2019 Worldwide VAT, GST and Sales Tax Guide - Lebanon

A taxable person is an entity or individual who makes taxable supplies of goods or services in the course of doing business in Lebanon, in excess of the registration threshold. In addition, a taxable person is an entity or individual who imports and exports VAT-able goods or services, regardless of their turnover. This definition includes a permanent establishment of a foreign business in Lebanon. The deadline for registration is two months following the last day of the quarter in which the liability to register arose.

The VAT registration threshold is total turnover of at least LBP100 million in any period varying from one to four consecutive quarters.

Importers and exporters of VAT-able or of goods or services that are exempt with the right of deduction are now obliged to register with the DVAT regardless of their turnover.

Voluntary registration. Any taxable person performing VAT-able activities or activities related to goods and services that are exempt with the right of deduction may voluntarily register for VAT, provided that the latter had a minimum turnover of LBP50 million in a period of one to four consecutive quarters.

Group registration. The Lebanese VAT law does not allow VAT group registration. Legal entities that are closely connected must register for VAT separately.

Registration procedures. A taxpayer registering with the DVAT is required to manually fill out hard copies of the necessary registration forms (K1-1, K11-1 and K12-1) along with other required documents and submit them to the DVAT within two months from the last day of the quarter in which the liability to register arose (in case of mandatory registration). The DVAT takes an average of one week to complete the registration.

Late-registration penalties. Late registration with the relevant tax department triggers the following penalties:

• LBP2 million for joint stock companies
• LBP1 million for limited liability companies
• LBP300,000 for sole proprietorships and other taxpayers

Non-established businesses. A “non-established business” is a business that has no fixed establishment in Lebanon. A non-established business must register for VAT if it makes taxable supplies in Lebanon.

Tax representatives. A non-established business must appoint a tax representative resident in Lebanon before it makes any supplies of goods or services there, regardless of its expected level of turnover. The tax representative is jointly and severally responsible for the payment of all VAT liabilities and penalties with the non-established business that it represents. The tax representative is solely responsible for complying with all of the other provisions of the Lebanese VAT law.

If a Lebanese resident receives a taxable supply of services from a non-established supplier that has not appointed a tax representative in Lebanon, the Lebanese resident is liable to pay VAT and any penalties due to the VAT authorities.

Reverse charge. Reverse charge is a transfer of liability to account for and pay the VAT on imported services from the person providing the service (the supplier) to the person receiving the service (the recipient). If services are being supplied by a foreign nonresident entity that has no agent in Lebanon to a Lebanese registered entity, it is the responsibility of the Lebanese taxpayer to book the VAT amount due on the service and declare it to the VAT department.

Digital economy. No special rules apply. However, non-established businesses should appoint a tax representative residing in Lebanon for all operations intended to be performed in Lebanon.

There is no obligation to appoint a tax representative if the services are performed abroad and provided to Lebanese residents.

Deregistration. A taxable person that ceases to carry on business in Lebanon must end its registration. A taxable person whose turnover falls below the compulsory registration limit may also deregister.

A taxable person that is registered voluntarily may request deregistration if its annual turnover does not exceed the compulsory VAT registration threshold.

Exemption from registration. The VAT law in Lebanon does not contain any provision for exemption from registration.

The time when VAT becomes due is called the “time of supply” or “tax point.” The tax point is the earliest of the following events:

• When the goods are delivered or the services are performed
• When the consideration is paid if this occurs before the goods are delivered or services are performed
• When the invoice is issued if this occurs before the goods are delivered or services are performed

The time of supply for imported goods is when the liability to pay customs duties arises, that is, either on the date of importation or when the goods leave a duty suspension regime.

A Lebanese resident who uses a service in Lebanon that is acquired from abroad must account for VAT on the service and pay VAT due to the VAT authorities. The tax point is when the service is received and the consideration is paid. The Lebanese VAT Law does not differentiate between companies and individuals. However, in practice, individuals do not self-account for the VAT, and no VAT is charged on the supply.

Deposits and prepayments. If, before the date of delivery of goods and services, the price has been partly or wholly paid by the customer, then the VAT is due at the date of payment based on the value of the amount paid.

Goods sent on approval for sale or return. In the case of a sale return, in order to be able to recover the output VAT already declared and paid, the supplier should repay the full amount received and get back the goods within three months from the date of supply, and a credit a note is required to be issued where the goods are returned.

Leased assets. VAT on leased assets classified as operational leases is payable upon payment of each installment. If the asset is transferred to the lessee at the end of the lease term, the VAT is computed based on the purchase price.

The time of supply differs if the asset is classified as a financial lease, under any of the below criteria:

• Ownership transfers at the end of the lease (upon final payment or required buyout)
• Written option for bargain purchase
• The present value of the lease payments is equal or more than 90% of the fair value of the leased property
• The lease term is equal or greater than 75% of the asset’s economic life

When any of these criteria apply, the VAT is due upon the earlier of effective receipt of the asset, issuance of an invoice or payment of an amount.

Reverse-charge services. Please refer to the reverse-charge section above (Section C).

Continuous supplies. VAT is due on the earliest of either the invoice issuance, installment payment or installment due date.

Imported goods. VAT is paid at customs at the time of importation and clearance of goods.

The Lebanese VAT authorities may refund the VAT incurred by businesses that are neither established nor registered for VAT in Lebanon under certain conditions.

VAT returns. Lebanese VAT returns are submitted for quarterly periods. VAT returns must be filed within 20 days after the end of each quarter. Payment in full is required at the same time. VAT liabilities must be paid in Lebanese pounds.

Special schemes. Not applicable.

Electronic filing and archiving. All taxpayers registered with the directorate of VAT should submit their quarterly declarations electronically starting the first quarter 2014. In order to do so, the taxpayer should register online and create an account with the Directorate of Value-Added Tax through the Ministry of Finance’s website (www.finance.gov.lb).

Annual returns. Not applicable.