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TITLE I - INTRODUCTION OF THE TAX Article 1 : Introduction of the tax There shall be created a tax, known as "value-added tax". It will be imposed, paid, and collected in accordance with the provisions of the present law. - The word "tax", wherever appearing in the present law, shall be construed to mean the value¬added tax. The expressions "Lebanese Territory" or "Lebanon", wherever appearing in the present law, shall be construed to mean the Lebanese territories, air space, and territorial waters. TITLE II - SCOPE OF THE TAX Article 2 : Operations liable to the tax The tax shall apply in respect of: 1 - The operations relating to the delivery of goods and the provisions of services against payment, taking place within the Lebanese territories, by a person liable to the tax. Shall be regarded as operations of delivery of goods or provisions of services, the operations laid down in articles 8 and 11 of the present law. 2 - The operations of importation carried out by any person, whether or not liable to tax. Article 3 (as modified by Law No. 497 of 30 January 2003 and Law No. 583 of23 April 2004) Persons liable to the tax: 1 - The tax is charged on every person, whether natural or juridical, carrying out, through an independent economic activity, operations of delivery of goods or provision of services, whether liable or non-liable to tax, with the right of deduction in accordance with the provisions of the present law, on condition that the total of his turnover during four successive seasons should exceed the following: - 225 million Lebanese pounds on or after 1/1/2004. - 150 million Lebanese pounds on or after 1/1/2005. Persons who are registered for the value-added tax on the basis of a turnover ranging from 150 million to 225 million Lebanese pounds, may request the striking out of their registration. 2 - Any person, who starts or undertakes an independent economic activity, liable or non-liable to tax, with the right of deduction as provided by the present law, may request to be liable to tax, whatever his turnover. Article 4 : Assessment of the turnover The turnover referred to in article 3 of the present law shall consist of the total of the following sums: - The amount of the operations liable to tax, on condition that the amount does not include the amount of the added tax. - The amount of the operations laid down in articles 19,20 and 21 of the present law. - The amount of the operations laid down in articles 16 and 17 of the present law will not be taken into account for the computation of the turnover. - The amount of the cession (transfer) of the establishment's fixed assets. Article 5 : Persons and operations outside the scope of the tax Are not liable to tax operations relating to non-erected real estate properties. Are also exempt from the tax, the State, the municipalities and all persons of public order in respect of any operation they carry out in their capacity of public authority, even if they receive, in exchange thereof, a benefit, an allowance or subscription, with the exception of the following operations relating to the following subjects which remain liable to the tax: - The letting out of personal properties. - The communications. - Water and electricity. - Audiovisual media. - Consumption markets, slaughterhouses and shops. - Tobacco and tombacs. - Parking areas for motor vehicles. - Ports and airports. - Cooperative stores. Article 6 : Delivery of goods For the purpose of the present law, the expression "delivery of goods" shall be construed to mean the transfer, to others, by the person liable to tax in his capacity of owner, of any material movable or non-movable goods, such as the sale or the barter. Article 7 : Goods regarded as material goods For the purpose of the present law, the following shall be regarded as material goods: 1 - The electric current, the gas supply, the heating and the refiigeration. 2 - The following real estate rights as they appear in the Code of real estate property : the usufiuct, the "Idjara Tawile", the "Tessarouf', the option resulting from a promise of sale, the "Idjaratein". Article 8 : Self-delivery by a person liable to tax Shall be considered as a delivery of goods, against remuneration: 1 - The appropriation by a person liable to tax, of goods or assets from his establishment, from which the due tax on his sales had previously been deducted in whole or in part, with the purpose of: A - Allocating them to his personal needs or to the needs of his employees and, generally, to the needs of his establishment. B - Offering them to others, without remuneration. 2 - The allocation by a person liable to tax of goods or assets for the purpose of his establishment, whether such goods or assets were of his own manufacture, erected, earned or imported by him in the course of his activity, do not entitle him to deduct the whole relevant tax, had he secured such goods and assets from a third person liable to tax. 3 - The appropriation by a person liable to tax of goods or assets from within his establishment for the purpose of carrying out an activity not covered by tax, in case such goods or fixed assets and their constituting elements, have enabled him to deduct the tax which would have applied following their acquisition or appropriation in accordance with paragraph 2 above. 4 - The appropriation by the person liable to tax, or by one of his legal successors - having ended the economic activity liable to tax - of goods belonging to the establishment, in case such goods when first acquired had benefited from a partial or total deduction of the tax. Article 9 : Transfer of the basic elements of the establishment No tax will be imposed when the basic elements of the establishment are transferred (to others), on condition that such an operation shall enable the transferee to carry on with the activity of the transferor, whether, the transfer was carried out with or without compensation, provided both the transferor and the transferee are liable to tax. VATE51l Article 10 : Provision of services Shall be regarded as a "provision of services", any operation that does not involve any "delivery of goods" according to articles 6 and 8 of the present law. As examples, the following will be regarded as provision of services: The transfer (cession) of non-material goods, whether or not such goods were represented by a document. The undertaking to abstain from carrying out a specific action, or to tolerate the carrying out of such an action. Article 11 : Self-delivery of a service by a person liable to tax The following shall be regarded as the provision of a service, against remuneration: 1 - The fact that a person liable to tax uses goods belonging to his establishment - which goods had benefited from a total or partial deduction of tax - for his personal needs or for the needs of his employees and, generally, for purposes other than the purposes of his establishment. 2 - The provision by the person liable to tax of services, free of compensation, for his personal needs or for the needs of his employees and, generally, for purposes other than the purposes of his establishment. 3 - The provision by the person liable to tax of services to further his economic activity, of the type which, had these services been provided by another person liable to tax, would not have rendered the due tax open for total deduction. Article 12 : The representative The representative liable to tax, whenever mediating in his own name and for the account of his principal, in the operation of delivery of goods or provision of services, shall be regarded as having so acted personally. Article 13 : Place of delivery of the goods Delivery shall be construed to have taken place in Lebanon in case the goods, on the date of the delivery, are inside the Lebanese territory. Article 14 : Place of the provision of services The provision of services shall be assumed to have taken place in Lebanon if the service was used within the Lebanese territory. Always, with due regard to the following provisions: A - The place of the provision of the services relating to a real estate property is the place where the property is located. B - The place of the provision of the services relating to movable material property is the place where the services were performed. Article 15 : Operations of importation The importation shall be assumed to have taken place when the goods have been released for local consumption, in accordance with the customs legislation. TITLE III - TAX EXEMPTION FIRST PART - Exemption within the Lebanese territory Article 15/2 (as added by Law No. 583 of23 April 2004) In derogation of any other text, whether general or special, no one is exempted from the liability to the provisions of the present law in what regards the assessment or the payment of the tax, unless there is an explicit provision of the law to this effect. Article 16 : Activities exempted from tax Shall be exempted from tax the operations carried out within the Lebanese territory and relating to the following activities: 1 - Services provided by medical doctors or by persons exercising professions having a medical character, and the fees for hospitalisation. 2 - Education 3 - Insurance, reinsurance, and the medical allowances from mutual funds and employers, as well as the related services. 4 - Banking and financial services. 5 - The activities of non-profit seeking organisations and societies dedicated for the fulfilment of the objectives for which they were initially established, except the activities they carry out frequently which, if exempted from tax, will have constituted unfair competition to tax liable institutions. 6 - Public transport of persons, including transportation by hire cars. 7 - Delivery of gold to the Central Bank. 8 - Betting, lottery and games of chance. 9 - Sale of constructed real estate properties. 10 - Letting out of constructed properties as residences. 11 - Work by farmers for the delivery of agricultural produce. Minutes for the implementation of this article shall be defined by decrees based on a proposal by the Minister of Finance, bearing in mind that these exemptions will apply immediately from the date on which the present law comes into force. Article 17 : Goods and things exempt from tax Delivery of the following goods and things shall be exempt from tax : A - Cattle, poultry, live fish, and agricultural food produce sold in its natural state. B - Bread, flour, meat, fish, milk, dairy products and their derivatives, rice, crushed wheat (burghol), sugar, salt (for food), vegetal oil, macaroni in its various forms and baby food preparations. C - Books and similar printed materials, magazines, newspapers, paper and cardboard as used for writing and printing, newsprint in the form of rolls or sheets, and printing ink. D - Postal and fiscal stamps, and bank-notes. E - Gas intended for domestic use (butane gas). F - Grain seeds, fertilizers, fodder, agricultural insecticides. G - Agricultural machinery. H - Medicinal drugs, pharmaceutical preparations including products for sanitary and pharmaceutical use (such as contraceptive aids, condoms, hygienic towels, baby nappies, and similar sanitary products). I - Medical instruments, apparatus and materials. J - Precious and semi-precious stones, made up or renovated precious and senu-precious stones, pearls, diamond, gold, silver and other precious stones. K - Currency paper notes, and metal coins, currently in circulation. L - Yachts and other vessels, pleasure or sports boats, of a length exceeding 15 metres and owned exclusively by non-Lebanese. M - Means of air transport, used for the transport of persons and goods. Minutes for the implementation of the present article shall be drawn up through decrees issued according to a proposal by the Minister of Finance, bearing in mind that these exemptions will commence on the date when the present law comes into force. SECOND PART - Exemption at importation Article 18 : Exemption at importation Are tax exempt: I - The importation of goods, the delivery of which within the Lebanese territory is exempt from tax in compliance with the provisions of articles 16 and 17 of the present law. 2 - Importation operations outlined in the customs legislation and relating to. exemptions benefiting the Presidency of the Republic, the Chamber of Deputies, the Presidency of the Government, and the UNO, as well as the diplomatic and consular exemptions, and the donations sent to government departments, public institutions and municipalities. 3 - Importation of personal effects, domestic appliances and samples of no commercial value as defined in the customs legislation. 4 - Importation of army equipment, arms and ammunitions. = Minutes for the implementation of the present article shall be drawn up through decrees issued on the basis of a proposal by the Minister of Finance, bearing in mind that these exemptions will commence on the date when the present law comes into force. THIRD PART - Exemption of exports and similar activities, international transport and certain activities of agents Article 19 (as modified by Law No. 583 of23 April 2004) Exemption of exports and similar activities Are exempt from tax the following operations: 1 - The delivery of goods sent or transported outside the Lebanese territory, and the provision of services to be used outside the Lebanese territory. 2 - The delivery of goods sent from Lebanon to locations of customs tax suspension, the provision of services to locations of customs tax suspension, the delivery of goods and the provision of services in locations of customs tax suspension, as well as the operations of their re-export, in accordance with customs legislation. 3 - The exportation of gold to central banks. 4 - The delivery of goods and the provision of services to administrations, public services and municipalities in what relates to that part which is financed from outside sources in the form ofloans or donations. Minutes for the implementation of the present article shall be drawn up through decrees issued on the basis of a proposal by the Minister of Finance, bearing in mind that these exemptions will commence on the date when the present law comes into force. Article 20 : Exemptions relating to international transport Are exempt from the tax: 1 - The delivery, transformation, repair, maintenance, letting or lease of: A - Ships destined for high sea navigation and which provide transport against a fee, rescue and assistance ships, and ships destined for sea fishing. B - Means of air transport used by airline companies which, basically, are engaged III international transportation against a fee. 2 - The provision of services against a fee, relating to manne ships, and to means of air transport and their cargoes. 3 - International transportation of persons and goods. Minutes for the implementation of the present article shall be drawn up through decrees issued on the basis of a proposal by the Minister of Finance, bearing in mind that these exemptions will commence on the date when the present article comes into force. Article 21 : Exemption of certain activities by agents Shall be exempt from tax the services provided by the agents who operate in the name, and for the account of their principals, whenever such services relate to activities already exempt from tax in accordance with articles 19 and 20 of the present law or to operations performed outside the Lebanese territory, save the services provided by travel agencies. Minutes for the implementation of the present article shall be drawn up through decrees issued on the basis of a proposal by the Minister of Finance, bearing in mind that these exemptions will commence on the date when the present article comes into force. TITLE IV - DATE WHEN THE TAX FALLS DUE Article 22 - Date when tax falls due The tax falls due on the date when the goods are delivered or the service is provided. In case the price has been cashed, in whole or in part, prior to the date on which the goods were delivered or the service was provided, the tax falls due on the date of encashment, on the basis of the amount encashed. In case the person liable to tax issues an invoice prior to delivering the goods, providing the service or encashing the price, the tax falls due on the date when the invoice is issued. In what relates to imported goods, the tax falls due when the customs duty is acquitted, in accordance with the customs legislation in force. TITLE V - RULES FOR LEVYING THE TAX Article 23 : Rules for levying the tax within the country 1 - The payment received, or to be received, by the supplier of the goods, or provider of the service, against supplying the goods or providing the service, shall constitute the basis for levying the tax. 2 - In what concerns the operations outlined in article 8 of the present law relating to the self¬delivery of goods by the person liable to tax, the purchase price of the goods, or of similar goods, shall be adopted as a basis for levying the tax. Whenever it proves impossible to know the price, the cost price on the date of these operations shall be adopted. 3 - In what concerns the operations outlined in article 11 of the present law relating to the self-provision of services by the person liable to tax, the total of the expenses sustained by the person liable to tax for the provision of the said services shall be adopted as a basis for levying the tax. 4 - In cases where it proves impossible to determine the amount paid in compensation, the tax shall be levied on the basis of the value commonly acceptable for the operation in question. The expression "commonly acceptable" means the price ruling on the Lebanese territory for a similar operation taking place on the date of the operation subject of the tax, between independent sellers and buyers and within the terms of utter competition. 5 - Shall also be part of the basis for levying the tax, the duties and taxes, save the value-added tax, as well as all the additional charges, such as the charges for brokerage, packing, transport, insurance, etc. Article 24 : Rules for levying the tax upon importation Upon importation, the customs value (of the goods), which is determined in accordance with customs criteria, shall be adopted as a basis for levying the tax, to which should be added all customs duties if applicable, and all normally related charges, save the value-added tax. TITLE VI - RATE OF TAX Article 25 : The tax rate of the tax The tax rate is ten per cent (10%). TITLE VII - TIME-LIMIT FOR ASSESSING THE TAX Article 26 : Time-limit for the tax assessment The tax due by the person liable to tax shall be calculated at the end of each month of the calendar year. However, the Minister of Finance, by a ministerial order, and for reasons necessitated by the introduction of this tax or for administrative reasons, may amend this time¬limit, so that the tax is computed on a seasonal basis. TITLE VIII - THE DEDUCTION Article 27 : The right of deduction The right of deduction is the right granted to a person liable' to tax, to deduct from the tax due on a particular operation, the amount of the tax which previously aggravated the price of this operation or aggravated any of the elements which constitute the price. The person liable to tax has the right to deduct from the tax he must pay for a given period of assessment, the whole ofthe deductible tax for the same period. . The right of deduction arises when the deductible tax falls due for payment. Article 28 (as modified by Law No. 583 of23 April 2004) The deductible tax The deductible tax is the tax which has already been applied to goods or services that the person liable to tax has obtained from another person liable to tax, as well as the goods and services he has imported, including the fixed assets, in order to carry out any of the following operations in the context of his commercial activity: 1 - Delivery of goods and provision of services, both being liable to tax. 2 - Operations of exportation and similar operations, and operations of international transport that are exempt from tax in accordance with articles 19, 20 and 21 of the present law. The tax on stocks of goods and raw materials that the taxpayer had at the date of enforcement of his registration for the tax, or that he had previously acquired, shall be also deductible, on condition that he uses these items for operations liable to tax, in accordance with a procedure and measures to be drawn up by a ministerial order from the Minister of Finance. Shall also become deductible the tax that has already been applied to the fixed assets which a person liable to tax has acquired prior to becoming tax liable, and which he devoted to perform tax liable operations. For the purpose of this article, the expression "fixed assets" means material properties such as machinery and equipment intended for continuous use in the establishment as work tools or means of exploitation. The minutes and the measures for the implementation of this article shall be drawn up through a decree based on a proposal by the Minister of Finance. Article 29 : The principles of the right to deduction In order to be able to exercise the right of deduction, the person liable to tax must be in possession of: An invoice showing the goods or services he has acquired from another person who is liable to the tax; the invoice must include the information outlined in article 38 of the present law; a replacement document is acceptable. Customs documents issued by the competent authorities, evidencing the orderly importation and the payment of the tax. Article 30 (as modified by Law No. 583 of23 April 2004) Surplus of the deductible tax In case the amount of the deductible tax at the end of a specific assessment period exceeds the amount of the tax for payments, the surplus will be carried over to the period that follows. The person liable to tax may, at the end of the sixth month of any year, and at the end of any year, apply for a refund of the balance of the surplus deductible tax as computed at that date. As for exporters, they have the right to apply, at the end of any tax assessment period, for the refund of the balance of the deductible tax as computed for that period, in accordance with criteria defined through a decree based on a proposal by the Minister of Finance. Any person not fulfilling the conditions for being tax liable may apply for a refund of the surplus of the deductible tax; this must be preceded by the administration's sanction of the application to strike off his registration. The administration must reach a decision on the application for refund within a maximum period of three months from the date on which the application was received. In case the administration approves the refund, in whole or in part, it will have to refund to the person liable to tax the amount due, failing which an interest of 9% will be charged on the unpaid sum, at the expiry of four months from the submission of the application. Article 31 : Right to partial deduction In case the person liable to tax, upon the delivery of goods or the provision of services, carries out some operation, only a part of which benefits from the right of refund, such a person may deduct a portion of the tax corresponding to that part. The details of implementation of the present article shall be drawn up through decrees based on a proposal by the Minister of Finance. Article 32 : Settlement of the deduction The deduction operations earmarked for settlement will have to be reviewed whenever the amount of the deduction exceeds or falls short of the amount which the person liable to tax could have deducted, as a result of: . 1 - Material errors. 2 - The introduction, at a date subsequent to the period of tax computation, of amendments to the elements which were adopted for assessing the amount of the deduction. The person who, of his own will, had subjected himself to the tax and then applied for the striking off of his registration within two years from the registration date, must return to the Treasury the difference, if any, between the amount of the tax he has recouped and the amount of the tax he had raised in favour of the Treasury, in respect of the period when he wilfully was liable to tax. TITLE IX - PERSONS LIABLE TO TAX AND THEIR OBLIGATIONS Article 33 : Persons liable to tax 1 - Within the Lebanese territory The tax is charged on persons liable to tax in accordance with the provisions of the present law, as well as on his legal successors, provided that the operations he carries out in the delivery of properties and the provision of services are liable to tax. In compliance with the provisions of paragraph (1) of article 40 of the present law, the tax is charged on the representative of the person not residing in Lebanon, who is appointed in accordance with the present law, or on the person with whom he deals in case he was not appointed. In compliance with the provisions of paragraph (2) of article 40 of the present law, the tax is charged on the person residing in Lebanon who makes use in this country of a service acquired outside the Lebanese territory. 2 - At the importation The tax is charged on the importer or on his representative in accordance with the provisions of the customs legislation in force. Article 34 : Extent of application of the obligations The obligations outlined in this chapter apply to : A - Persons liable to tax in accordance with the provisions of article 3 of the present law. B - Persons who carry out operations exempt from tax, which give them a right to deduction, in accordance with item (2) of paragraph (I) of article 28 of the present law. Article 35 : The obligation to declare All persons liable to tax must submit: 1 - An application for registration at the administrative office of the value-added tax, within two months dating from the last day of the season in which all conditions for adherence to the tax will have been fulfilled. 2 - Application for striking off the registration: A - Within two months from the end of the calendar year which follows the year in which the conditions for adherence to the tax will have disappeared. B - Within two months from the date on which activity has ceased. 3 - An advice to the tax's administrative office, informing them of any change in the nature of activity, address, name or moral identity, or any other data originally mentioned in the registration application; such a letter should be submitted within two months from the occurrence of the change. 4 - A periodical declaration, within two months from the end of the tax assessment period as defined in article 26 of the present law, mentioning, if need be, the amount of the tax to be deducted. These applications and declarations should be addressed to the tax unit concerned on paper and/or electronic forms specially designed for this purpose. Article 36 : Accountancy obligations By a ministerial order from the Minister of Finance, a method will be fixed for book-keeping and organising the necessary accounting documents, which the person liable to tax must comply with, thus paving the way for implementation and supervision of the tax. Any person liable to income tax under the lump sum profit or the estimated profit systems, who is also liable to value-added tax, must organise his book-keeping and accountancy documents in the method appropriate to taxpayers on the basis of real profit; however, he must persist in declaring his income tax result on the basis oflump sum or estimated profit. Article 36/2 (as added by Law No. 583 of23 April 2004) 1- Persons liable to the value-added tax, whose turnover during four previous successive seasons is less than 300 million Lebanese pounds, and as long as their turnover remains at this level, with the exception of persons liable to tax on the basis of real profit, or taxpayers compulsorily liable on the basis of lump sum profit, as well as non-resident persons liable to the value-added tax and their agents, must have an accounting system based on the following books and records: - A ledger (daybook) in which all effected operations must be recorded. - An inventory and immobilisation book. The contents and the method of accounting for these books as well as the organisation of the compulsory accounting documents concerning the taxpayer and the beneficiary of the provisions of the present article shall be laid down by a ministerial order from the Minister of Finance Persons mentioned in the present article must have their books and their records numbered and stamped, either by the Trade Registry or by a notary, before starting accounting entries therein. This text shall also apply to the income tax payers mentioned in the present article. 2 - Persons mentioned in the first subsection of the present article shall benefit from an annual reduction of the tax amounting to one million five hundred thousand Lebanese pounds, deductible from the amount of the tax due, during a period of five years dating from the year during which their registration for the value-added tax takes effect. The details of implementation of the present article shall be laid down by ministerial orders from the Minister of Finance Article 37 : Books, invoices and accounting documents Persons liable to tax are under obligation to keep account records, invoices and other accounting documents for a period of four years, dating from the end of the calendar year in which the tax was created. Article 38 : Issuing of invoices Persons liable to tax are under obligation to issue an invoice, or any other document In replacement, in respect of any delivery of goods or provision of services to any other person. The invoice must include the following data, at the least: Name, address and registration number of the supplier of goods or the provider of the service, at the Ministry of Finance. - Name and address of the person in whose name the invoice was issued. - The object of the delivery of goods or the provision of service. - The serial number, and date, of the invoice. The amount due against delivery of the goods or provision of the service. Amount of the due tax, with an indication of the rate of tax that has been applied. Article 39 : Settlement of the tax The tax is to be settled in one payment, within the time-limit for the presentation of the periodical declaration, that is twenty days from the end of the tax assessment period, in respect of the operations liable to tax which took place within the said period, after deduction of the amount of the deductible tax. In case the administration levies any additional or complementary amounts, the tax will be settled by means of a special advice within one month from the date of the notification (to the taxpayer) that these amounts must be settled. The tax will be settled at any of the accredited banks or their branches in Lebanon, in accordance with provisions and measures fixed by a ministerial rder from the Minister of Finance. Article 40 : Non-resident persons 1 - There is an obligation upon any person with no real or elected domicile in Lebanon, and prior to undertaking any activity of goods delivery or service provision over the Lebanese territory, and irrespective of the amount of the turnover to be achieved, to appoint a resident representative in Lebanon; this must be done with the approval of the tax administration, in accordance with conditions to be fixed by a ministerial order from the Minister of Finance. Persons residing in Lebanon, whose involvement with a non-resident person has led to tax liability, must satisfy themselves that the latter has a representative in Lebanon. If no representative has been appointed, the person concerned is bound to pay the tax, and any fines that become due, to the tax authority, while reserving the right to pursue the non¬resident person. This representative will be held responsible, jointly and severally with his principal, for the payment of the tax and fine resulting from the operations in questions; he fills his place in respect of all the obligations imposed on him in accordance with the present law and its implementation texts. 2 - Persons in Lebanon who make use of a service acquired from a party resident outside the Lebanese territory, must declare the tax arising from this service, whatever its value, and settle it to the tax administration, in accordance with a procedure to be fixed by a decree from the Council of Ministers based on a proposal by the Minister of Finance. Article 41 : Binding obligations at the importation Declaration of the tax upon importation must be made In accordance with the forms and procedures laid down in the customs legislation. The tax shall be paid when the goods are put on the market for local consumption, in accordance with the procedure laid down in the customs legislation. As a matter of course, collection of the tax shall be suspended whenever the customs duties are themselves suspended, in all situations resulting in the suspension of customs duties, in accordance with the procedure laid down in the customs legislation. TITLE X - OPERATIONS OF TRAVEL AGENCIES Article 42 : Operations of travel agencies The expression "travel agencies" means any natural or juridical person who organises and provides, whether directly or as an intermediary, with the intent of achieving a profit, travels or sojourns, accommodation in hotels, and meals, and who organises tours and visits to historic and other sites, and, generally, any person who sells to travellers services associated with, or deriving from, the above mentioned operations. For the purpose of the present law, these operations are tantamount to the provision of services. The rules and bases for imposing and collecting tax on the operations of travel agencies will be defined by decrees from the Council of Ministers, on the basis of a proposal by the Minister of Finance. TITLE XI - THE SUPERVISION Article 43 : The procedure of supervision 1 - Right of inspection: Civil servants of the tax administration concerned may examine the books, invoices and other documents of every person either liable to tax or connected with it, in order to satisfy themselves that the tax to be collected from that person or from the persons with whom he deals, is indeed accurate. With due regard to the law issued on 3 September 1956 relating to banking secrecy, no one, including the official administrations, can invoke the professional secret for denying the civil servants of the tax administration access to the books, invoices and other documents which enable (the civil servants) to make sure that the correct tax has been collected from the taxpayers. In case the registers and documents are kept or filed electronically, the civil servants of the tax administration concerned may request to be informed of the content of the documents so held, so that they can obtain digital or paper documents thereof, which are legible. 2 - Supply of information: With due regard to the law issued on 3 September 1956 relating to banking secrecy, all persons, whether natural or juridical, in Lebanon, must make available to the civil servants of the tax administration concerned, upon their demand in writing, all the registers, documents and details held by them, which enables (the civil servants) to satisfy themselves that the correct tax due by the persons, or by others, has been collected. 3 - Supervision over the operations of importation and exportation of goods: The provisions relating to the powers laid down in the customs law shall remain in force. Shall also remain in force, in what concerns the present article, the legal provisions which are not in contradiction with the present law in what relates to the investigation of infringements, their corroboration and settlement in all matters connected with the supervision of the operations of importation and exportation of goods. Article 44 : The professional secret All persons who, by virtue of their positions, powers or competence, take part in the imposition of the tax, its collection or in the examinations of the objections submitted in respect thereof, are bound by the professional secret and, in the case of infringement, may be pursued under article 579 of the Penal Code. The professional secret may not be invoked in the lawsuits affecting the administration's interests or whenever the departments of supervision or collection carry out their administrative work. Article 45 : Cases of direct evaluation In addition to the fines laid down in article 48 of the present law, the tax administration may resort to a direct assessment of the tax in the following cases: 1 - If the taxpayer fails to submit the periodical declaration relating to the tax assessment for a given period within the fixed time-limit. 2 - If the taxpayer does not abide by the obligations imposed on him under the law or under the procedure relating to book-keeping and submission / filing of accounting documents, thus making the tax administration unable to carry out its functions in the inspection of these records. 3 - If the taxpayer does not issue an invoice in accordance with the provisions of article 38 of the present law whenever this is a compulsory matter, or if he issues an invoice containing incorrect information. 4 - If the taxpayer submits an incorrect periodical declaration, not reflecting his true and actual economic activity, with the purpose of evading payment of the tax or unlawfully obtaining refund of the tax. Direct evaluation of the amount of the tax due will be made on the basis of the estimated sums of the operations carried out during the assessment period for the tax in question. TITLE XII - COLLECTION OF THE TAX Article 46 : Collection of the tax within the Lebanese territory 1 - The procedure of collection: The tax unit shall address to the person liable to tax who has failed to pay the tax and the amounts imposed on him within the legal time-limit, a letter informing him of the necessity to settle within fifteen days from his receipt of the letter. If the taxpayer fails to settle the tax, the tax unit shall send him via a registered letter, a personal and final ultimatum, summoning him to settle the amounts due by him within fifteen days from the date of his receipt of the ultimatum. Should the taxpayer not settle the sums due by him following expiry of the final time-limit of the ultimatum, this ultimatum will be affixed on the door of his residence or place of work. The date of implementation of this measure will be the date of its notification. The procedure for collecting direct taxes and similar charges as laid down in Decree-Law No. 147 dated 12/6/1959 with its amendments, which does not conflict with the provisions of the present law and its implementation texts, shall apply in this case. 2 - Fine for delay in settling the tax : In the case of non-payment of the tax within the time-limit of the periodical declaration, a fine of three per cent (3%) a month will be added. This fine will apply from the end of the period allowed for settling the tax, and it will be calculated on the total amount of the taxes and the verifications fines as they became due. A fraction of the month will be calculated as one whole month. Should it appear, as a result of investigations or direct imposition that the tax paid falls short of the amount due, a fine of three per cent (3%) a month will, as a matter of course, be imposed from the end of the period allowed for setting the tax, on the unpaid balance of the tax and the fines relating to it. 3 - Right of privilege for Treasury funds: In what relates to taxes, fines and other sums due to the state under the present law, the Treasury enjoys a first -class general privilege over the properties of the persons under compulsion to pay the amounts in question. The Treasury also enjoys an obligatory and legal mortgage on all their non-movable properties. Article 47: Collection of the tax upon importation The measures and procedures laid down in the customs legislation will be followed in respect of the collection of the tax upon importation. TITLE XIII - INFRINGEMENTS AND FINES Article 48 (as modified by Law No. 583 of23 April 2004) Infringements and fines 1 - Delay or non-submission of the application for registration: Any person who fulfils the conditions for adherence to the tax according to the present law and who does not undertake or delays in undertaking the obligations prescribed by law, because of non-submission of the application for registration within the legal time-limit, must pay the following amounts and nothing else: A - The amount of the tax due, computed on the basis of the margin of the lump sum profit defined in the income tax, on the operations liable to the tax that he undertook as from the end of the time-limit of registration for the value-added tax until the date of enforcement of his registration, without having the right to benefit from the deduction mentioned in article 28 of the present law for the period in question. B - A fine of 10% of the tax due as mentioned in paragraph A, for each taxable period of the periods included in the above-mentioned period, provided that the fine for every taxation period is not less than one million Lebanese pounds. Infringements by the taxpayer after the date of enforcement of his registration shall be subject to penalty in accordance with the provisions of subsection 2 and following subsections of the present article. 2 - Delay in submission of the periodical declaration: In case of delay in the submission of the declaration referred to in paragraph (4) of article 35 of the present law, a fine often per cent (10%) of the amount of the tax due will be imposed, for every month of delay. A fraction of the month shall be considered as one full month. However, the amount of the fine should not exceed twice the amount of the tax due, and should not be less than 500,000 Lebanese pounds for each taxation period, in addition to the fine for delay in settling the unpaid tax as mentioned in paragraph (2) of article 46 of the present law. 3 - Inexact declaration: With the exception of material errors, a taxpayer who submits an inaccurate declaration that does not mirror his true economic activity, shall be fined twice the amount of the non-declared tax. 4 - Unjustified demand for the refund of the tax : Any person who, with the intention of fraud, submits an unjustified demand for the refund of tax, shall be fined twice the amount of the tax the restitution of which is demanded, in addition to applying the provisions of the penal code against him. 5 - Infringements relating to invoices and documents: A - Any amount that is entered in an invoice, or in a similar document, as a tax due (for payment) indeed becomes due for payment within the legal time-limit. In case of non¬payment, a fine for delayed payment will be levied in accordance with the provisions of the present law. The fine takes effect from the date on which the tax becomes due. B - Whoever issues an invoice in an improper manner will be fined three times the tax mentioned in the invoice. C - Whoever does not issue an invoice, or a similar document, whenever such an issue is a compulsory requirement under the provisions of article 38 of the present law, will be fined twice the tax due in principle on the subject operation. D - Any taxpayer who issues an invoice, or a similar document, contammg inaccurate information about the name or address of the parties involved in the operation, or the nature or the quantity of the goods delivered, the service provided, or the price and its annexes, or the amount of the tax, will be imposed a fine equal to twice the tax due, in principle, on the operation subject of the invoice, or to twice the tax shown on the invoice if higher. 6 - Book-keeping, filing and bringing out of documents: Whoever infringes the provisions of the present law or its implementation provisions, in respect of book-keeping, delivery, filing, bringing out of registers, invoices or any other accountancy documents, will be fined twice the amount of the tax due, provided that the fine is not inferior to five hundred thousand Lebanese pounds. 7 - Interference by a third person: Whoever interferes in any of the infringements mentioned in the previous paragraphs of the present article shall be fined the same amount of the tax mentioned, the fine in any case not being inferior to five million Lebanese pounds. 8 - At importation and exportation: In what concerns importation and exportation operations, enquiries into infringements and their seizure, collection and settlement, shall be conducted in accordance with the provisions laid down in the customs legislation. 9 - In derogation of any other text, in what regards infringements related to invoices, accounting books and records, as a matter of form, i.e. which have no effect on the basis of the tax due, a fine of 5% of the tax due shall be imposed, provided that the total fine is not less than 200,000 Lebanese pounds. VATE511 10 - The highest fine among the fines imposed by virtue of the present article shall apply for each infringement. The minutes for the implementation of the present article shall be drawn up through ministerial orders issued by the Minister of Finance(l) TITLE XIV - REFUND Article 49 : The refund Taxpayers have the right to obtain a refund for the whole, or part, of the tax already paid by them, in case the operation subject of the tax has been either annulled, cancelled or quashed, or in case the price has not been paid in full or in part or its value has been reduced, at a date subsequent to the date when the operation was concluded. The measures and procedures for refunding the tax whenever its value exceeds the tax due, will be fixed by a decree based on a proposal by the Minister of Finance. "(1) Article 20 - Fifthly - of Law No. 583 of 23 April 2004 stipulates: The provisions of the amended article 48 shall apply to allfiles which have been imposed but not settled at the date of enforcement of the present law, as well as files which have not yet been imposed, without taking into account the taxation period therefor, whether previous or subsequent. All tax assessments formerly settled shall be considered as a vested right for the Treasury." TITLE XV - OBJECTIONS Article 50 : Procedure of objection within the Lebanese territory. I - The objection: The taxpayer has the right to object to the amounts imposed on him or to the amounts the recovery or refund of which have been turned down in accordance with the provisions of article 49 of the present law, by submitting a written demand to the tax unit concerned within one month from the date of his receipt of the administration's decision or from the date of his payment of the tax. The objection must be well-founded, under pain of rejection The tax unit concerned must adjudicate on the objection within six months from the date of its receipts of the plea; the unit must also inform the opponent of its decision within fifteen days from the date of the decision. If six months elapse without the administration adjudicating on the issue, the administration's silence will then be tantamount to an implicit approval of the objection. In case the objection is accepted either officially or implicitly, its content must be acted upon within one month from the date of the publication of the decision or from the date when it was considered implicitly approved. 2 - Committee of objection: The administration's decisions to turn down the objections, either in whole or in part, may be challenged before the committee of objection. The challenge must be submitted within one month from the date when the administration's decision was notified. There shall be formed in each Mohafazat one or more committees of first instance, to look into objections against the tax, and adjudicate upon them. Each committee shall consist of: Ajudge, whether active or honorary, whether judiciary or administrative, of the fourth grade or above, to be appointed upon proposal of the Minister of justice, following approval of the Higher Council of Justice or the State Council, -->President - A civil servant from the Ministry of Finance, of grade three at the lowest, to be chosen by the Minister of Finance --> Reporter - A delegate from the chamber of commerce and industry concerned, chosen by the president of the chamber in question --> Member This committee shall adopt the same procedure as the summary courts .. Decisions will be carried out by majority vote. The committee must adjudicate on the objection within six months from the date when the objection was filed at the committee. The reporter will notify the committee's decision to the tax unit concerned, and to the taxpayer within fifteen day's from its publication. 3 - Challenge before the Council of State: Both the tax unit concerned and the taxpayer may appeal against the decisions of the committee of objections directly before the Council of State, within thirty days from the date on which the committee's decision was notified. The procedure of simplified sittings will be adopted at the Council of State. For his appeal (at the Council of State) to be accepted, the taxpayer must deposit a sum equal to eight per cent (8%) of the amount of the tax under contest. Any plea not accompanied by a receipt evidencing payment of the deposit will be rejected as a matter of course. The taxpayer will get a refund of the deposit if the Council of State wholly finds in his favour. In case the decision turns to be in favour of the Treasury, the deposit in question will be lost to the Treasury. If the decision turns to be partially in favour of the taxpayer, the deposit to be refunded to him will be proportionate to the tax that the court has decided he is not liable to. Article 51 : Procedure of objection at the importation The procedure followed in the customs legislation shall apply to objections against the tax at importation. All rights of total or partial reproduction are reserved TITLE XVI - TIME LIMITATION Article 52 : Time limitation The amounts due to the Treasury become null and void under the effect of time limitation four years from the end of the calendar year in which the amounts in question became due. Time limitation in respect of amounts due to the Treasury will be suspended, and there will be an extension of four additional years by the simple fact that individual proceedings are taken, by means of the notification of an encashment order, or personal ultimatum, or an admission of the debt (by the person liable to tax), or any other action that stops the time limitation in accordance with the code of obligations and contracts. In derogation of any other text, the right of deduction will lapse under the effect of time limitation after four years from the end of the year in which this right was created. Will lapse under the effect of time limitation the right to claim the refund, in whole or in part, of the tax, after four years from the end of the calendar year in which the tax became due. TITLE XVII - MISCELLANEOUS PROVISIONS Article 53 : Fiscal stamp tax Declarations, objections, statements and any other papers and documents connected with this tax, shall be exempt from the fiscal stamp tax. Article 54 : Decrepit sums Shall be considered irredeemable the sums owed by taxpayers, including the fines thereon, the value of which does not exceed ten thousand Lebanese pounds. The financial units concerned are spared the task of issuing encashment orders for such sums, and of their collection. Article 55 (as modified by Law No. 583 of23 April 2004) Cancelled indirect taxes 1 - The following taxes shall be cancelled, and replaced by the value-added tax, starting from the present law coming into force: - The 5% tax imposed on the cost of meals, drinks and accommodation, according to the provisions of article 43 of Law No. 326 of 28/6/2001 (Budget law year 2001), and the entertainment tax imposed in accordance with the provisions of the Decree-Law No. 66 of 5 August 1967 and its amendments, in what concerns natural and juridical persons who, compulsorily or optionally, are liable to the value-added tax. The tax imposed on playing cards, according to Decree-Law No. 65 of 5/8/1967 and its amendments. - The duty imposed on non-alcoholic beverages, according to Law No. 57/88 of 9/8/1988 and its amendments. The duty imposed on cement, according to Decree No. 2152 of 1/4/1938 and its amendments, and the duty imposed on gypsum and lime in accordance with the provisions of article 29 of the budget 1985 (Decree No. 2152/38) and its amendments. The tax imposed under article 38 of the Law No. 60/88 of 12/8/1988, amounting to five per cent (5%) on the value of advertisements which are shown or broadcasted on television. 2 - Are also cancelled, from the date when the present law comes into force, the municipal taxes imposed under articles 96, 97 and 98 of the law No. 60/88 of 12/8/1988 on the consumption of water, electricity and on wire and wireless communications; these municipal duties will be replaced by the value-added tax which should be collected in favour of the municipality in whose jurisdiction the subscriptions are located. The administration concerned will levy the tax on the subscribers and collect it from them; it will remit the proceeds after deduction of the tax paid on its purchases, once every three months, to every municipality concerned in proportion to its share of the subscriptions, or to the independent municipal fund in respect of the subscriptions located outside the municipality's domain. As for the persons who provide services of communications, water and electricity under contracts concluded with the State, they must collect the tax on these services, and remit to the administration concerned the difference between the collected tax and the tax paid on their purchases. Minutes for the implementation of this article shall be defined by a decree taken on the basis of a proposal of the Minister of finance. Article 56 : Directorate of value-added tax A directorate shall be created at the Ministry of Finance - Directorate of General Finance - to handle the management, supervision and collection of the value-added tax; it will be composed of the following services: - Service oflegislation and tax policies - Service of operations Service of verification and refunds - Service of administrative and financial coordination The Service oflegislation and tax policies shall consist of the following sections: - Section oflegislation and tax policies Section of fiscal obligation Section of contestation and appeal The Service of operations shall consist of the following sections: Section of the services to taxpayers Section of the management of data - Section of tax collection - Section of public relations and alertness The Service of verification and refund shall be composed of the following sections: Section of field verification - Section of tax verification and refunds The Service of planning and administrative and financial coordination shall be composed of the following sections: Section of administrative matters and staff Section of ( electronic) information - Section of administrative and financial coordination The framework of these services and sections, as well as their categories of functions, duties and working hours, shall be defined by a decree from the Council of Ministers based on a proposal by the Minister of Finance, after seeking the opinion of the civil service department and enquiries by the administration of research and orientation. In derogation of any other text, whether general or special, the supplementary general and particular conditions for the nomination of staff at this directorate and the financial appointments at the General Financial Directorate which were defined by Decree-Law No. 123 of 12/6/1959 with its amendments, shall be fixed by decrees from the Council of Ministers based on a proposal by the Minister of Finance, after seeking the opinion of the Civil Service Department. The positions at the directorate of the value-added tax of categories two and three may be filled by contracts, on condition that such contracts should be drawn up in conformity with the current organisational and legal requirements, following approval of the Civil Service Department. Staff hired by contract will benefit from all powers and obligations enjoyed by the integrated civil servants. It will be possible to conclude contracts with one or more companies from the private sector, to manage the cases of recovery of the tax paid, on their purchases, by persons non-resident in Lebanon when transporting such purchases outside Lebanon with their personal effects, as stipulated in paragraph one (1) of article 58 of the present law, always with due regard to the provisions of the general accountancy law (Decree No. 14969 of 30/12/1963) and its amendments. Article 57 : Interim provisions In derogation of the provisions of paragraph (1) of article 35 of the present law, every person who, on the issue of the present law, fulfils the conditions for becoming tax liable and whose business turnover for the previous twelve months exceeds five hundred million Lebanese pounds, is required to submit a registration demand dating from the issue date of the present law and up to 31/112002, under pain of being fined two million Lebanese pounds. The tax shall be levied on tax-liable operations of goods delivery and service provisions which take place following the coming into force of the present law. The tax shall also be levied on goods imported which have been put on the market after that date. In what concerns contracts concluded, and their prices agreed upon, prior to the date when the present law takes effect, and which are to be implemented after that date, every party to the contract may amend the agreed price in order to adapt it to the (new) tax situation, unless the two parties have expressly agreed otherwise. Persons who implement, after the date of introduction of the present law, operations that were previously agreed upon, through a contract concluded with any public administration before that date, have the right to charge that administration with the additional fiscal charge resulting from the application of the tax. As for contracts that were partially implemented before the date of introduction of the present law, the tax shall apply on that part of the contract that is still to be completed when the present law takes effect. Minutes for the implementation of this article shall be drawn up by a decree from the Council of Ministers, based on a proposal by the Minister of Finance. TITLE XVIII - ENFORCEABLE PROVISIONS Article 58 (as modified by Law No. 583 of23 April 2004) Special cases for refunding the tax The conditions, procedure and application measures for the refund of the tax in the following cases, as well as the date of their coming into force, shall be drawn up by means of decrees from the Council of Ministers, based on a proposal by the Minister of Finance : A - The tax paid on his purchases by a person non-resident in Lebanon when taking them outside Lebanon as part of his personal effects and for his particular use B - The tax levied on goods and services previously offered in Lebanon to companies and businessmen not residing in Lebanon and not carrying out any tax-liable activity over the Lebanese territory. C - A part on the whole of the tax paid by diplomatic, consular and international institutions, including their staff, according to international agreements. Persons who adopt a simplified method for the organisation and issuance of invoices, and who have to make use of a cash register machine, may file a request to the administration of the value-added tax for the refund of the amount of one machine bought after 3111/2002, on condition that it is in conformity with the specifications laid down by the administration, and in accordance with a procedure and conditions to be drawn up by a ministerial order from the Minister of Finance. Article 59 (as modified by Law No. 497 of30 January 2003 and Law No. 583 of23 April 2004) Cases of refund of the tax for tax-exempt operations: It will be possible to demand the refund of the whole of the tax levied on fixed assets which were used for undertaking the following tax-exempt operations, in accordance with articles 16 and 17 of the present law: Industry of medical drugs Industry offood products which is tax-exempt in accordance with the provisions of paragraph (B) of article 17 of the present law Hospitalisation and medical laboratories Education Non-profit seeking organisations Common transport for persons Industry of books , newspapers and magazines Industry of pharmaceutical products, including products for sanitary and pharmaceutical use (such as contraceptive aids, condoms, hygienic towe1s,baby nappies, and similar sanitary products). Industry of paper and cardboard as used for writing and printing, newsprint in the form of rolls or sheets, and printing ink. For the purpose of this article, "fixed assets" means the equipment and machinery intended for continuous use at the institution. It will also be possible to seek the refund of 100% of the tax which was imposed on running expenses relating to the following tax-exempt operations, in accordance with the provisions of articles 16 and 17 of the present law: - Industry of medical drugs - Industry offood products, which is tax-exempt in accordance with the provisions of paragraph (B) of article 17 of the present law - Education Hospitalisation and medical laboratories Non-profit seeking institutions - Industry of books, newspapers and magazines Industry of pharmaceutical products, including products for sanitary and pharmaceutical use (such as contraceptive aids, condoms, hygienic towels, baby nap pies, and similar sanitary products). Industry of paper and cardboard as used for writing and printing, newsprint in the form of rolls or sheets, and printing ink. Minutes for the implementation of this article shall be drawn up in a decree taken on the basis of a proposal by the Minister of Finance. Article 60 : Various special cases A - Persons liable to tax, who carry out operations in cash, may apply for the adoption of a simplified system for the preparation and issue of invoices, according to a procedure to be fixed by a ministerial order from the Minister of Finance. B - In order to prevent tax dodging by the parcelling out of the institution's operations, the total of the turnover achieved by persons who manage, or simultaneously carry out similar or closely related activities in several institutions, will be added together in order to determine the conditions for making them liable to tax. The procedure for the implementation of this paragraph shall be drawn up in accordance with a ministerial order from the Minister of Finance. C - The tax will be levied in respect of the operations of delivery of jewellery on the basis of the margin of real profit. It will not be possible to deduct the amount of the tax due on these operations from the amount of the tax which was levied on the goods and services acquired for the performance of these activities. Minutes for the application of this article shall be drawn up in a decree to be taken on the basis of a proposal by the Minister of Finance. D - For the assessment of the tax to be levied on persons who, in the course of their commercial activity, purchase used goods from a person not liable to tax, for the purpose of selling them, the tax included in the purchase price of such goods shall be extracted in accordance with a procedure to be laid down in a ministerial order from the Minister of Finance. Article 61 : The following text shall be added to paragraph A of Law No. 20179 and its amendments dated 26 December 1979 : "It will also be exempt from the value-added tax referred to in the value-added tax law". Article 62 : Minutes for the implementation of the law The minutes for the implementation of the present law, in what relates to articles pot stating which specific authority will be in charge of their implementation, shall be drawn up by decrees taken by the Council of Ministers, on the basis of a proposal by the Minister of Finance. Article 63 : Enforcement of the law The present law shall be published in the Official Gazette, and it will become enforceable as from 1/2/2002. Paragraph (I) of article 35 thereof, regarding registration, shall take effect from the date of publication of the present law. Beirut, 10 December 2001 The Speaker of the Chamber of Deputies Signed: Nabih Berry |
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