Tax Declaration

Tax Period Adopted for Declaration

The adopted tax period is the calendar quarter. Accordingly, the calendar year is divided into four tax periods:

• First period: from 1/1 to 31/3.
• Second period: from 1/4 to 30/6.
• Third period: from 1/7 to 30/9.
• Fourth period: from 1/10 to 31/12.

Submitting Declarations

Declarations must be submitted exclusively by mail, through LibanPost, on a quarterly basis within 20 days from the end of the calendar quarter, using form Q2-1 sent by the Directorate to the taxable person before the end of each quarter.

Reference: Decision No. 424/1 dated 25/3/2006, procedures and conditions for sending tax declarations and statements by mail.

Extension of the Declaration Submission Deadline

The tax administration may extend the deadline for submitting declarations by one month at most, based on a written request submitted by the taxpayer where substantial reasons justify the extension, provided that the request is submitted no later than ten days before the expiry of the original declaration deadline.

The tax administration must decide on the request no later than five days before the expiry of the original declaration deadline.

Failure by the tax administration to decide on the request is considered an implicit rejection. In all cases, the tax administration’s decision in this regard is not subject to any appeal.

Reference: Article 39 of Law No. 44 dated 11/11/2008, Tax Procedures Law.

What Is the Right of Deduction?

It is the right granted to the taxable person to deduct, from the tax due on their sales, the tax that affected all such sales.

Reference: Article 27 of Law No. 379 dated 14/12/2001, Value Added Tax Law.

Decree No. 7336 dated 31/1/2002 and its amendments, right of deduction.

What Is Partial Deduction Right?

• If a taxable person carries out, when supplying goods or providing services, transactions of which only part grants the right of deduction, that person may deduct a part of the tax proportional to that part.
• Reference: Article 31 of Law No. 379/2001, Value Added Tax Law.
• How is the deduction ratio calculated?

The deduction ratio is the ratio between the value of all transactions granting the taxable person the right of deduction and the value of all transactions carried out by the taxable person, including those that do not grant this right.

Reference: Article 12 of Decree No. 7336 dated 31/1/2002 and its amendments, right of deduction.

Persons Who Do Not Benefit from the Right of Deduction

• Persons not subject to tax.
• Persons outside the scope of tax.
• Persons carrying out transactions exempt from tax.
• Persons carrying out activities subject to special treatment, such as jewelry trade.

Reference: Article 4 of Decree No. 7336 dated 31/1/2002, right of deduction.

Mechanism for Applying Deduction in Value Added Tax

The right of deduction is applied through the declaration by deducting the total deductible tax from the total collected tax due by the taxable person for a specific tax period. Any deductible tax surplus, where it exists, is carried forward to subsequent tax periods until it is used or refunded.

If the collected tax exceeds the deductible tax paid, the taxable person must pay the difference to the tax administration.

• If the collected tax is greater than the paid tax, the result is tax due to the tax administration.
• If the paid tax is greater than the collected tax, the result is a tax surplus eligible for deduction or refund.

Reference: Decree No. 7336 dated 31/1/2002 and its amendments, right of deduction.

What Is Deductible Tax Surplus?

If, at the end of a given calculation period, the deductible tax exceeds the tax due, the surplus is carried forward to the following period.

Reference: Article 30 of Law No. 379 dated 14/12/2001, Value Added Tax Law.

Decree No. 7336 dated 31/1/2002 and its amendments, right of deduction.

Refund

The taxable person may, after the end of the second quarter of the calendar year or at the end of any calendar year, submit a request to refund the balance of the deductible tax surplus calculated at the end of that year.

Reference: Decree on the right of deduction and its amendments.

If the value of the tax paid exceeds the tax due, the tax administration may use the surplus to collect other amounts due from the taxpayer, provided that the taxpayer is notified.

The surplus must first be allocated to withholding taxes and value added tax, then to other amounts due.

If the amounts due relate to more than one tax period, the surplus is allocated first to the oldest tax obligation.

The remaining surplus balance is refunded to the taxpayer within 45 days from the date the refund request is submitted, or within 30 days if the surplus results from an error discovered by the tax administration.

Interest is calculated on overpaid amounts at a rate of 0.75% per month, starting from the expiry of the 45-day or 30-day deadline, with any fraction of a month considered a full month.

Reference: Article 54 of Law No. 44 dated 11/11/2008, Tax Procedures Law.

Decree No. 7336 dated 31/1/2002 and its amendments, right of deduction.

Amending a Periodic Declaration

If the taxpayer discovers that the declaration submitted to the tax administration contains an error or omission resulting in additional tax, the taxpayer may submit an amended declaration showing the error or omission, and must pay the unpaid tax and related charges where applicable.

The amendment may be made before the date of issuance of the audit assignment order for the tax period concerned, and within the applicable time limits.

The correction request is submitted using form Q2-4.

Reference: Article 40 of Law No. 44, Tax Procedures Law.

Decree No. 7296 dated 26/1/2002, obligations of the taxable person.

Some Special Cases

Jewelry Sector

Jewelry refers to manufactured articles of gold or other precious metals, and articles of jewelry containing precious or semi-precious stones. For supplies of jewelry, tax is imposed on the basis of the profit margin. For more details, please refer to the Jewelry Guide.

Reference: Decree No. 7338 dated 31/1/2002, jewelry.

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 carried out 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 penalty due from the non-resident.

If the non-resident does not appoint a representative in Lebanon, the contracting party in Lebanon 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 they are taxable, or through the special declaration Q5-2.

Reference: Article 40 of Law No. 379 dated 14/12/2001, Value Added Tax Law.

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