Lebanon Businessnews News
 

Deposit tax proposed
by Ministry of Finance
2021 draft budget mimics last year’s. Slew of tax breaks
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The Ministry of Finance (MoF) has proposed a one-time tax on deposits that were exceeding $1 million on October 1, 2020.

The proposal is part of the draft budget that MoF has sent to the Council of Ministers for approval. The draft budget will also need to be ratified by Parliament to become law. It would be subject to modifications by these two bodies.

USD deposits or equivalent in foreign currencies
$1 million - $20 million 1 percent
$20 million - $50 million 1.5 percent
More than $50 million 2 percent

LL deposits
LL1.5 billion - LL30 billion 1 percent
LL30 billion – LL75 billion 1.5 percent
More than LL75 billion 2 percent

The draft budget forecasts LL18.3 trillion in expenditures (equivalent to $12 billion at LL1,507.5 exchange rate) and a budget deficit of 26 percent. This presumes additional borrowing of LL4.7 trillion ($3.1 billion).

Excerpts from proposals in the draft budget
Non-Lebanese purchasers of a housing unit exceeding $350,000 in Beirut, or $200,000 outside the capital, will be granted the right to obtain a residency permit. The decision excludes Syrian and Palestinian refugees.

LL1.5 trillion ($1 billion) in subsidy to Electricité du Liban (EDL) earmarked for fuel purchases.

LL200 billion ($133 million) to combat the Covid-19 pandemic.

LL100 billion ($67 million) aid for reconstruction of damages caused by the Port Explosion.

The draft has postponed payments for one year relating to a number of programs including new public buildings, expropriation compensations, and a number of infrastructure projects.

It allows payment in installments of all due taxes for the years 2019-2020 free of penalties and interest as well as a number of other tax settlement schemes. It has forgiven penalties on tax violations that were committed since October 2019 in full, and at the rate of 90 percent for those committed before that time.

Industrial exports will enjoy a 50 percent income tax break.

Startup companies, whose employees are at least 80 percent Lebanese, will enjoy an income tax holiday for their first three years. Hospitality and industrial companies will enjoy an 80 percent income tax relief for the years 2021-2023.

The government will determine priority areas for economic development. Commercial and industrial companies in those areas that will start operation after the passage of the draft law will enjoy a ten-year income tax break, a break on building construction fees, and a 50 percent discount on vehicle registration. A company can benefit from these advantages if it has a capital of $5 million or more, and employs at least 50 Lebanese people, representing at least 85 percent of its total workforce.

Cash and non-cash payments to employees, paid in the years 2020-2022 as compensation for hardship, will be exempt from income tax.

Tax on interest on deposits has been set to ten percent for those earning less than three percent interest rate on USD deposits and five percent on LL deposits. Larger amounts will be taxed at 30 percent. Amounts deposited after the publishing of this law will be exempt of tax on interest.

Companies and establishments that were forced to close during official lockdowns mandated by the Covid-19 pandemic will enjoy a 50 percent income tax holiday.

Companies with a capital of more than LL1.5 billion in combined fixed assets that merge will enjoy a three-year tax holiday, up to an amount equivalent to their merged capital, except for banks and financial institutions.

The cap on deposit insurance has been increased to LL300 million or its equivalent in foreign currencies.
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Date Posted: Jan 28, 2021