VAT general principles (For more info about this subjuct please go to Lebanon Value Added Tax page)
1. Scope of tax
provides that every person who carries a business in Lebanon and makes or
intends to make taxable supplies is a taxable person.
bodies acting as state authorities
the supply of
provides that VAT will be levied on the value of:
services supplied in Lebanon by any taxable person in the course of a business
including goods that the taxable person may take from his business for his
into Lebanon by any person, taxable or not.
The law provides that a taxable person becomes liable to VAT and to its obligations only when at the end of any quarter its turnover covering this quarter and the 3 previous quarters exceeds the threshold to be determined by the law (1 billion LBP).
The taxable turnover is composed by:
- the total amount of the taxable supplies
- and the total amount of the zero-rated supplies
The threshold does not apply at import.
Tate and coverage
The law provides a rate of 10 %.
The law provides for a list of exempted sectors:
treatment centers, and closely linked services
services and closely linked supply of goods made by non-profit organizations.
Banks: the major
difficulty in applying BAT to the financial sector is taxing interest charges.
Interest includes elements which reflect the risk of the loan, the real cost of
capital, the inflation rate, and a charge for the service rendered. In
principle, only the last should be taxed, but in practice it is impossible to
separate out this taxable component of interest from the rest.
services are liable to an insurance tax.
are liable to special taxes and charges, hence are exempted from BAT. However,
where establishments such as casinos sell meals and drinks as well as organize
the gambling, then their activities as restaurants and caterers are liable to
provides for a list of essential goods zero-rated:
fish, poultry and thir natural products; milk, and all dairies products
flour, rice, borghol, spaghetti and other kinds of pasta
3. Operational principles:
The law provides that the registered person has to file a tax return every quarter.
According to the provisions of the law, the amount on which the tax is chargeable shall be:
consideration that the person supplying goods and services is entitled to
receive in respect of such supply, including all taxes, commissions and charges
If there is no
consideration, the open market price.
In the case of
used goods and travel agencies services, the profit margin.
At import, the
value determined for customs purposes including customs duties.
input tax exceeds for a period the output tax, the taxpayer has the right to
carry it forward to the next period. The law provides that the taxable person
can claim a refund only at the end of the year and at the end of each period if
he is an exporter.
the non-resident has failed to designate such a representative, the contracting
party is responsible for the payment of the tax and penalties due.
- The taxable value is the travel agent gross profit margin;
- Tax charged to the travel agent by other taxable persons is not eligible for deduction or refund.
- Having a combination of both “local and international services”, the travel industry would have a part of its operations -which is local or internal service- subject to VAT and another part, which is exempted, i.e. international operations.
VAT at imports will be managed by the Customs as far as collection and appeal.
5. Transitional provisions:
- The law provides that the 5 % tax on hotels and restaurants will be abolished where VAT is applicable (threshold).
The stamp duties
shall be abolished regarding the procedures and documents related to VAT.