Lebanon’s fiscal year runs from January to December and is based on the Gregorian calendar. With the special approval of the local tax authorities, companies may, however, use their own accounting year.
Taxes on business income in any given year are based on the profits of the previous financial year.
Tax returns by artificial persons (entities) must be filed by 31 March of the year following the year of income. Tax returns by capital companies must be filed by 31 May of the year following the year of income.
Submission deadlines of annual declarations for institutions that are exempt from income tax (other than companies) are as follows:
- Before 1 February for institutions adopting the cash basis of accounting.
- Before 1 April for institutions adopting the accrual basis of accounting and for representative offices that represent non-corporate entities.
- Before 1 June for representative offices that represent corporations.
If taxpayers fail to submit a tax return, realisation penalties will be due.
Payment of tax
The same deadlines for tax returns apply for tax payments.
If taxpayers fail to make payment, late payment penalties will be due.
Tax audit process
The most common ways for the tax authorities to select companies for tax audits are the size of the company, the type of business, and certain risk assessment measures.
Tax audits typically cover a single type of tax.
In a typical situation, a tax audit is likely to take less than one year from first information request to substantive resolution.
Statute of limitations
The tax administration has four years to collect its rights. The period is calculated from the end of the year that follows the current business year.
The taxable person may request the refund of excess tax within four years starting from the end of the year where the refund right was created.
The tax administration can exceed the statute of limitations in cases where a profit or revenue has been proven by a court order, arbitration, or inheritance clearance. The extension is limited till the end of the calendar year following the end of the year in which the tax administration was notified of such event.
The statute of limitations as per the Lebanese Tax Procedures Law is five years (e.g. 2017 will expire on 31 December 2022). However, due to the economic and financial crisis, as well as the lockdowns enforced by the pandemic's spread, the Lebanese Parliament approved and issued several laws suspending certain legal tax liabilities and deadlines. Such laws were supported by additional application instructions and decisions issued by the MoF. As such, the MoF circulated an internal memo where it highlighted the deadlines for statute of limitations calculation purposes taking into consideration the above-mentioned suspensions.
Under the statute of limitations, a company should keep its accounting books and documentation for ten years.
Declaration of ultimate beneficial ownership
As per the Lebanese MoF, the M18 form declaration of the ultimate beneficial owners of any Lebanese entity should be declared, pursuant to the Decision No.1472/1, dated 27 September 2018, where the deadline is 31 May of each year. For the M18 form of 2019, the deadline is extended to 31 December 2020.
Topics of focus for tax authorities
Lately, several topics have been of interest to the tax authorities in Lebanon, including transfer pricing, payments of royalties and management fees to non-resident parties, provisions, and employee compensation.