Important Details About Value Added Tax

WHAT IS VALUE ADDED TAX (VAT)?
Value-Added Tax is a tax applied on consumption of goods, and services provided in Lebanon, whether produced locally or imported from a foreign country. VAT is an important feature of modern tax systems. It has already been implemented in many countries over the last two decades, (both developing, and developed). It is, currently, applied in more than 125 countries. Typically, VAT has been used as a substitute for production, and sales taxes, as well as for Customs tariffs .

TAXABLE PERSON, AND TAXABLE SUPPLIES:
A taxable person is every normal or juridical person who is in the course of an independent economical activity, supplies, goods, and services other than the exempted ones. Most goods & services are subject to VAT at a rate of 10 percent:

The supply of goods, and services carried-out by a taxable person within the Lebanese territory.

Imports transactions undertaken by a taxable or non-taxable person.

REGISTRATION:
Special tax refund claims (Tourists, Foreign businesses, Diplomats etc.)

Do I need to register?
You are liable to register for VAT if your total turnover covering the last four successive quarters exceeds LL 500 million. The taxable turnover consists of your total turnover excluding the value of transfer of Capital Assets.

Optional Registration
People, whose turnovers vary between 150 million LBP, and 500 million LBP can choose to register for the tax. In order to preserve the competitiveness of the market, the optional registration turnover threshold may be lowered by Ministerial decision.

The VAT law in Lebanon has set certain regulations and rules that are related to Customs Clearance, Import, Export, Invoices, and Collection of Taxes. These rules must be well known by all sides whether they are Forwarders, Shippers, Cargo Agents, and Customers.

VAT RULES AND REGULATIONS:

Article 18: Exemptions at Import

Tax shall not be charged in respect of:

1. The importation of goods where the supply of such goods within the Lebanese territory is exempted from the tax.

2. The transactions provided for in the customs legislation, and related to the exemptions, specifically to the Presidency of the Republic, Parliament, Prime Ministry, United Nations Organization, the Political and Consulate exemptions, and the donations granted to the public administrations and institutions.

3. The personal luggage, household equipment, and the specimens with no commercial value according to the criteria adopted by the Customs law.

4. The importation of military vehicles, weapons, and ammunitions. The details of application of this article are regulated by a decree issued upon the proposal of the Minister of Finance, provided that the above- mentioned exemptions are valid starting the date of effectiveness of the law.

Article19: Exemption of Exports, and Like Transactions

Tax shall not be charged in respect of:

1. The supply of goods dispatched or transported to a destination outside the Lebanese territory, and the supply of services used outside the Lebanese territory.

2. The supply of goods, and services in the Free Zones according to the conditions, and restrictions determined by the Customs legislation.

3. The exportation of Gold to the Central Banks.

4. The supply of goods and services to the Public Administrations, Departments, and Municipalities, regarding the part financed from foreign resources as loans or donations. The details of application of this article are regulated by a decree issued upon the proposal of the Minister of Finance, provided that the above- mentioned exemptions are valid starting the date of effectiveness of the law.

Article 20: Exemption of International Transport

Tax shall not be charged in respect of:

1) The supply, alteration, repairing, maintenance, leasing, or letting of:
a- Seagoing vessels used for navigation in the high seas, and which fulfil remunerated transport activity, rescue, and assistance seagoing vessels, or those used for sea hunting.

b- Means of transportation by Air used for Air Navigation, and which mainly carry-out an international remunerated transport activity.

2) The supply of services for consideration related to seagoing vessels, and means of transportation by Air, and their cargo.

3) The international transport of persons and merchandise. The details of application of this article are regulated by a decree issued upon the proposal of the Minister of Finance, provided that the above mentioned exemptions are valid starting the date of effectiveness of the law.

Article 24: Taxable Base at Import

At import, the taxable amount is the customs' value determined according to the valuation rules at Customs, in addition to Customs duties, and all taxes initially due, excluding the Value-Added Tax.

Article 37: Retention of Records, Invoices, and Other Accounting Documents

The taxable person shall retain the records, invoices, and other accounting documents for a 4 years' time limit starting the end of the calendar year through which the tax was due.

Article 38: Issuance of the Tax Invoice

Every taxable person shall issue an invoice, or other document serving as an invoice in respect of all goods, and services supplied by him to another person. The invoice shall at least state clearly the following:

1. The name, address, and registration number of the supplier of goods or services at the Ministry of Finance.

2. The name, and address of the person for the interest of whom the invoice has been issued.

3. The description of the supply of goods, and services.

4. The serial number and, date of the invoice.

5. The due amount for the supply of goods, and services.

6. The tax chargeable with the applied tax rate.

Article 41: Obligations at Import

The same rules, and forms provided for in the Customs legislation shall be applied to the tax declaration at import. The tax is paid at the time when the merchandise are placed in the domestic consumption according to the rules provided for in the Customs legislation. The collection of the tax will be banned temporarily in all Customs situations where the duties are temporarily suspended according to the rules provided for in the Customs legislation.

Article 47: Collection of the Tax at Import

The rules and, procedures specified in the customs legislation are applied to the collection of the tax at import.

For more information about Value Added Tax please visit http://www.finance.gov.lb/