Special Cases

Adoption of the Cash Basis

• Who are the persons who may follow the cash basis in their accounting?

Persons who carry out supplies of goods and provide services to final consumers who are not subject to VAT may follow the cash basis in their accounting, such as restaurants, pharmacies, supermarkets...

In order for a person to benefit from the possibility of using the simplified invoice or receipt system, they must:

• Meet the conditions for VAT registration, whether mandatory or optional, and be registered with the tax administration.
• The activity requested to be subject to the simplified invoice or receipt system must be a retail activity, or another activity carried out by the taxable person, while the ordinary obligations provided by law remain applicable, especially those provided for in Article 38 of the law.
• The nature of the activity and the volume of operations must not allow the taxable person to issue a separate invoice for each transaction in accordance with the law.

• What is the special treatment?

A person who follows the cash basis in their accounting may request from the tax administration a special treatment allowing them to issue a simplified invoice or cash receipt instead of the tax invoice provided for in Article 38 of the law.

The taxable person may issue a simplified invoice that complies with the provisions of the law upon the customer’s request, and must keep copies of such invoices.

• How is this special treatment applied?

To apply this special treatment, the taxable person must, when the conditions are met, submit a request to the tax administration.

The effects of this approval apply from the date on which it is granted.

Reference: Decision No. 294/1 dated 6/3/2002.

Transfer of the Essential Elements of an Establishment

VAT is not due on the transfer of the essential elements of an establishment, provided that the following conditions are met:

• The transfer must include the elements necessary to carry out the establishment’s activity, without which the transferee cannot continue operating the establishment.
• The transferee must become subject to VAT immediately upon completion of the transfer.
• The transferee must commit to continuing the operation of the establishment as a taxable person throughout the transfer process, and must submit a declaration of what was acquired as a result of the transfer.
• The transferee must be subject to VAT, and the transferred establishment must become originally subject to VAT because all registration conditions are met after the transfer process is completed.

To benefit from the exemption:

A declaration signed by both the transferor and the transferee must be submitted within one month from the date of signing the transfer deed before the notary public, together with a copy of the deed. The transferee must also submit an undertaking to continue the same activity immediately after completion of the transfer.

Reference: Decree No. 7298 dated 26/1/2002 relating to the transfer of the essential elements of an establishment.

Refund of Tax on Fixed Assets Acquired Before VAT Registration

To recover the tax mentioned above:

A detailed inventory must be prepared as of the registration date and submitted within two months from the date on which registration becomes effective. The request must include a detailed list of the assets showing their type, purchase date, supplier name, purchase invoice numbers or customs declarations, their value, and the tax paid and requested for refund.

References:

• Decree No. 7336 dated 31/1/2002.
• Decree No. 12910 dated 17/7/2004.
• Decision No. 1131/1 dated 18/9/2004.

Refund of Tax Paid on Inventory Acquired Before VAT Registration

To recover the tax mentioned above:

A detailed inventory must be prepared as of the registration date and submitted within three months from the date on which registration becomes effective. The request must include a detailed list of the inventory showing the type of goods, purchase date, supplier name, purchase invoice numbers or customs declarations, their value, and the tax paid and requested for refund.

Reference: Decision No. 978/1 dated 2/8/2004 relating to the deduction of tax incurred on inventory of goods and raw materials held by the taxable person on the date VAT registration becomes effective and acquired before registration.

Refund of the Cost of a Cash Register Machine

A refund request must be submitted to the Directorate within two months from the date of obtaining the administration’s approval, with the following documents attached:

• A copy of the purchase invoice of the cash register from the supplier, the receipt issued by the cash register, and a copy of the administration’s approval.

The value of the tax paid and requested for refund must also be stated.

The value of the refund may not exceed LBP 2 million.

Reference: Article 23 of Budget Law 2004 No. 583 and Decision No. 914/1 dated 16/7/2004.

VAT Refund for Tourists

Definition

Tourists may recover the tax paid on certain goods or items purchased in Lebanon and intended to be taken with them to their country of residence.

A tourist means any natural person, whether a Lebanese resident abroad or a foreigner, who has an address or usual place of residence outside Lebanon, has no permanent or temporary place of business in Lebanon, and whose visit to Lebanon is purely for tourism purposes, provided that the stay in Lebanon does not exceed three continuous months.

What are the conditions for VAT refund?

A tourist may request a VAT refund on purchases made within Lebanese territory if the following conditions are met:

• The purchases or goods are transported as part of the tourist’s personal luggage.
• The goods or items are outside the scope of the Lebanese tax administration.
• The total amount of a single invoice is not less than LBP 150,000.
• The purchases are taken out of Lebanon within three months from the purchase date or invoice date.
• The purchases are new and not consumed in Lebanon.

What purchases allow the right of deduction?

• Taxable items of all kinds, such as art items, accessories, perfumes, organized tourist packages...
• Food and beverages of all kinds, restaurants, cafés, supermarkets...
• Fuel and tobacco.

For more information, please refer to the VAT Refund Guide for Tourists or contact Global Refund Lebanon S.A.L. Email: Taxfree.lb@globalrefund.com Website: www.globalrefund.com

Reference: Decree No. 7301 relating to the conditions for VAT refund for non-residents in Lebanon, tourists.

Non-Resident Businessmen

Who are non-resident businessmen?

Non-resident businessmen and companies mean foreign or Lebanese legal persons residing abroad who do not have a permanent place of business in Lebanon and do not have a permanent residence in Lebanon, and whose visit to Lebanon is for the purpose of holding conferences, lectures, exhibitions, or participating in them.

What are the conditions for VAT refund for non-residents?

In order to benefit from the right of refund, certain conditions must be met, including:

1. The person must be registered with the tax administration in the country of residence or place of business, or must be registered in the commercial register in the country of residence.
2. The person must carry out an activity consisting of supplying goods or providing services, whether taxable or not taxable in Lebanon.

For more information, please refer to the Guide for Non-Resident Businessmen and Companies.

Non-resident businessmen or companies may recover the tax incurred on goods or services used within Lebanese territory if the tax paid on such goods exceeds LBP 1,000,000 during one visit or several visits in a given year.

If the tax paid during a given year does not exceed the amount specified in the previous paragraph, the tax amount may be carried forward to the following year.

For more information, please refer to the Guide for Non-Resident Businessmen and Decree No. 7299.

How is this tax refunded?

Non-resident businessmen and companies may request a refund of the full tax paid in Lebanon on goods and services directly, clearly, and explicitly connected to achieving the previously specified purpose, such as exhibition space rentals, hall or office rentals, rental of equipment and tools used exclusively for that purpose, hotel accommodation, and car rental expenses.

The refund may cover tax paid during the three years preceding the submission of the request.

The request is submitted directly by the non-resident businessman or by their representative in Lebanon.

If the refund request is approved, the approved tax amount is paid before the end of the year during which the refund request was submitted.

Provision of Services by Non-Residents

A non-resident person must, at least one week before carrying out any taxable transaction, appoint one representative for all activities intended to be performed in Lebanon. The representative is jointly liable with the non-resident for financial obligations toward the tax administration.

The administration may pursue the representative by legal means to collect the amount due from the non-resident. If the non-resident does not appoint a representative in Lebanon, the contracting party becomes responsible for paying the tax and related penalties where applicable, and must withhold them from the amount payable and pay them through a special payment notice.

No representative is required for services performed from abroad and benefiting a person residing in Lebanon. In such case, that person is responsible for paying the tax on those services through their periodic declaration if taxable, or through a special declaration to the tax administration if not taxable.

Reference: Decree No. 7837 dated 30/4/2002, non-resident.

VAT Refund by Embassies, Diplomatic Missions and International Organizations

Who benefits from the right of refund?

1. Bodies benefiting from the right of refund:
   • Diplomatic and consular missions established in Lebanon, subject to reciprocity, United Nations organizations operating in Lebanon, and international and regional organizations linked to the Lebanese State by agreements.
   • These bodies benefit from refund of all fees and taxes, except fees collected against specific services provided to diplomatic and consular missions and international organizations benefiting from the right of refund.
2. Persons benefiting from the right of refund:
   • Persons affiliated with the bodies benefiting from this right benefit from the refund, namely:
   • Foreign diplomatic and consular officials accredited and residing in Lebanon, subject to reciprocity.
   • Employees of United Nations organizations holding international passports of categories “4” and “3” and above.
   • Employees of international organizations who enjoy diplomatic status under agreements concluded with the Lebanese State.
   • Employees who enjoy rights related to professional use and exemption from customs duties, subject to reciprocity.

The above persons may benefit from tax designation provided that:

• Six months have passed during which they have been residing permanently in Lebanon.
• They do not carry out any profit-generating activity in Lebanon.

Family members of the persons mentioned above also benefit from these rights.

Persons benefiting from the refund may recover the tax incurred on goods and services allocated exclusively for their personal use, excluding food products and ordinary electrical or office supplies.

Reference: Decree No. 7295 dated 26/1/2001 and its amendments.

What transactions grant the right of refund?

The right of refund is granted for supplies of goods and services performed within Lebanese territory by a taxable person for the benefit of a person or body benefiting from the right of refund, as well as imports of goods carried out by a person or body benefiting from the right of refund.

What are the conditions for VAT refund?

The right of refund is subject to the principle of reciprocity between states.

VAT refund may not be claimed if the value of the single invoice is below the required threshold.

The competent bodies submit the VAT refund request in their name on special forms prepared by the tax administration, showing the amount of tax requested for refund, at the end of each month of the year. The deadline for submitting the refund request must not exceed one year from the purchase date.

The refund request is submitted through the Ministry of Foreign Affairs and Emigrants, and is not accepted unless certified by that Ministry.

Individuals benefiting from the right of refund must submit their refund requests through the bodies to which they belong.

The refund request must include:

• A list detailing the amount requested for refund by the body and relating to the tax paid on goods and services allocated for its official use.
• A list detailing the amount requested for refund by persons affiliated with the body and relating to the tax paid on goods and services allocated for their private use.
• Documents and invoices proving the import.

The documents and invoices submitted must be original, or certified true copies issued by the body submitting the request.

Please refer to the Guide for Embassies, Diplomatic Missions and International Organizations.

Reference: Decree No. 7295 dated 26/1/2001 and its amendments.

Refund According to Article 59

Who benefits from the refund according to Article 59?

Beneficiaries are persons who carry out certain tax-exempt operations according to Articles 16 and 17 of the law, such as hospitalization, education, pharmaceutical manufacturing, and non-profit associations.

What does this refund include?

Refund of the tax that affected fixed assets and current expenses at a rate of 100%.

Reference: Decree No. 7365 dated 2/2/2002 and its amendments.

How is the refund made?

To benefit from this refund, the concerned party must submit a request to obtain a dedicated account from the Value Added Tax Directorate in accordance with the relevant tax procedures and Article 59 of Law No. 379/2001.