed in the event of non-payment, running from the date on which the tax falls due. b) A penalty equal to three times the tax recorded in the invoice shall be imposed on any person who issues an invoice without entitlement. c) A penalty equal to twice the tax originally due on the operation that was the subject of the invoice shall be imposed on any person who fails to issue an invoice or equivalent document when this is mandatory under Article 38 of this Law. d) A penalty equal to twice the tax originally due on the operation that was the subject of the invoice, or twice the tax recorded in the invoice if higher, shall be imposed on any taxable person who issues an invoice or equivalent document containing incorrect information with respect to the name or address of the parties involved in the operation, or the nature or quantity of the goods supplied or services rendered, or the price and ancillary costs or the tax value. 6- Keeping, retaining and presenting records and documents: Any person who violates the provisions of this Law or its implementing provisions with respect to the keeping, delivering, retaining or presenting of records, invoices or any other accounting document shall be penalised with a fine equal to twice the tax due, provided it is not less than five hundred thousand Lebanese pounds. 7- Involvement of a third party: Any person who participates in any of the violations set out in the preceding paragraphs of this Article shall be penalised with a fine equal to the amount of the tax referred to, provided that this fine is not less than five million Lebanese pounds. 8- Upon importation and exportation: In operations involving the importation and exportation of goods, violations shall be verified, recorded, collected and settled in accordance with the provisions set out in customs legislation. 9- Formal violations: Notwithstanding any other provision, with respect to violations relating to invoices, books and accounting documents that are of a formal nature, i.e. that do not affect the substance of the tax due, a penalty equal to 5% of the tax due shall be imposed, provided that the total penalty is not less than 200,000 Lebanese pounds. 10- Application of the higher penalty: For any single violation, the higher of the penalties imposed under this Article shall apply.

A taxable person shall have the right to recover all or part of the tax paid by him where the taxable operation is annulled, cancelled or rescinded, or where payment of the price, in whole or in part, has not been made or the price has been reduced at a date subsequent to the date of the operation. The procedures and rules relating to the refund of tax that exceeds the tax due shall be determined by a decree upon the proposal of the Minister of Finance.

1- Objection: A taxable person shall have the right to object to amounts imposed on him or whose recovery or refund has been refused in accordance with Article 49 of this Law, by submitting a written application to the competent tax unit within one month of the date of notification to him of the administration's decision or from the date of his payment of the tax. The objection must be reasoned, failing which it shall be rejected. The competent tax unit must decide on the objection within six months of the date of receipt of the application, and the said unit must notify the objector of its decision within the fifteen-day period following the date the decision is taken. If the six-month period elapses without the administration having issued any decision, the administration's silence shall be deemed an implied decision accepting the objection. Where the objection is accepted expressly or implicitly, its content shall be implemented within one month of the date the decision is issued or of the date it is deemed to have been accepted implicitly. 2- Objection Committee: Decisions of the administration rejecting an objection, wholly or in part, may be appealed before the Objection Committee, and the appeal must be filed within one month of the date of notification of the administration's decision. One or more primary committees to hear objections relating to the tax and to decide thereon shall be formed by decree in each governorate, composed of: - A serving or honorary judge, civil or administrative, of the fourth grade or above, appointed upon the proposal of the Minister of Justice with the approval of the Supreme Judicial Council or the Council of State office, as president. - A Ministry of Finance official of at least the third grade, selected by the Minister of Finance, as member and rapporteur. - Two delegates from the competent Chamber of Commerce and Industry, selected by the president of that Chamber, as members. The committee shall adopt the procedures followed before the summary courts and shall take its decisions by majority. The committee must decide on the objection within six months of its registration with it, and the rapporteur must notify the committee's decision to the competent tax unit and the taxable person within fifteen days of the date of its issuance. 3- Appeal before the Council of State: Both the competent tax unit and the taxable person shall have the right to appeal committee decisions directly before the Council of State within 30 days of the date of notification of the committee's decision. The brief trial procedures shall apply before the Council of State. The admissibility of an appeal submitted by the taxable person is conditional upon depositing a security equal to eight percent (8%) of the amount of the disputed tax. Any appeal not accompanied by a receipt proving payment of the security shall be dismissed on formal grounds. The taxable person shall recover the security where the Council of State's decision is entirely in his favour. Where the said decision is entirely in favour of the treasury, the security shall become a right of the treasury. Where the decision is partially in favour of the taxable person, the security returnable shall be in proportion to the tax found not to be due from him.

The procedures followed under customs legislation shall apply to objections relating to tax upon importation.

Amounts due to the treasury shall be extinguished by the statute of limitations after four years following the end of the financial year during which those amounts became due. The statute of limitations in respect of amounts due to the treasury shall be interrupted, and shall run for a new four-year period, upon commencement of individual proceedings through service of a warrant of arrest or personal notice of service, or acknowledgement of the debt by the taxable person, or any other act interrupting the limitation period in accordance with the Law of Obligations and Contracts. Notwithstanding any other provision, the right of deduction shall be extinguished by the statute of limitations after four years following the end of the year during which that right arose. The right to seek total or partial refund of tax shall be extinguished by the statute of limitations after four years following the end of the financial year during which the tax fell due.

Returns, objections, statements and other papers and documents relating to this tax are exempt from stamp duty.

Amounts due from taxable persons, including penalties accrued thereon, whose value does not exceed ten thousand Lebanese pounds, shall be deemed negligible, and the competent financial units shall be exempt from issuing collection orders for such amounts and from collecting them.

1- The following duties shall be repealed and replaced by the value added tax, with effect from the date of entry into force of this Law: - The 5% duty on food, beverage and accommodation charges, imposed under Article 43 of Law No. 326 dated 28/6/2001 (Budget Law for 2001), and the entertainment duty imposed under Legislative Decree No. 66 dated 5 August 1967 and its amendments, with respect to natural and legal persons subject mandatorily or voluntarily to value added tax. - The duty imposed on gaming rooms, under Legislative Decree No. 65 dated 5/8/1967 and its amendments. - The duty imposed on non-alcoholic beverages, under Law No. 88/57 dated 9/8/1988 and its amendments. - The duty imposed on cement under Decree No. 2152 dated 1/4/1938 and its amendments, and the duty imposed on gypsum and lime pursuant to Article 29 of the Budget Law for 1985 (Decree No. 38/2152) and its amendments. - The duty imposed under Article 38 of Law No. 88/60 dated 12/8/1988 at the rate of 5% (five percent) on the value of the advertising consideration broadcast or aired by television. 2- Also repealed, with effect from the date of entry into force of this Law, are the municipal duties imposed under Articles 96, 97 and 98 of Law No. 88/60 dated 12/8/1988 on the consumption of water, electricity, and wire and wireless telecommunications, and these duties shall be replaced by the value added tax collected for the benefit of the municipality within whose area the subscriptions fall. The competent administration shall impose the tax on subscribers and collect it from them, and shall pay the proceeds after deducting the tax paid on its purchases once every three months to each relevant municipality, in proportion to its share of subscriptions, or to the independent municipal fund in respect of subscriptions falling outside the municipal area. Persons who provide telecommunications, water and electricity services under contracts concluded with the State shall collect the tax on those services and pay to the competent administration the difference between the tax collected and the tax paid on their purchases. The detailed rules for applying this Article shall be determined by a decree adopted upon the proposal of the Minister of Finance.

A directorate shall be established within the Ministry of Finance - General Finance Directorate - to undertake the administration, monitoring, collection and recovery of the tax, composed of the following departments: - Department of Tax Legislation and Policy. - Department of Operations. - Department of Audit and Refunds. - Department of Administrative and Financial Coordination. The Department of Tax Legislation and Policy shall be composed of the following divisions: - Division of Tax Legislation and Policy. - Division of Tax Compliance. - Division of Objections and Appeals. The Department of Operations shall be composed of the following divisions: - Division of Taxpayer Services. - Division of Information Processing. - Division of Collection. - Division of Public Relations and Awareness. The Department of Audit and Refunds shall be composed of the following divisions: - Division of Field Audit. - Division of Tax Monitoring and Refunds. The Department of Planning and Administrative and Financial Coordination shall be composed of the following divisions: - Division of Administrative Affairs and Personnel. - Division of Information Technology. - Division of Administrative and Financial Coordination. Positions in the Value Added Tax Directorate of the second and third grades may be filled on a contractual basis in accordance with Table No. 3, provided that contracting is based on a competitive examination conducted by the Civil Service Council whose rules shall be determined by a decision of the Minister of Finance. Contractual employees shall enjoy all the powers and obligations of staff members. One or more private-sector companies may be contracted for the purpose of managing the refund of tax paid on purchases by non-resident persons in Lebanon upon their transfer as part of their personal luggage to outside the country, as referred to in paragraph (a) of Article 58 of this Law, with due regard for the provisions of the Public Accounting Law (Decree No. 14969 dated 30/12/1963) and its amendments.

Notwithstanding the provisions of item (1) of Article 35 of this Law, every person who, on the date of issuance of this Law, meets the conditions for subjection to the tax and whose turnover for the preceding twelve months exceeds five hundred million Lebanese pounds must proceed to submit a registration application from the date of issuance of this Law and until 31/1/2002, under pain of a penalty of two million Lebanese pounds. Tax shall be imposed on taxable supply-of-goods and provision-of-services operations that took place after the date of entry into force of this Law, as well as on the importation of goods placed in consumption after that date. With respect to contracts concluded and agreed upon before the date of entry into force of this Law but to be performed after that date, any of the contracting parties may adjust the agreed price in order to reflect the necessity of applying the tax, unless the parties have previously and expressly agreed otherwise. A person who performs, after the date of entry into force of this Law, operations agreed upon under contracts previously concluded with a public administration prior to that date, shall have the right to charge the relevant administration the additional tax burden arising from the application of the tax. With respect to contracts partially performed before the date of entry into force of this Law, tax shall be imposed on the part still in the course of performance as of the date of entry into force. The detailed rules for applying this Article shall be determined by a decree adopted by the Council of Ministers upon the proposal of the Minister of Finance.

The conditions, procedures and rules for applying the following tax refund cases and the date of their entry into force shall be determined by decrees adopted by the Council of Ministers upon the proposal of the Minister of Finance: a) Tax paid on purchases by any non-resident person in Lebanon upon their transfer as part of his personal luggage to outside the country for use for his personal purposes. b) Tax that affected goods and services provided in Lebanon to non-resident companies and businessmen who do not carry out taxable operations on Lebanese territory. c) Part or all of the tax paid by diplomatic and consular bodies, international organisations and their officials in accordance with international conventions. 5- Persons who are subject to the simplified system for organising and issuing invoices and who are required to use a Cash Register shall have the right to submit an application to the Value Added Tax Directorate for the refund of the price of one machine acquired after 31/1/2002, provided it complies with the specifications imposed by the directorate, in accordance with the conditions and procedures determined by a decision of the Minister of Finance.

Refund of all the tax that affected fixed assets used for carrying out the following activities exempt from tax in accordance with Articles 16 and 17 of this Law shall be claimed: - Manufacture of medicines. - Manufacture of food products exempt from tax pursuant to paragraph (b) of Article 17 of this Law. - Hospitalisation and medical laboratories. - Education. - Activities of bodies and associations that hold public-benefit status and are concerned with the care of persons with special needs, the elderly, orphans, children, and persons with mental or cancerous illnesses and other illnesses determined by a decree of the Council of Ministers. - Collective transport of persons. - Manufacture of books, newspapers and magazines. - Manufacture of pharmaceutical products including items for sanitary and pharmaceutical use (contraceptives, male barriers, sanitary towels and pads, nappies and similar sanitary items). - Manufacture of paper and cardboard of the types used for writing or printing, newsprint in rolls or sheets, printing ink. 'Fixed assets' within the meaning of this Article means machinery and equipment assigned to permanent use in the enterprise. Refund of 100% of the tax that affected current expenses relating to the above-mentioned operations shall also be claimed. A taxpayer may submit, after the end of any financial year and within 20 days, a refund request for exempt operations in accordance with the provisions of this Article, provided that the amount claimed for refund is not less than five million Lebanese pounds; amounts below five million Lebanese pounds shall be carried forward to the following year; where the taxpayer is no longer classified in accordance with this Article, he shall have the right to submit the refund request regardless of the amount. The detailed rules for applying this Article shall be determined, when necessary, by a decree upon the proposal of the Minister of Finance.

a) Taxable persons who carry out operations in exchange for cash payment shall have the right to request the application of a simplified system for organising and issuing invoices, in accordance with procedures determined by a decision of the Minister of Finance. b) In order to prevent evasion of subjection to tax through the fragmentation of the operations of enterprises, the total turnover achieved by persons who simultaneously manage or carry out similar or interconnected activities or businesses in multiple enterprises shall be aggregated for the purpose of determining whether the conditions for their subjection to tax are met. The procedures for applying this paragraph shall be determined by a decision of the Minister of Finance. c) Tax on operations involving the supply of jewellery shall be imposed on the basis of gross profit margin, and the value of the tax that affected goods and services acquired for the purpose of carrying out those operations may not be deducted from the value of the tax due thereon. The detailed rules for applying this paragraph shall be determined by a decree upon the proposal of the Minister of Finance. d) For the purpose of computing the tax due from taxable persons who, in the course of their commercial activity, purchase used goods from a non-taxable person with a view to selling them, the tax included in the purchase price of those goods shall be extracted in accordance with procedures determined by a decision of the Minister of Finance. e) Operations involving the importation of used land vehicles and used spare parts shall be subject to value added tax, and the tax paid shall not be deductible. Operations involving the supply of used land vehicles and used spare parts within Lebanese territory, as well as operations involving their export abroad, shall be exempt from value added tax without the right of deduction. This provision shall apply from the beginning of the quarter following the quarter in which this Law is published, and its detailed implementing rules shall be determined, when necessary, by a decision of the Minister of Finance. f) Operations involving the importation of scrap metal shall be subject to value added tax, and the tax paid shall not be deductible. Operations involving the supply of scrap metal within Lebanese territory, as well as operations involving its export abroad, shall be exempt from value added tax without the right of deduction. This provision shall apply from the beginning of the quarter following the quarter in which this Law is published, and its detailed implementing rules shall be determined, when necessary, by a decision of the Minister of Finance.

The detailed rules for applying this Law, with respect to articles that do not specify the competent authority for determining implementing rules, shall be determined by decrees adopted by the Council of Ministers upon the proposal of the Minister of Finance.

This Law shall be published in the Official Gazette and shall enter into force on 1/2/2002; item (1) of Article 35 hereof relating to registration shall apply from the date of issuance of this Law. Baabda, 14/12/2001 Signature: Emile Lahoud This Law was published in Official Gazette No. 63 dated 24/12/2001