Taxation

Tax Registration

Mandatory VAT Registration Conditions

Carrying out an economic activity subject to tax.
Turnover exceeding the minimum threshold for registration, currently LBP 150 million.
Over four consecutive quarters.

Reference: Article 3 of Law No. 379/2001, Value Added Tax Law, as amended by Law No. 379/2003 and Law No. 583/2004, the General Budget and attached budgets for 2004.

Minimum Turnover Requiring Registration

From the start of VAT application until 31/03/2003	LBP 500 million, approximately USD 330,000.
From 01/04/2003 until 31/12/2003	LBP 300 million, approximately USD 200,000.
From 01/01/2004 until 31/12/2004	LBP 225 million, approximately USD 150,000.
From 01/01/2005 to date	LBP 150 million, approximately USD 100,000.

Reference: Article 3 of Law No. 379/2001, Value Added Tax Law, as amended by Law No. 379/2003 and Law No. 583/2004, the General Budget and attached budgets for 2004.

Turnover Calculation

Turnover is the total of:

Revenues from taxable transactions.
Revenues from exempt transactions without deduction right.
Revenues from export transactions of taxable goods or exempt goods with deduction right.

Sale of fixed assets is excluded.

Reference: Article 4 of Value Added Tax Law No. 379/2001.

Legal Deadline for Submitting a Registration Request

The registration request must be submitted using the dedicated form within two months from the date on which the registration conditions are met.

Reference: Article 35 of Law No. 379/2001, Value Added Tax Law.

Documents Required for Registration

Individual Establishments

Registration request, Form No. 1-A1.
Commercial registration evidence.
Statement confirming the absence of a similar or related activity with the activity subject to registration, in accordance with Minister of Finance Decision No. 368/2002.
Detailed turnover statement for the quarters preceding the registration request date, for a maximum period of five years.
Copy of the identity card of the concerned person or the legal power of attorney for the representative.
Undertaking by the taxpayer subject to VAT and a copy of the first invoice showing receipt of funds or provision of taxable services, where the taxpayer has become engaged in a taxable activity or an exempt activity with deduction right after previously being limited to exempt transactions without deduction right.

Note: Copies of official documents are sufficient after presenting the original documents.

Partnerships and Capital Companies

Registration request, Form No. 1-A1.
Commercial registration evidence.
Company articles of association showing the final distribution of shares or quotas.
Statement confirming the absence of a similar or related activity with the activity subject to registration, in accordance with Minister of Finance Decision No. 368/2002.
Detailed turnover statement for the quarters preceding the registration request date, for a maximum period of five years.
Copy of the identity card or individual civil extract of the trader or partner, or legal power of attorney for the representative.
Undertaking by the taxpayer subject to VAT and a copy of the first invoice showing receipt of funds or provision of taxable services, where the taxpayer has become engaged in a taxable activity or an exempt activity with deduction right after previously being limited to exempt transactions without deduction right.

Note: Copies of official documents are sufficient after presenting the original documents.

Real Estate Individual Establishments

Registration request, Form No. 1-A1.
Commercial registration evidence.
Statement confirming the absence of a similar or related activity with the activity subject to registration, in accordance with Minister of Finance Decision No. 368/2002.
Detailed turnover statement for the quarters preceding the registration request date, for a maximum period of five years.
Copy of the identity card or individual civil extract of the trader or partner, or legal power of attorney for the representative.
Copy of the first commercial lease contract if the taxpayer carries out taxable real estate commercial activity.

Note: Copies of official documents are sufficient after presenting the original documents.

Institutions Leasing Under Free Management or Investment

Registration request, Form No. 1-A1.
Commercial registration evidence.
Company articles of association showing the final distribution of shares or quotas.
Statement confirming the absence of a similar or related activity with the activity subject to registration, in accordance with Minister of Finance Decision No. 368/2002.
Free management or investment contract.
Detailed turnover statement for the quarters preceding the registration request date, for a maximum period of five years.
Copy of the identity card or individual civil extract of the trader or partner, or legal power of attorney for the representative.

Note: Copies of official documents are sufficient after presenting the original documents.

Expected Processing Time by the Administration

The day following the submission of all required documents.

Optional Registration

Any person carrying out a taxable economic activity may register voluntarily for VAT regardless of turnover.

From the effective date of optional registration, the voluntarily registered person becomes subject to the same obligations as a person required to register mandatorily.

Reference: Article 3 of Law No. 379/2001, Value Added Tax Law, as amended by Law No. 379/2003 and Law No. 583/2004.

Important Registration Note

The registration certificate must be displayed in a visible place.

Some Special Registration Cases

Similar or Related Activities

Similar or related activities are activities that are resources or complements of other activities, have common customers or closure within a group, or are under the control of one person through supervision or direction.

Where similar or related activities exist, the following are taken into account to determine whether registration conditions are met:

Carrying out a taxable economic activity.
Distribution of shares or quotas.
Family relationship between partners.
Fulfilment of registration conditions by one taxpayer in the group.
The group’s turnover exceeding the minimum registration threshold.

Reference: Minister of Finance Decision No. 368/1 dated 4/4/2002, similar and related activities.

Free Management

A free management contract is a contract whereby the manager operates the establishment for a period and exploits it for their own account, bearing alone the burdens of such exploitation, while the owner of the establishment receives a fixed or agreed consideration.

In the presence of a free management contract, four cases must be distinguished:

First case: the owner is subject to VAT, the investor is not subject to VAT, and the establishment is naturally subject to VAT.
Second case: the owner is subject to VAT, the investor is not subject to VAT, but the activity of the invested establishment is taxable.
Third case: the owner is not subject to VAT, the investor is not subject to VAT, and the activity of the establishment is taxable by nature.
Fourth case: the owner is not subject to VAT, the investor is already subject to VAT, and the establishment’s activity is taxable by nature.

Case	Date on Which Registration Conditions Are Met
First case	The investor becomes subject to VAT automatically from the date of the investment contract.
Second case	The investor has two options: registering the establishment under a separate VAT number, or operating it as a branch of a taxable establishment owned by the investor.
Third case	The invested establishment remains not subject to VAT until its own registration conditions are met, taking into account the rules on similar and related activities.
Fourth case	The establishment is automatically subject to VAT if its activity is similar or related to the investor’s main taxable activity. If the investor chooses to convert the establishment under the free management contract into a branch of their own establishment, the investor must notify the VAT Directorate of the amendment within two months from the date of the investment contract, and must declare the transactions of this establishment within the periodic declaration of the main establishment. If the activity of the invested establishment is not similar or related to the investor’s main activity, and the invested establishment is not converted into a branch of the investor’s main establishment, the invested establishment becomes subject to VAT independently when its own registration conditions are met.

Reference: Minister of Finance Instructions No. 705 dated 23/4/2003, relating to free management contracts.

Taxpayers Subject to Lump-Sum Profit in Income Tax

What are the conditions for their VAT registration?

To determine the date on which registration conditions are met, the following are taken into account:

Carrying out a taxable economic activity.
Over four consecutive quarters.
Exceeding the minimum registration threshold.

Offshore Companies

When are offshore companies subject to VAT?

Offshore companies are subject to VAT when the following conditions are met:

The company carries out a taxable economic activity or an exempt activity with deduction right, such as exporting goods or services from Lebanon abroad, or exporting goods from abroad to abroad using the free zone.
Its turnover exceeds the minimum registration threshold.
It carries out its activity for at least four consecutive quarters, with any fraction of a quarter considered a full quarter.

Reference: Article 3 of Law No. 379/2001, Value Added Tax Law, as amended by Law No. 379/2003 and Law No. 583/2004.

Non-Residents

A non-resident person subject to VAT is any natural or legal person carrying out a taxable activity on Lebanese territory in accordance with the law, without having a place of residence or establishment in Lebanon.

All statutory registration conditions apply to non-residents, except the requirement to reach the minimum turnover threshold.

For more information and details on this subject, click here: Non-Residents Guides.