Taxation

Tax Declaration

Tax Period Used for Filing

The applicable tax period is the calendar quarter. The calendar year is therefore divided into four tax periods:

First period: from 1 January to 31 March.
Second period: from 1 April to 30 June.
Third period: from 1 July to 30 September.
Fourth period: from 1 October to 31 December.

Submitting Tax Returns

Tax returns must be submitted exclusively by post through LibanPost on a quarterly basis, within 20 days after the end of the calendar quarter. The return must be submitted using Form Q1-2, which the Directorate sends to the taxable person before the end of each quarter.

Reference: Decision No. 424/1 dated 25 March 2006 (Procedures and Conditions for Sending Tax Returns and Statements by Post).

Extension of the Filing Deadline

The tax administration may extend the deadline for filing a tax return by no more than one month, based on a written request submitted by the taxpayer when substantial reasons justify the extension.

The request must be submitted at least ten days before the original filing deadline. The tax administration must decide on the request at least five days before that deadline.

Failure by the tax administration to decide on the request is considered an implicit rejection. The administration's decision in this regard is not subject to review.

Reference: Article 39 of Law No. 44 dated 11 November 2008 (Tax Procedures Law) .

What Is the Right to Deduct?

The right to deduct allows a taxable person to deduct, from the VAT due on sales, the VAT incurred as part of the cost of those sales.

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What Is the Partial Right to Deduct?

When a taxable person carries out supplies of goods or services of which only some grant the right to deduct, the taxable person may deduct the portion of VAT corresponding to those qualifying transactions.

Reference: Article 31 of Law No. 379/2001 (Value Added Tax Law) .

Calculating the Deduction Ratio

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

Reference: Article 12 of Decree No. 7336 dated 31 January 2002 and its amendments concerning the right to deduct .

Persons Who Do Not Benefit from the Right to Deduct

Persons who are not subject to VAT.
Persons outside the scope of VAT.
Persons carrying out VAT-exempt transactions.
Persons carrying out activities subject to special treatment, such as jewellery trading.

Reference: Article 4 of Decree No. 7336 dated 31 January 2002 (Right to Deduct) .

How the VAT Deduction Is Applied

The right to deduct is applied by subtracting the total deductible VAT from the total VAT due from the taxable person, meaning the VAT collected, for a given tax period.

Any excess deductible VAT is carried forward to subsequent tax periods until it is fully used or refunded. When the VAT collected exceeds the deductible or paid VAT, the taxable person must pay the difference to the tax administration.

When VAT collected is greater than VAT paid: VAT is payable to the tax administration.
When VAT paid is greater than VAT collected: there is an excess amount that may be deducted or refunded.

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What Is Excess Deductible VAT?

When the deductible VAT at the end of a calculation period exceeds the VAT due, the excess amount is carried forward to the following period.

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Refunds

After the end of the second calendar quarter, or at the end of any calendar year, a taxable person may request a refund of the excess deductible VAT balance calculated at the end of that year.

When VAT paid exceeds VAT due, the tax administration may apply the excess amount against other taxes owed by the taxpayer, provided that the taxpayer is notified.

The excess amount is first allocated to withholding taxes and VAT, followed by other outstanding amounts. When amounts are due for more than one tax period, the excess is allocated first to the oldest tax obligation.

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

Interest at a rate of 0.75% per month is calculated on amounts paid in excess of the VAT due, beginning after the applicable 45-day or 30-day period has expired. Any fraction of a month is treated as a full month.

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Amending a Periodic Tax Return

If a taxpayer discovers that a return submitted to the tax administration contains an error or omission resulting in additional tax, the taxpayer may submit an amended return explaining the error or omission and pay the outstanding tax and any related charges, where applicable.

The amendment must be made before the date on which an audit assignment is issued for the tax period covered by the return and within the applicable limitation periods.

The correction request must be submitted using Form Q2-4 .

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Special Cases

Jewellery Sector

Jewellery includes articles made of gold or other precious metals, as well as articles incorporating precious or semi-precious stones.

VAT on the supply of jewellery is calculated on the basis of the profit margin. For further details, please consult the jewellery guide.

Reference: Decree No. 7338 dated 31 January 2002 (Jewellery) .

Non-Residents

At least one week before carrying out any taxable transaction, a non-resident person must appoint one representative for all activities that the person intends to conduct in Lebanon.

The representative is jointly liable with the non-resident principal for financial obligations toward the tax administration. The administration may pursue the representative through legal means to collect amounts owed by the non-resident principal.

If the non-resident person does not appoint a representative in Lebanon, the contracting party becomes responsible for paying the tax and any related penalties, where applicable. The contracting party must withhold these amounts from the payment due and remit them using a special payment notice.

A representative is not required for services performed from outside Lebanon and received by a person residing in Lebanon. In this case, the Lebanese resident is responsible for paying VAT on those services through the periodic return when registered for VAT, or through the special return, Form Q5-2 .

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