Lebanon Businessnews News

Tax declarations to be used
as basis for obtaining loans
Central Bank’s decision

aims to fight fiscal evasion

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Banks and financial institutions are allowed to lend or renew credit facilities to businesses only against duly audited financial statements that are identical to those submitted to the tax authorities, according to a new circular by the Central Bank (BDL).

The decision applies to enterprises or companies whose annual turnover is equal to or greater than LL1.5 billion ($1 million).

The banks’ assessment of the credit worthiness of a business should be based on the financial statements that fulfill these conditions and that include the balance sheet, the income statement, and the cash flow statement, BDL said.

Banks and financial institutions whose current lending portfolio is not fully in line with the new regulation will be given until the end of September 2020 to rectify the situation. They are required to ask businesses that have not amended their files to immediately settle their loans otherwise they must deposit an equivalent amount with BDL. This deposit will not generate any interest and will be frozen until the adjustment takes place.

The move aims put the practice of some businesses that hold two different accounting records for the purpose of tax evasion to an end. Where this practice takes place, an ‘official’ record is submitted to the tax authorities while the other, the accurate record, is used for the business’ own managerial purposes. Businesses that hold double records usually do not issue invoices for transactions that take place outside the official accounting records.
Reported by Shikrallah Nakhoul
Date Posted: Jul 22, 2019
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