Revaluation / Reassessment

Revaluation / Reassessment

Revaluation, Article 45 of the Income Tax Law

Only taxpayers subject to the actual-profit method may revalue their fixed assets every 5 years in accordance with the procedures mentioned in the Commercial Law, whereby the revaluation report is notified to the competent financial department.

Betterment profit is the profit resulting from fixed assets due to their revaluation or due to their disposal.

Betterment profit = new value of the revalued asset - net value after depreciation.

Or / and

Betterment profit = sale price - net value after depreciation.

Tax rate: Betterment profit is subject to tax at the rate of 10% of the profit value.

Tax payment deadline: The tax is paid within the annual income tax declaration.

Penalty

Any taxpayer who does not submit the declaration is subject to a penalty of 5% of the tax due according to the declaration or the profit determined by the tax administration for each month of delay, or fraction of a month, provided that the penalty does not exceed 100% of the tax due for each declaration and is not less than:

• LBP 750,000, seven hundred and fifty thousand Lebanese pounds, for joint-stock companies.
• LBP 500,000, five hundred thousand Lebanese pounds, for partnerships, limited liability companies, and institutions exempt from tax.
• LBP 100,000, one hundred thousand Lebanese pounds, for individuals and other taxpayers.

In addition, a late payment penalty, collection penalty, of 1% of the unpaid tax due shall apply, plus the assessment penalty, starting from the expiry date of the original payment deadline.

Forms and Attached Documents

A revaluation request addressed to the competent financial unit, including:

• The applicant’s name, full address, and registration number with the Ministry of Finance.
• The fixed assets or trading assets intended to be revalued.
• The report of the expert or accounting office that carried out the revaluation.
• Revaluation / reassessment statement, Article 45 of the Income Tax Law.
• A25 for partnerships.
• SH25 for capital companies.
• F25 for individuals.

Exemption of Betterment Profit

Betterment profit is exempt from income tax in each of the following cases:

1. If it remains separated in a special account on both the assets and liabilities sides, meaning it does not become part of the asset value and cannot be depreciated.
2. If it is used to cover losses that are still shown in the balance sheet.
3. If these profits are reinvested in accordance with Article 5 bis of the Income Tax Law.

Exceptional Reassessment, Article 45 bis of the Income Tax Law

The provisions of exceptional reassessment are no longer applicable after the 2007 business year.

Natural and legal persons required to keep regular accounting records pursuant to legal or regulatory texts may, once only, carry out an exceptional reassessment of fixed asset elements, including shares, debt securities, and company shares, as well as real estate and fixed assets, whether they are fixed assets or trading assets, in order to correct the effects of monetary inflation resulting from the decline in the exchange rate of the Lebanese pound against foreign currencies and from the change in the value of such real estate and fixed assets since the 1975 business year.

The exceptional reassessment covers all fixed assets, real estate, and fixed assets referred to above in the previous paragraph that are recorded in the institution’s books before January 1, 1994, provided that the value does not exceed the market price.

Positive differences resulting from the reassessment are subject to a new proportional tax at the rate of 1.5% of the value of such differences, and these differences are exempt from any other income tax regardless of their later use.

Income tax rate: Positive differences resulting from reassessment are subject to a proportional tax at the rate of 1.5% of the value of such differences.

Deadline: The tax on the differences is paid in cash within a period not exceeding one month from the date of reassessment.

Taxpayers subject to the fixed-profit or estimated-profit method may benefit from the reassessment provided for in this article if documents exist that allow the reassessment of fixed assets, real estate, and fixed assets, whether they are fixed assets or trading assets.

In all cases, for banks, these provisions may not conflict with the Code of Money and Credit and all regulatory and implementing texts issued by Banque du Liban.

The procedures for applying this article are determined by decrees issued by the Council of Ministers upon the proposal of the Minister of Finance.

Forms and Attached Documents

A reassessment request addressed to the competent financial unit, including:

• The applicant’s name, full address, and registration number with the Ministry of Finance.
• The fixed assets or trading assets intended to be reassessed.
• The report of the expert or accounting office that carried out the reassessment.
• Revaluation / reassessment statement, Article 45 of the Income Tax Law:
  • A25 for partnerships.
  • SH25 for capital companies.
  • F25 for individuals.
• Income tax receipt for reassessment differences, S1 after tax payment.

Notes

• The approval request for reassessment must be submitted within one month from the date of the report of the office or expert who carried out the reassessment.
• The tax is paid when submitting the request according to the advance payment system.

Penalty

If assessment schedules are issued for the amount of the tax, the taxpayer must pay them within two months from the date of notification. Otherwise, a collection penalty of 1% per month is imposed on the unpaid tax, with any fraction of a month considered a full month.