SC Majzoub & Partners

VALUE ADDED TAX

Over the last two years, Lebanon has been preparing for the implementation of the Value Added Tax expected effective February 1, 2002.

The VAT |LAW| was approved by the Council of Ministers on the 7th of June 2001 and was ratified by the Parliament on December 5th 2001, and published in issue no 63, December 24 2001 of the official gazette.

The introduction of the VAT in Lebanon is based on several considerations.

On the one hand, VAT will contribute in reducing the deficit and containing the debt levels accumulated during the years of the war and the years thereafter, its implementation will help in ensuring continuous economic growth and financial and monetary stability.
On the other hand, the Lebanese tax system has traditionally relied heavily on import duties. Therefore, in its effort to implement its international and regional trade obligations (WTO, EU, Arab Trade Union�) which require the reduction of custom tariffs, Lebanon has to introduce an alternative broad base tax on consumption, which would play an important role in generating revenues.
The VAT is an indirect tax that is collected by the Treasury at the level of the business unit but paid by the buyer and ultimately by the consumer.

Because there is a wide list of exempted goods and services, the tax burden of the VAT varies depending on the level of consumption and the nature of the basket of goods and services consumed.

The Value Added Tax, which is already implemented in more than 125 countries, is the best among the indirect tax alternatives.
The VAT does not discriminate against investments.

The VAT constitutes the most important element of the tax reform undertaken by the Lebanese government since the end of the war in 1992.