Category: insights

Law No 42 of November 24, 2015 

On Declaring the Cross-Border Transportation of Money

Article 1:

For the purpose of implementing the provisions of this Law, the following expressions shall mean:

1- Currency/ Negotiable Instruments:

– Banknotes and coins in circulation, whether in Lebanese pound or any other currency.

– Commercial papers, securities, means of payment and other types of negotiable movable assets, in case they are not made out or endorsed to the benefit, or to the order of a designated payee (drawing bonds, promissory notes, checks, payment orders, bearer shares, prepaid cards, etc.).

2- Declaration: to provide detailed information on the owner of the Currency/Negotiable Instruments being transported, the person transporting them, the recipient party, their value, type, origin and intended use, the routes and modes of transportation.

3- Disclosure: to provide detailed information, at the request of the Customs authorities, on the owner of the Currency/Negotiable Instruments being transported, the person transporting them, the recipient party, their value, type, origin and intended use, the routes and modes of transportation.

4- False declaration/false disclosure: to provide false or incomplete information on the value  of Currency/Negotiable Instruments transported across borders or other information which is asked for in the declaration/disclosure requested by the authorities; or failing to make a declaration/disclosure as imposed / required .

Article 2:

All persons transporting physically, in or out of the border, Currency/Negotiable Instruments on them, in their accompanying luggage, or by any other means, by containerized cargo or any other means of shipping, or through the post, must submit a written declaration thereon to the Customs authorities, whenever the value of the Currency/Negotiable Instruments exceeds the amount of USD 15,000 or its equivalent in other currencies, by filling in a form that includes the complete relevant information requested.

As an exemption to the preceding paragraph, a disclosure thereof to the Customs authorities may be sufficient without the need for the declaration, when the Currency/Negotiable Instruments are being physically transported outside Lebanon and their value exceeds the amount of USD 15,000 or its equivalent in other currencies, according to the implementation rules mentioned in Article 6 below to be issued in relation to this Law.

Article 3:

Customs authorities are empowered to search natural persons, inspect their luggage and the transportation modes referred to in Article 2 above, in order to check the accuracy of the information declared or disclosed.

In case a false declaration/disclosure is detected or suspected , or in case of non-declaration/non- disclosure, or in case of suspecting the transportation of illicit Currency/Negotiable Instruments, within the meaning of Article 1 of amended Law No 318/2001, the Customs authorities are empowered to request additional information about the transported Currency/Negotiable Instruments, to seize them and prepare relevant seizure records, after notifying the Public Prosecution of the Court of Cassation. The latter shall, within a maximum period of two days, take the appropriate decision in light of the available data, as to whether maintain the seizure or free the said Currency/Negotiable Instruments, and accordingly notify its decision to the «Special Investigation Commission» established pursuant to amended Law No 318 of April 20, 2001 on Fighting Money Laundering and Terrorist Financing.

Customs authorities shall promptly notify the «Special Investigation Commission» of the above-mentioned seizure records.

Article 4:

Customs authorities shall establish an electronic database that has the necessary safety and confidentiality specifications. All the declarations, disclosures, records, files and official documents shall be archived in the database in a way that clearly distinguishes between the declarations and disclosures referred to in Article 2 of this Law and those mentioned in Article 3 thereof.

The Special Investigation Commission shall be empowered to directly access the declarations, disclosures, records, files and official documents mentioned in Article 3 of this Law.

Article 5:

Customs authorities shall impose on any person making a false declaration/disclosure or failing to make a declaration/disclosure, a fine not exceeding ten million Lebanese pounds, not precluding  any criminal prosecution as specified in the provisions of above-mentioned Law No 318.

Article 6:

The Customs Higher Council shall issue, within three months from the enactment date of this Law, and in collaboration with the «Special Investigation Commission», a decision pursuant to which it shall set the implementation rules of the provisions of this Law, notably the preparation of the declaration form mentioned in Article 2 thereof.

Article 7:

The detailed implementation of the provisions of this Law shall be set, where applicable, through Decrees taken by the Council of Ministers, upon a proposal made by the Minister of Finance on the basis  of  the  preparation  work  done  by  the  Customs  Higher  Council  in  collaboration  with the

«Special Investigation Commission» specified in Law No 318/2001.

Article 8:

This Law shall enter into force upon its publication in the Official Gazette.

Chapter One

General Terms

Section One: Scope of Application of the Law

Article One: Scope of Application of the Law

Right Holders and Operators, as defined in Law No. 132 dated 24/8/2010 (Offshore Petroleum Resources Law), are subject to the provisions of this Law along with, and except for the provisions exclusively related to these companies, other taxpayers including Contractors, Subcontractors, and Operators not being Right Holders as defined in Article 66 of Law No. 132/2010 and the employees as stipulated in Article 11 of this Law.

Provisions of the applicable tax laws are applied on all taxpayers referred to in the first paragraph regarding the activities they perform on Lebanese territories and maritime Waters as defined in Law No. 132 dated 24/8/2010 (Offshore Petroleum Resources Law) in all that do not conflict with the provisions of this Law.

Section Two

Definitions

Article Two: Definitions

Definitions used in Law No. 132/2010 and in Law No. 44 dated 11/11/2008 (Tax Procedures Law) are to be adopted in the context of application of the provisions of this Law along with those used in the applicable laws and regulations governing Petroleum Activities in Lebanon in addition to the following definitions:

“Affiliated Company”: is a company that controls the legal person to which it is directly or indirectly related to, or that is subject, whether directly or indirectly, to the Control of this latter, or that is subject with the latter, whether directly or indirectly, to the Control of a third company.

“Associate Company”: is the company in which a legal person has a significant influence over and cannot be considered as an Affiliated Company or a business partner to that legal person.

“Related Parties”: A related party is considered any natural or legal person related to any other natural or legal person subject to the provisions of this Law and that with respect to the following persons:

1. Any person or person’s family members that are close to the legal person who is subject to this Law, in case the following conditions are met:
2. In case this person controls or jointly controls the legal person subject to this Law;
3. In case this person is a member of the key management personnel of the legal person subject to this Law or of its Parent Company.
4. Any legal person related to the legal person subject to the provisions of this Law in case the following conditions are met:
5. In case the legal person and the legal person subject to the provisions of this law are members of the same Group (this includes the Parent Companies, Affiliated Companies and Associate Companies);
6. In case the legal person is an associate of the legal person subject to the provisions of this Law or is in a joint venture with the legal person subject to the provisions of this Law;
7. If the legal person is controlled or jointly controlled by the person identified in paragraph 1;
8. If the natural person, as identified in paragraph 1-A, is a member of the key management personnel of the legal person or its Parent Company.

“Control”: The Control of a company means the ownership of a majority of the voting rights of the said company or the power to appoint the majority of the board of directors or similar management body.

“Parent Company”: is the company that owns sufficient voting shares in another company to control the management and the operations through the influence or election of its board of directors whereby the second company is considered a subsidiary of the parent company.

“Agent”: the legal or natural person residing in Lebanon that can be both dependent and independent of the company it’s representing but has, in both cases, sufficient authority to carry out activities that result in rights or liabilities to the said company.

“Contractor”: the natural or legal person that is contracted by the Right Holders or the Operators to carry out any of the Petroleum Activities related to or resulting from the Exploration and Production Agreements.

“Subcontractor”: the natural or legal person who supports the Contractor in carrying out any part of the Petroleum Activities resulting from the related Exploration and Production Agreements or any related activities.

“Resident”: A Resident in Lebanon is considered:

1. Every natural or legal person carrying out the execution of operations or services in Lebanon for more than 183 days in a continuous or intermittent manner during any twelve consecutive months.
2. Every legal person established under the applicable laws of Lebanon. 3. Every natural person that:

      –  Has a place to practice the profession in Lebanon;

      –  An employee or laborer for any natural or legal person;

    – Has been in Lebanon for more than 183 days, in a continuous or intermittent manner,  during any 12 consecutive months, or has had at his disposal a permanent domicile in Lebanon that represents his place of residence or his family’s usual place of residence.

The following are excluded from the 183 days’ period that the natural person spends in Lebanon in case he is present:

a. Exclusively for the purpose of traveling from one country to another;

b. Exclusively for undergoing medical treatment.

“Permanent Establishment”:

1. A Permanent Establishment is considered as every fixed place of business in Lebanon through which economic activity is wholly or partially carried out within the Lebanese territories and maritime Waters as defined in Law No. 132 dated 24/8/2010 (Offshore Petroleum Resources Law).
2. The term “Permanent Establishment” specially includes the following: A. A place of management;
3. A branch; C. An office; D. A factory;
4. A workshop;
5. A farm or any cultivated lands;
6. A mine, an oil or gas well, a quarry or any other place of Exploration or extraction of natural resources.
7. A building site or construction or assembly or installation or supervisory activity related to it but only if its activities continue for a period or periods amounting to a total of more than 183 days during any 12 consecutive months.

“Escrow Account”: is the bank account established by a Right Holder to cover the cost of planning, preparation and implementation of a plan for cessation of Petroleum Activities and decommissioning of Facilities.

“Arm’s Length”: a principle based upon which the evaluation of the transactions that occur between Affiliated companies and Related Parties is performed as if they were completed between unrelated companies and under free competitive conditions.

“Ring Fencing”: is the principle that does not allow for an offsetting between taxable income derived from a particular Exploration and Production Agreement and the deductible charges incurred in another Exploration and Production Agreement.

“Capital Expenditures”: for tax purposes, Capital Expenditures means the funds paid for the acquisition of new Fixed Assets or performing improvements that extend the life or increase the productivity of existing Fixed Assets which are capitalized and depreciated in accordance with the applicable laws.

“Exploration Costs”: for tax purposes, Exploration Costs means all the direct and indirect costs attributable to the Exploration and appraisal activities that are conducted throughout the Exploration Phase and incurred by Right Holders and Operators throughout the Exploration and Appraisal phase during the Petroleum Exploration, including the following:

–    Surveys and studies for Exploration purposes;

–    Core hole drilling and water well drilling as part of Exploration operations;

–  Labor, materials and services used in drilling wells with the object of finding new Reservoirs or for the purpose of appraising the extent of Reservoirs already discovered provided such wells are not completed as Production wells;

–     Facilities  used  solely  in  support  of  Exploration  together  with  purchased geological  and geophysical information;

–    Expenditures supporting Petroleum Activities related to the Exploration Phase;

–    General and Administrative Expenses allocated to Exploration;

–    Interest due on debt and loans incurred during the Exploration Phase.

–    Development Costs: for tax purposes, Development Costs means all expenditures incurred during the Development process of the Petroleum Activities, including the following:

–   Costs related to appraisal activities conducted during the Development Phase;

–   Drilling wells which are completed as Production wells and wells for purposes of Production from a Reservoir already discovered regardless of whether these wells are dry or producing;

–   Completing Wells by way of installation of casing or equipment or otherwise after a Well has been drilled for the purpose of bringing the Well into use as a Production Well.

–   Intangible drilling costs such as labor, consumable Material and services having no salvage value which are incurred in drilling and deepening of Wells for Production purposes;

–   Geological and geophysical information acquired in connection with Development operations;

–   The costs of sites, Facilities, and appurtenant equipment used in Production;

–   Engineering and design studies for Facilities;

–   Expenditures in support of Petroleum Activities related to the Development Phase;

–   General and Administrative Expenses allocated to Development;

–   Interest due on debt and loans incurred during the Development Phase.

–  Operating Costs: for tax purposes, Operating Costs means all expenditures incurred for conducting Petroleum Activities that are not included in Exploration Costs and Development Costs, including the following:

–   Operating, servicing, maintaining and repairing wells for Production and all Facilities completed during Development and Production;

–  Planning, producing, controlling, measuring and testing the flow of Petroleum and collecting, gathering, treating, storing and transporting the Petroleum from the Reservoir to the point of delivery as stipulated by the Development and Production plan approved by the Council of Ministers;

–    Costs of Escrow account;

–    Expenditures in support of Petroleum Activities related to the Production phase;

–    General and Administrative Expenses not allocated to the Exploration Costs or Development Costs;

–    Interest due on debt and loans incurred during the Production phase.

–   General and Administrative Expenses: for tax purposes, General and Administrative Expenses means:

– Main offices, field offices and administrative costs that are incurred within the Lebanese territories and maritime Waters that include supervisory, management and accounting activities, and employees and laborers’ services;

– General administrative costs paid to non-resident Affiliated Companies for the management of the Petroleum Activities’ services that include information technology services, supervision and guidance, financial management services, legal and accounting services, and the employees and laborers’ related services.

– “Recoverable Costs”: are the costs incurred by Right Holders and Operators during the execution of the Petroleum Activities, to the extent allowed by the Exploration and Production Agreement.

–  “Full Cost Method of Accounting”: is the accounting method that allows capitalization of Exploration Costs and Development Costs regardless of the commerciality of the Discovery.

–  “Fixed Assets”: tangible or intangible assets with an expected useful life of more than one year, presented in the statement of financial position of the Right Holder or the Operator or the Contractor or the Subcontractor.

–  “Tax Evasion”: Tax Evasion means every activity that results in the reduction or cancellation of taxes or deferring its entitlements’ date or an unlawful increase in the deductible or refundable tax amount.

Tax Evasion results from:

• Every act carried out by the taxpayer with the purpose of concealing revenue;
• Every act carried out by the taxpayer with the purpose of creating virtual expenses;
• Every act carried out by the taxpayer with the purpose of concealing actual act or agreement in order to reduce the tax due in principle on the actual transaction;
• Every transaction carried out by the taxpayer, which, although legal in the form, is essentially intended to evade the payment of the tax due in principle or to obtain unlawful tax

The transactions described in items 3 and 4 above are considered as the result of Tax Evasion when their value exceeds or falls below 10% of the fair market value of the transaction as they were made between independent persons and under full competitive terms compared with similar transactions at the date of the tax related activity.

–  “Thin Capitalization”: The company is considered to be in a Thin Capitalization state when its debt exceeds the value of its private equity capital.

For the purpose of applying this principle, the amounts invested by the Parent Company in its branch, as well as non-interest bearing loans granted by the Parent Company to an Affiliated Company or a branch, are considered part of private equity capital.

Chapter Two

Taxation System of Petroleum Activities

Section One: Income Tax on Petroleum Activities

Article Three: Basis of Calculating the Taxable Result

For purposes of calculating the taxable result, Right Holders and Operators must comply with the following:

1. Adoption of the Ring Fencing principle by Exploration and Production Agreement.
2. Adoption of the Full Cost basis of accounting in a manner that does not contradict with the provisions stipulated in the context of this Law.
3. Separation of costs and allocation of costs in accordance with the purpose for which these costs are incurred where all Exploration and Development Costs are considered as Capital Expenditures and Operating Costs are considered as operational expenditures. With regards to General and Administrative Expenses, the General and Administrative Expenses are regularly allocated to Exploration Costs, Development Costs and Operating Costs.
4. Adoption of the accrual basis of accounting in recording the accounting entries provided that this principle is also applied to other taxpayers being Contractors, Subcontractors and Operators other than the Right Holders.
5. Application of the ceilings set out in the paragraph related to deductible and non-deductible expenses on the costs and expenses before allocating the costs and expenses to Capital Expenditures and Operating Expenses.

Article Four: Calculation of Taxable Result

For the purposes of calculating the taxable income, Crude Oil and Petroleum other than Crude Oil are valued in accordance with the valuation method determined in the law 132/2010 and its implementation provisions.

The taxable result of a defined financial year for Right Holders and Operators is the total revenues derived from Petroleum Activities covered by the law 132/2010 after deducting all the allowable costs and expenses required in the performance of activities in that year provided that allowable costs and expenses satisfy the following conditions:

–  The allowable costs and expenses are necessary for the purpose of realizing the revenues;

–   The allowable costs and expenses are actual costs and supported by documentation;

–   The allowable costs and expenses do not increase the value of Fixed Assets used  in the Petroleum Activities.

The following proceeds and revenues are included in calculation of results:

–  The revenues generated from the sale or transfer of any benefit from the extracted Petroleum in accordance with the conditions stipulated in Article 40 of Law number 132/2010 and its implementation provisions.

–   The revenues derived from providing services.

–   The revenues generated by Petroleum Right Holders and Operators when they partially or fully farmed out their rights from the Exploration and Production Agreement.

–   The proceeds resulting from the use of the Facilities and intellectual properties.

–   The proceeds from insurance.

–   The gain on the difference of exchange.

–   The proceeds resulting from the distribution of excess funds from the Escrow Account.

–   The interest income.

–   The  amounts  collected  from  suppliers  and  manufacturers  or  their  Agents resulting from compensation for impurities in materials and equipment.

–   The gain resulting from the disposal of fixed tangible assets, intangible assets and financial assets.

–   The other exceptional income and debt waivers from creditors and shareholders.

–   The rebates that are granted subsequently and are considered as revenues.

Subject to the principles stipulated in Article 3 of this Law, the following costs and expenses are included in the calculation of the deductible expenses:

–     Operating costs, as defined in Article 2 of this Law, including:

1. The amounts paid as salaries and wages to employees and laborers, the benefits and other allowances that employees and laborers earn, representation allowances and the amounts paid as an end of service indemnity in accordance with the limits set by a decision issued by The Minister of Finance.
2. The contributions and expenses of the national social security fund, and end of service indemnity funds and medical insurance costs paid in favour of the employees and laborers.
3. The costs of the Escrow Account.
4. The General and Administrative Expenses provided that the ceiling for the general administrative costs paid to the Resident and non-resident Affiliated entities in Lebanon is 0.5% of the total annual Exploration, Development and Operating Costs as defined in Article 2 of this Law.

5. The interests and expenses paid related to the debts and loans arranged for conducting business in accordance with the Arm’s Length Principle.

– The depreciation and amortisation of the tangible and intangible assets including the Capital Expenditures which include the Exploration and Development costs accounted for based on fixed rates of the asset’s historical cost without adding the differences resulting from the revaluation operations. The principles of calculating these depreciation and amortisation and their application shall be determined by a joint decision issued by The Minister of Finance and the Minister of Energy and Water.

–     The fees collected by the State as stipulated in Law number 132/2010.

–     The costs of insurance.

– The costs of training employees, laborers and public sector employees as mentioned in the  legal provisions.

– All the taxes and fees imposed on the taxpayer except for the taxes stipulated in the first and second sections of the second chapter of this Law and of the Legislative Decree number 144 dated 12/6/1959 and its amendments (Income Tax Law).

–  The losses of raw material and the losses resulting from destruction, damage or write-off of   the assets, which are approved by the Petroleum Administration.

– The losses resulting from the disposal of assets subject to depreciation or amortization during the tax year.

–  The bad debts losses that are proven to be actually impaired after taking the necessary measures to collect them provided that the details of application of this clause shall be determined based on a decree issued upon a joint proposal by the Minister of Finance and the Minister of Energy and Water.

– The loss resulting from amounts paid to third parties as indemnification under the condition  that these losses are proven by documentation.

–  The negative difference of exchange.

– The provisions accrued to cover bad debt losses at bankruptcy declaration or to cover employees’ termination and work emergencies’ compensations.

The following are not considered as allowable tax-deductible expenses:

–   Capital interest.

–   Losses that affect the taxpayer due to the activities of institutions, branches, agencies, offices or others, located outside of Lebanon whether it is its Affiliate or Parent despite whether the affiliation is limited to supervision.

– Costs and expenses incurred abroad by the taxpayer on behalf of institutions, branches, agencies, offices or others, whether the taxpayer is its affiliate or its Parent.

– Interest due on debt and loans granted to the Right Holders and Operators in both of the following cases:

1. Interest due on the portion of loans and debt which exceeds one and a half times (150%) the related equity in the case of thin capitalization.
2. Interests due on the portion of loans and debt which exceeds 60% (sixty percent) of the Recoverable Costs balance that is approved by the Petroleum Administration.

The interests that are not tax allowable are calculated according to the above-mentioned two cases and the greater amount will be added back to the taxable result.

The details of implementation of this clause shall be determined by a decree issued based on a proposal by The Minister of Finance.

– Costs paid on a date earlier than the signature date of the Exploration and Production Agreements.

– Taxes stipulated in Sections 1 and 2 of the second chapter of this Law and in the Legislative Decree No 144 dated on 12/6/1959 and its amendments (Income Tax Law) as well as taxes and fees paid or due to a foreign country on income generated in Lebanon or for any other reason, as well as all types of fines.

Article Five: Deficit Carry forward

Right Holders and Operators can carry forward the deficit that occurred in a specific year to the subsequent years, provided that this deficit is recovered from the total realised profits in any of the subsequent years and the deficit or profit balance will remain subject to the legal provisions stipulated in this Law.

In case the taxpayer decides to waive all or part of his share in the Exploration and Production Agreement, then the assignee taxpayer is entitled to provide the assigned taxpayer with the option to benefit from part of the carry forward losses proportionally to the portion waived. Consequently, the assigned taxpayer has the right to offset the portion of carry forward losses from their future profits. In this case, the assignee taxpayer cannot benefit anymore from offsetting these losses against the profits generated in the subsequent years.

The details of implementation of this clause shall be determined by a decree based on a proposal by The Minister of Finance.

Article Six: Exceptions

Investments in financial instruments are not in the scope of this Law, including hedging and derivatives, and are subject to the provisions of Legislative Decree no 144 dated on 12/6/1959 and its amendments (Income Tax Law).

The details of implementation of this clause shall be determined through a decision issued by The Minister of Finance

Article Seven: Tax Rate

Right Holders and Operators are subject to a tax rate of 20% of the taxable result calculated in accordance with Article 4 of this Law.

Article Eight: Tax Revenue from Petroleum Activities

The destination of the income taxes imposed on the Right Holders and Operators shall be determined in the Law of establishing a sovereign wealth fund when issued.

Article Nine: Income from Movable Capital

1. A pre-qualified company, which has already been granted a Petroleum right that is related to the Exploration and Production Agreement in accordance with Article 12 of the Law 132/2010 (Offshore Petroleum Resources Law) and seeks to assign an Affiliated Company to sign the Exploration and Production Agreement (the Signing Affiliate), can establish the Signing Affiliate in Lebanon provided that the Signing Affiliate is subject to the provisions stipulated in the tender protocol of the licensing round.
2. The Signing Affiliate must be a joint stock company whose object permits the conduct of Petroleum Activities.
3. The Lebanese company established according to this Article, is exempted from Articles 78 and 144 of the provisions of the Code of Commerce in respect of the nationality of the shareholders and the nationality of the board of directors.
4. The exception mentioned in the preceding paragraph, in respect of Articles 78 and 144 of the Code of Commerce, is disregarded in the case that the company covered by the exception is no longer a Right Holder. The company is given six months to resolve its issues.
5. Right Holders and Operators must inform the Tax Administration about any direct or indirect, partial or full transfer of their shares or other rights within one month from its date of occurrence.
6. Gains resulting from the transfer of shares of the Right Holders and Operators are subject to movable capital tax and the gains resulting from the transfer of shares of companies that own direct or indirect contributions in the Right Holders and Operators are subject to movable capital tax based on the share of investment in non-movable properties or Petroleum rights in Lebanon from the total investment in the company whose shares are being transferred. The details of implementation of this clause shall be determined by a decree based on a proposal by The Minister of Finance.

7. Profits mentioned above are subject to the same commercial profits tax rate as stipulated in this Law.
8. Right Holders and Operators must declare any transfer of shares as discussed in paragraph six above and must pay the tax due on the seller within one month of its date of occurrence.
9. Right Holders, Operators, and taxpayers referred to in the first Article of this Law are still subject to the provisions of chapter three of the Income Tax Law and its amendments.
10. Amendments that are applied by the Tax Administration to the taxable result, and that directly or indirectly benefit the shareholders or Related Parties, or resulting from Tax Evasion stipulated in Article two of this Law are subject to the movable capital tax.

Article Ten: Withholding Tax at Source

1. Right Holders, Operators, Operators who are not Right Holders, Contractors and subcontractors must Quarterly declare the amounts due to non-residents and pay Quarterly any due tax within a period of 20 days from the end of each Gregorian Quarter based on the following:
2. Amounts that are due for buying materials:

• Amounts that are due for buying material that will be installed inside Lebanon, the installation costs are taxed based on 15% profit and 20% tax in case separated. However, if the installation costs were not separable, the total purchase costs will be subject to tax including the installation costs based on 15% profit and 20% tax.
• Amounts that are due for buying material delivered outside of Lebanon and do not include installation expenses; hence, no tax is charged.

1. Amounts that are due for providing services performed inside or outside Lebanon to the mentioned individuals, are taxed based on 50% profit and 20% tax.
2. As for the amounts due as interests, and even if related to the purchasing activity, these amounts are taxed at a rate of 10% over their full value based on the provisions of chapter three of the Income Tax Law.
3. Taxpayers that are referred to above must withhold tax unless the person whom they are dealing with and who works through a Permanent Establishment or is a Resident in Lebanon is registered with the Tax Administration.

As for the person who is a Resident in a country that has a double tax treaty with Lebanon, these taxpayers must withhold the mentioned tax on the amounts due to them, provided that the person requests the refund of the withheld tax based on a request submitted to the Tax Administration.

The details of implementation of this clause shall be determined through a decision issued by The Minister of Finance.

Section Two

Income Tax on Salaries and Wages

Article Eleven: Income Tax on Salaries and Wages

Income Tax on Salaries and Wages is applied on employees’ salaries, wages, indemnity benefits, public and private pensions and lifetime benefits received by employees and laborers employed by individuals working in the Petroleum industry or these individuals’ providers of services and materials, taking place on the Lebanese territories and maritime Waters according to the precise definition of these Waters in the Law No 132 dated on 24/8/2010 (Offshore Petroleum Resources Law).

The following is not subject to Income tax on salaries and Wages:

1. Pension salaries due according to legal provisions or a permanent comprehensive system for all employees and laborers approved by the Ministry of Labor.
2. Service termination indemnity due in accordance with the laws applicable in Lebanon. c. Lifetime benefits and temporary compensations due to the victims of work accidents.

Article Twelve: Deductible Benefits and Amounts

The following benefits and amounts are deducted from the taxable income on employees’ salaries and wages:

a. Amounts due to the pension fund, medical insurance fund and similar amounts supported by legal documents for employees and laborers not subject to the provisions of the Lebanese Social Security Law.

b. Compensations due for representation allowances.

c. Transportation and relocation allowances including travel expenses for business related trips.

d. Meal and clothing allowances due to performing the work.

e. Education grants, birth grants, marriage or death of a family member grants, provided that these grants fall under a comprehensive permanent system for all employees and laborers that is approved by the Ministry of Labor.

f. Amounts due in respect of the employee or laborer’s training, regardless of the location of the training, and when the purpose of this training is to enhance and develop the employee and laborer’s technical skills in the performance of assigned duties in Lebanon.

g. Amounts due in respect of obtaining visas, work permits and residence cards in Lebanon for the foreign employee or laborer and their family members in addition to the travel expenses from and to Lebanon related to the start or cease of employment in Lebanon.

The details for implementation of this article shall be determined through a decision issued by The Minister of Finance.

Article Thirteen: Payment of the Tax Imposed on the Employees and Laborers’ Income

1. The brackets and rates stipulated in Title II of Legislative Decree No 144 dated 12/06/1959 (Income Tax Law) are applied on the income earned by the employee or laborer after considering the deductions stipulated in the previous Article.
2. The employers must abide by all the obligations stipulated in Title 2 of Legislative Decree No 144 dated on12/6/1959 (Income Tax Law).
3. All rights and obligations of non-resident employers stipulated in Title 2 of the Income Tax Law are transferred to the Resident employee or laborer, and particularly, rights and obligations related to the submission of declarations and paying tax.
4. The Resident employer, who contracts a non-resident party to perform work or services in Lebanon executed by non-resident individuals, must declare and pay the tax imposed on these non-resident individuals’ salaries.

The details of implementation of this clause shall be determined through a decision issued by The Minister of Finance.

Section Three

Indirect taxes

Article Fourteen: Stamp Duty

All agreements signed by Right Holders and Operators are subject to a proportional stamp duty rate according to the provisions of Legislative Decree No 67 dated 5/8/1967 and its amendments (Stamp Duty), except for the Exploration and Production Agreements that are subject to a fixed stamp duty amounting to five million Lebanese Pounds for each copy.

The provisions of Legislative Decree No 67 dated 5/8/1967 and its amendments (Stamp Duty) remain valid on these agreements provided that these provisions do not contradict with this Law.

Section Four

Built Property Tax

Article Fifteen: Built Property Tax

Constructions, installations and fixations used to carry out Petroleum Activities in the maritime Waters, in accordance with the definition of these Waters in Law No 132 dated 24/08/2010 (Offshore Petroleum Resources Law), are exempted from the built property tax.

Section Five

Value Added Tax

Article Sixteen: Application of Value Added Tax

1. The delivery of goods or the provision of services that are subject to tax or exempted from tax with the right of deductions, that occur within the Lebanese territories or maritime Waters in accordance with the definition of these Waters in Law No. 132 dated 24/08/2010 (Offshore Petroleum Resources Law) and that are carried out by the individuals who practice Petroleum Activities or providers of services and materials to these individuals, shall be subject to Value Added Tax
2. Joint stock companies being Right Holders, and in accordance with Law No 132 dated 24/8/2010, may optionally request to be subject to Value Added Tax from the date of registration at the Ministry of Finance.
3. The activity of transporting Petroleum products outside the Lebanese territories and maritime Waters, in accordance with the definition of these Waters in Law No 132 dated on 24/08/2010 (Offshore Petroleum Resources Law), and provided that the Petroleum Administration has approved this exporting activity, is exempt from the Value Added Tax with the right of deduction.
4. Joint stock companies being Right Holders and Operators have the right to deduct the paid Value Added Tax incurred to perform the Petroleum Activities from the date of registration in the Value Added Tax and even prior to the generation of any revenues.
5. Right Holders and Operators are entitled to deduct all Value Added Tax payments made in order to design, purchase, construct, install, operate and maintain the machinery and equipment, even if these payments were made to build and develop the machinery and equipment and regardless of the materials used to manufacture or construct the machinery and equipment, including the materials that are usually used in the construction of buildings such as cement, steel and others.
6. All goods exempted from Custom Fees, as stipulated in Article 21 of this Law, imported by the Right Holders, Operators or their Agents for the use in Petroleum Activities, are also exempted from the Value Added Tax.
7. The operations taking place between Right Holders and Operators that fall directly within the Exploration and Production Agreement and that only cover the distribution of expenditures, are not subject to Value Added Tax and do not require the issuance of invoices to support this type of operations. These operations only require the issuance of the monthly statements of account by the Operators while the services exchanged between Right Holders are subject to the provisions of the Value Added Tax Law. Right Holders and Operators also have the right to exercise the right of deduction based on the monthly statements of account issued each proportionally to their respective shares.
8. Right Holders and Operators are the legal representatives for each non-resident person whose cooperation with Right Holders and Operators leads to the execution of any transaction involving delivery of goods or services on the Lebanese territories or maritime Waters (in accordance with the definition of these Waters in Law No 132 dated 24/08/2010 (Offshore Petroleum Resources Law)), disregarding the value of these transactions. Right Holders and Operators using a service of a non-resident party on the Lebanese territories or maritime Waters (in accordance with the definition of these Waters in Law No 132 dated 24/08/2010 (Offshore Petroleum Resources Law)), must declare the tax payable on this service regardless of its value and pay it to the Tax Authorities in accordance with laws and regulations.
9. Right Holders and Operators have the right to submit a semi-annual refund request of the deductible tax surplus balance even if no revenues were generated, and the Tax Authorities shall decide on this request and pay the amount approved to be redeemed within a period of four months from the date of the request submission, otherwise interest will be charged at an annual interest rate equivalent to the rate on six-month sovereign treasury bills.

Section Six

Tax Evasion

Article Seventeen: Anti-Tax Evasion

1. The competent Tax Department in the Ministry of Finance has the right, in the existence of one of the Tax Evasion cases as defined in Article 2 of this Law, to take all or some of the following measures:

a. Application of the Arm’s Length standards to a deed or an economic event where the taxpayer has adopted different standards;

b. Reclassification of the transaction where the form of this transaction does not reflect its economic substance;

c.  Adjustments to the amounts which may affect the amount of the tax due and the determination of their actual value;

d. Adjustments to the amount of the tax due on the Taxpayer or any other parties involved in the transaction.

2. The taxpayer must keep the documentation that support the Arm’s Length pricing method used. These documentation must be presented to the competent Tax Department upon request.

3. The Ministry of Finance shall inform the Petroleum Administration of the measures taken.

Section Seven

Tax Obligations

Article Eighteen: Tax Obligations on Right Holders and Operators

These companies must:

1. Submit a description of the applied allocation procedures.
2. Submit their tax declarations for all types of taxes on templates prepared by the Ministry of Finance.
3. Subject to the provisions of Article 8 of this Law, maintain the accounting records, submit the declarations and pay the taxes in United States Dollars.
4. Submit the income tax declarations and the auditor’s report to the competent Tax Department before the thirty first (31st) of May of the following fiscal year or within a five months’ period from the end of the fiscal year followed by these companies.
5. Settle Quarterly advance payments for the income tax on profits within a period of 20 days from the end of each Quarter.

The details of implementation of this clause shall be determined through a decision issued by The Minister of Finance.

Section Eight

Fines

Article Nineteen: Fines

1. Tax violations committed by Right Holders and Operators remain subject to the fines stipulated in Law No 44 dated 11/11/2008 and its amendments (Tax Procedures Law).
2. Subject to the provisions of clause 1 above, Right Holders and Operators which do not inform the Tax Administration about the information stipulated in Article 9 – clause 5, are subject to a fine of five million Lebanese pounds.
3. Subject to the provisions of clause 1 above and in Tax Evasion cases specified in this Law, the fine stipulated in Article 110 of the Law No 44 dated 11/11/2008 and its amendments (Tax Procedure Law) concerning incorrect tax declarations is substituted with the following fine:                                    For each person that declares a tax which is less than the tax due is subject to a fine that is equal to three hundred percent (300%) of the additional tax relevant to the Tax Evasion provided that the minimum penalty is not less than 100,000,000 L.L. (one hundred million Lebanese Pounds).

4. The minimum limit for fines during the relevant tax period is applied in the event of a loss carried forward related to income tax or a balance carried forward related to the value added tax.
5. All fines due on the Right Holders and Operators are imposed in United States Dollars.

Section Nine

Various provisions

Article Twenty: Various Provisions

– In case of Affiliated Companies, the Parent Company is jointly and severally responsible for  the applicable taxes on the Right Holders and Operators.

– Every Right Holder or Operator is considered a taxpayer for his taxable activities in accordance with the laws in force, and there are no tax liabilities towards the other Right Holders.

– The activities of the Right Holders and Operators which are not related to the Petroleum Activities remain subject to the provisions stipulated in the applicable tax laws other than this Law.

Chapter Three

Other provisions

Section One: Customs Duties

Article Twenty One: Exemption from Customs Duties

1.Custom Law and its amendments are applied in what does not conflict with the provisions mentioned below.

2.Equipment, machinery, tools, vehicles, spare parts and materials, that do not have equivalence in the national Production and that are imported by each Right Holder or Operator or their Agent to be used in the Petroleum Activities or to be re-exported, are exempted from customs duties including the minimum duty and the internal consumption duty. These goods shall be specified in accordance with the suggested lists by the Petroleum Administration (that includes the Harmonized System Codes for goods) provided that these lists are approved by The Minister of Finance after seeking the opinion of each of the Ministry of Industry and the Supreme Council for Customs.

3.The operations of importing household appliances, clothing, personal effects held for personal use by the foreign employees working for the Right Holder or Operator in Lebanon, or by their families are exempted in accordance with the Customs Law particularly Article 316.

4. The details of implementation of this clause shall be determined through a decision issued by the Supreme Council for Customs.

5. Except for that, it is subject to the temporary admission as specified in Article 282 of the Customs Law.

Article Twenty Two: Administration of Documentation on Import, Export and Re-export

Imports and exports operations shall be performed based on customs’ records that are specific to these operations accompanied with all required documents and documentation in accordance with the rules.

Customs Administration has the right to request to present the documentation that it considers appropriate to prove that the goods imported or re-exported will be used or have been used for Petroleum Activities.

Article Twenty Three: Transfers and Disposals

1. Where pursuant to the provisions of Article 21 of this Law, goods that were exempted upon import, shall not be sold, assigned, transferred, leased or have their objective of use changed in Lebanon only after acknowledging the Custom Administration and after payment of customs duties in accordance with the goods’ condition and their value on the date of transfer. The beneficiary of the exemption shall not deliver these goods to other parties only after completing all customs related procedures.

2.The imported goods that were exempted from customs duties in accordance with the provisions of Article 21 of this Law and that are to be disposed of for nil value (to be written off from books at the end of its useful life) will be either re-exported or destroyed based on the stakeholders’ consensus with the approval and supervision of the Customs Authorities and specialized parties in accordance with the statutory rules, if the destruction does not harm the environment after payment of the required due fees as scrap.

3. Amounts of the customs duties are calculated pursuant to the standards set forth in the Customs Law.

Article Twenty Four: Social Security

The employer is not required to pay any contributions to the National Social Security Fund on behalf of the foreign employees and laborers working for him and who do not benefit from the contributions provided by the National Social Security Fund in accordance with the provisions of clause 2 of the third paragraph of Article 9 of the Social Security Law.

However, Lebanese employees and the other foreign employees and laborers, not included in the provisions of the paragraph above, shall remain subject to the provisions of the Social Security Law, accordingly the employer is required to pay the contributions to the National Social Security Fund.

Section Two

Final Provisions

Article Twenty Five:

The Ministry of Energy and Water shall prepare every four months a report on the progress of petroleum activities and submit it to the Parliament.

Article Twenty Six: Details of Application of this Law

The details of implementation of this Law, concerning the Articles whose details of application were not identified by the specialized source, shall be determined based on decrees issued by the Council of Ministers upon the proposal of The Minister of Finance.

Article Twenty Seven: Entry into Force

This Law shall enter into force immediately upon publication in the Official Gazette.

٢٠١٦ ١٠/ ٢٧/ تاريخ ٥٥ رقم قانون

تبادل المعلومات لغايات ضريبية

مادة وحيدة:

أولاً: يهدف هذا القانون الى

– تطبيق وتنفيذ أحكام أي اتفاقية تتعلق بتبادل المعلومات لغايات ضريبية، الموقعة والمبرمة وفقاً للأصول.

– الإلزام بإعطاء المعلومات المطلوبة تنفيذاً لأحكام تلك الإتفاقية.

ثانياً: (1) ما لم يقض النص خلاف ذلك، تعني المصطلحات التالية ما يلي: -أ الاتفاقية : أي معاهـــــــــدة أو اتفاقيـــــــــة دوليـــــــــة تـــــــــنص علـــــــــى تبـــــــــادل المعلومـــــــــات لأغـراض ضـريبية، بمـا فـي ذلـك التبـادل التلقـائي للمعلومـات بـين لبنـان وأي دولة أجنبية؛

ب – التبادل التلقائي للمعلومات: إعطاء معلومات محددة مسبقاً عن مقيمـين فـي دولـة أجنبيــة تــرتبط مــع لبنــان بموجــب اتفاقيــة وذلــك بشــكل دوري ودون أي طلب مسبق؛

ج – السلطة المختصة: وزير المالية أو ممثل مفوض من قبله؛ -د اتفاقيــة الســلطات المختصــة: أي اتفاقيــة ثنائيـة أو متعــددة الأطـراف بــين الســلطة المختصـة وأي دولـة أجنبيـة لتوضـيح أو تفسـير أحكـام اتفاقيـة معينـة أو تسهيل التبادل التلقائي للمعلومات بموجب أي اتفاقية؛

-هـ المعلومات: أي بيان أو سجل يتضمن وقائع معينة ويتخذ أي شكل من الأشكال؛

-و الطلب: طلب يـتم تقديمـه الـى السـلطة المختصـة للحصـول علـى معلومـات بموجـب اتفاقية معينة؛

ز – الدولة مقدمة الطلب: الدولة التي تتقدم بطلب للحصول على معلومات؛ ح – الشخص: أي فرد أو شركة أو أي هيئة أخرى مؤسسة وفقاً للقوانين النافذة؛

(2) في حال وجود تباين بين أحكام هذا القانون أو أي اتفاقيـة مـع احكـام قـانون آخـر، تطبـق أحكام هذا القانون والاتفاقية.

ثالثاً: بهدف الالتزام بالأحكام المتعلقة بتبادل المعلومات في أي اتفاقية، تستعمل السطلة المختصة الصلاحيات المنصوص عليها في المواد ٢٣ ،٤٤ ،٤٨ و ١٠٣ من قانون الاجراءات الضريبية لمجمع المعلومات حتى لو لم تكن الادارة الضريبية بحاجة الى تلك المعلومات لأغراض ضريبية داخلية .

رابعاً: (1) تساعد السلطة المختصة الدولـة مقدمـة طلـب المعلومـات وفقـاً لشـروط الاتفاقيـة المبرمـة معهــا. إذا تبــين للســلطة المختصــة، عنــد اســتلامها أي طلــب، أنــه متوافــق مــع أحكــام الاتفاقيــــــة الموقعـــــــة مـــــــع هـــــــذه الدولـــــــة، تنفــــــذ عنـــــــدها الســـــــلطة المختصـــــــة الطلـــــــب وفقاً لأحكام هذه الاتفاقية وهذا القانون.

(2) يمكــــن للســــلطة المختصــــة أن تطلــــب معلومــــات إضــــافية مــــن الدولــــة مقدمــــة الطلــــب عندما يكون ذلك ضرورياً لمساعدتها على معالجة الطلب.

(3) فـي حــال قــررت السـلطة المختصــة ان الطلــب لا يتوافــق مـع أح اكــ م الاتفاقيــة الموقعــة مـع هـذه الدولـة، عنـدها تـرفض السـلطة المختصـة الطلـب وتبلـغ الدولـة مقدمـة الطلـب بذلك.

خامساً: (1) اً عندما تكون المعلومات المطلوبة غير مشمولة بقانون السرية المصرفية الصادر بتاريخ /٩/٣ ١٩٥٦ أو بالمادة ١٥١ من قانون النقد والتسليف، تقوم السلطة المختصة بإجابة الطلب مباشرة الى الدولة مقدمة الطلب.

(2) عنـــــدما تكـــــون المعلومـــــات المطلوبـــــة مشـــــمولة بقـــــانون الســـــرية المصـــــرفية الصـــــادر بتاريخ /٩/٣ ١٩٥٦ أو بالمادة ١٥١ من قانون النقد والتسليف، وفي حال تبـين للسـلطة المختصـــــة، ان الطلـــــب متوافـــــق مـــــع أحكـــــام الاتفاقيـــــة الموقعـــــة مـــــع هـــــذه الدولـــــة، يتوجــب علــى «هيئــة التحقيــق الخاصــة» المنصــوص عليهــا بموجــب القــانون رقــم ٤٤ تــــــــاريخ /٢٤/ ١١ ٢٠١٥ المتعلــــــــق بمكافحــــــــة تبيــــــــيض الأمــــــــوال وتمويــــــــل الارهــــــــاب تأمين المعلومات وتزويدها الى السلطة المختصة.

(3) لا يمكــن تزويــد الدولــة مقدمــة الطلــب بالمعلومــات المنصــوص عليهــا فــي الفقــرة (2) دون أن يـتم ابـلاغ المسـتعلم عنـه بـذلك الـذي يعـود لـه، خـلال مهلـة خمسـة عشـر يومـاً من تاريخ تبلغ قرار السلطة المختصة وفقاً لأحكام التبليـغ الـواردة فـي قـانون الاجـراءات الضريبية، الاعتراض على هذا القرار أمام مجلس شورى الدولة . يبـت مجلـس شـورى الدولـة بصـورة نهائيـة غيـر قابلـة للمراجعـة بصـحة تـوافر الشـروط القانونيـة التـي توجــب عمليـة تبـادل المعلومــات وذلـك بمهلـة اقصــاها ثلاثـة أشـهر مــن تاريخ تقديم المراجعة. بعد انقضاء هذه المهلة، أو في حال قرر مجلس الشورى اعطاء المعلومـات المطلوبـة، على السلطة المختصة تزويد الدولة مقدمة الطلب بال عم لومات المطلوبة.

(4) علـــــى الـــــرغم مـــــن الأحكـــــام الســـــابقة، وفـــــي مـــــا خـــــص الطلبـــــات العاجلـــــة بطبيعتهـــــا او تلك التي يمكن ان يؤثر إبلاغ المستعلم عنه على فرص نجاح التحقيقـات التـي تقـوم بهـــا الدولـــة مقدمـــة الطلـــب، يجـــب أن يـــتم تزويـــد هـــذه الأخيـــرة بالمعلومـــات مـــن دون ٕ جراءات يتفق عليها بين الـد الإخطار المسبق المذكور أعلاه وفقاً لمعايير وا ولتين تحفـظ حقوق جميع الأطراف.

سادساً: (1) يعـود لكـل مـن مصـرف لبنـان وهيئـة التحقيـق الخاصـة الطلـب مـن المؤسسـات الماليـة، بوقـــــت محـــــدد وبطريقـــــة معينـــــة وفقـــــاً للأحكـــــام التـــــي يـــــنص عليهـــــا هـــــذا القـــــانون، تقــــديم المعلومــــات المطلوبــــة لتقــــوم الســــلطة المختصــــة بالتبــــادل التلقــــائي للمعلومــــات بموجــــــب أي اتفاقيــــــة أو اتفاقيــــــة الســــــلطات المختصــــــة. تــــــزود الســــــلطة المختصــــــة بتلك المعلومات لتتمكن من القيام بمهامها بموجب الاتفاقية.

(2) يحق لكل من وزير المالية أو مصرف لبنان، كل وفق اختصاصه، وفقاً لقرارات تصدر لاحقاً، تحديد: -أ المؤسسات التي عليها إعطاء المعلومات ؛ ب- المعلومات التي يجب إعطاءها والطريقة لذلك من ضمنها الطريقة الالكترونية؛ -ج معيار دقة و شمول المعلومات التي يجب اعطاءها؛

(3) لمجلـس الـوزراء عنـد الاقتضـاء، الاتخـاذ بمراسـيم الاجـراءات الضـرورية لتطبيـق أحكـام هذا القانون في الحالات غير المنصوص عليها في الفقرة الثانية أعلاه.

(4) فـي حـال مخالفـة الأحكـام المنصـوص عليهـا بموجـب هـذه المـادة أو عـدم الامتثـال لهـا، تفـرض غرامــة مــا بــين مئــة مليــون ومئتــي مليــون ليــرة دون المسـاس بحـق السـلطة ً الــى القــوانين الرقابيــة التابعــة لهــا لفــرض العقوبــات الاداريــة والغرامــات الماليــة اســتنادا الخاصة بها.

سابعاً: يطبق هذا القانون على اتفاقيات تفادي الازدواج الضريبي النافذة كافة.

ثامناً: اجيز للحكومة إبرام الاتفاقية المتعددة الأطراف للتعاون التقني في المجال الضريبي ¹

((The Multilateral Convention on Mutual Assistance in tax Matters (MAC)

(مرفقة ربطاً والتي يمكن ان تعدل من وقت لآخر)، والاتفاقية المتعلقة بالسلطات المختصـة ¹

The multilateral competent authority agreement on automatic exchange on)

((financial account information (CMAA مرفقة ربطا.

يفوض وزير المالية التوقيع على هاتين الاتفاقيتين.

تاسعاً: (1) تدخل أحكام هذا القانون حيز التنفيذ بالرغم من أي التزام متعلق بالسرية أو أي قيود أخرى مفروضة، بموجب أي قانون آخر، على عملية الافصاح عن

           المعلومات.

  (2) إن أي معلومــات يــتم تبادلهــا، بموجــب البنــدين رابعــاً وسادســاً مــع الســلطة المختصــة وفقاً لأي اتفاقية أو وفقاً لهـذا القـانون، يـتم التعامـل معهـا علـى

   أنهـا سـرية، وفقـاً لأحكـام المادة ٢٥ من قانون الاجراءات الضريبية .

عاشراً: تلغى احكام القانون رقم 43 تاريخ 24/11/2015 ( تبادل المعلومات الضريبية ).

حادي عشر: يعمـــــل بهـــــذا القـــــانون فـــــور نشـــــره فـــــي الجريـــــدة الرســـــمية مـــــع اســـــتعجال اصـــــداره وفقاً للفقرة الأولى من المادة ٥٦ من الدستور.

* انّ الاتفاقيّة المتعددة الأطراف للتعاون التقني في المجال الضريبي

((The Multilateral Convention on Mutual Assistance in tax Matters (MAC)

والاتفاقية المتعلقة بالسلطات المختصة

((The multilateral competent authority agreement on automatic exchange on financial account information (CMAA)

منشورتان في الجريدة الرسمية عدد ٥١ تاريخ /٢٧/ ١٠ ٢٠١٦.

¹ – نص هذه الاتفاقية منشور في الجريدة الر سمية عدد ٥١ تاريخ /٢٧/ ١٠ ٢٠١٦.

Law No 44 of November 24, 2015
Fighting Money Laundering and Terrorist Financing

Single Article:
The draft law required by Decree No 8200 of May 24, 2012 (amending Law No 318 of April 20, 2001, on Fighting Money Laundering) is adopted, as amended by the subcommittee of the joint parliamentary committees and the Parliament.

This Law shall enter into force upon its publication in the Official Gazette.

The Law on Fighting Money Laundering and Terrorist Financing

Article 1
For the purpose of this Law, illicit funds include assets, tangible and intangible, movable and immovable, including any legal documents or instruments evidencing title to, or interest in, such assets, resulting from the commission of, or the punishable attempted commission of, or the participation in any of the following offences, whether in Lebanon or abroad:

1. The growing, manufacturing, or illicit trafficking of narcotic drugs and/or psychotropic substances according to the Lebanese laws.
2. The participation in illegal associations with the intention of committing crimes and misdemeanors.
3. Terrorism, according to the provisions of Lebanese laws.
4. The financing of terrorism or terrorist acts and any other related activities (travel, organizing, training, recruiting…) or the financing of individuals or terrorist organizations, according to the provisions of Lebanese laws.
5. Illicit arms trafficking.
6. Kidnapping, using weapons or any other means.
7. Insider trading, breach of confidentiality, hindering of auctions, and illegal speculation.
8. Incitation to debauchery and offence against ethics and public decency by way of organized gangs.
9. Corruption, including bribery, trading in influence, embezzlement, abuse of functions, abuse of power, and illicit enrichment.
10. Theft, breach of trust, and embezzlement.
11. Fraud, including fraudulent bankruptcy.
12. The counterfeiting of public and private documents and instruments, including checks and credit cards of all types and the counterfeiting of money, stamps and stamped papers.
13. Smuggling, according to the provisions of the Customs Law.
14. The counterfeiting of goods and fraudulent trading in counterfeit goods.
15. Air and maritime piracy.
16. Trafficking in human beings and smuggling of migrants.
17. Sexual exploitation, including sexual exploitation of children.
18. Environmental crimes.
19. Extortion.
20. Murder.
21. Tax evasion, in accordance with the Lebanese laws.

Article 2
Money laundering is any act committed with the purpose of:

1. Concealing the real source of illicit funds, or giving, by any means, a false justification regarding the said source, while being aware of the illicit nature of these funds.
2. Transferring or transporting funds, or substituting or investing the latter in purchasing movable or immovable assets or in carrying out financial transactions for the purpose of concealing or disguising the such funds’ illicit source, or assisting a person involved in the commission of any of the offences mentioned in Article 1 to avoid prosecution, while being aware of the illicit nature of these funds. Money laundering is a separate offence that does not necessitate a charge with the underlying predicate offence. Charging the offender with an underlying predicate offence shall not preclude the pursuing of any legal proceedings against the latter for a money laundering offence, in case of variation in the elements of the offences.

Article 3
Whoever undertakes or attempts to undertake or incites or facilitates or intervenes or participates in:

1. Money-laundering operations, shall be punishable by imprisonment for a period of three to seven years, and by a fine not exceeding twice the amount laundered.
2. Terrorist financing operations or any related activities, shall incur the penalties stipulated in Article 316 bis and Articles 212 to 222 of the Penal Code.

Article 4
Banks, financial institutions, leasing companies, institutions that issue and promote credit or charge cards, institutions that perform money transfers electronically, exchange institutions, financial intermediation institutions, collective investments schemes, and any other institution requiring a license or supervised by Banque du Liban, must comply with the obligations specified below and with the regulations issued by Banque du Liban for the purpose of implementing the provisions of this Law:

1. To implement Customer Due Diligence measures on permanent customers (whether natural persons or legal persons or unique legal arrangements), in order to check their identity on the basis of reliable documents or information or data.
2. To implement Customer Due Diligence measures on transient customers to verify their identity, if the amount of a single operation or series of operations exceeds the threshold designated by Banque du Liban.
3. To determine the identity of the beneficial owner and take the steps needed to verify this identity, on the basis of reliable documents or information or data.
4. To retain copies of related documents of all operations, and to retain information or data or copies of the customers’ identification documents, for at least five years after performing the operations or ending the business relationship, whichever longer.
5. To continuously monitor and review the business relationship.
6. To apply the measures specified in Paragraphs 1 to 5 above to permanent and transient customers, whenever there are doubts regarding the accuracy or adequacy of declared customer identification data, or whenever there is a suspicion of money laundering or terrorist financing, regardless of any thresholds or exemptions that limits the implementation of these measures.
7. To take into account the indicators that flag the likelihood of a money laundering or terrorist financing operation, as well as the due diligence principles to detect suspicious operations.

Article 5
Institutions not subjected to the Banking Secrecy Law of September 3, 1956, particularly insurance companies, casinos, real estate dealers and agents, and merchants of valuables (jewelry, precious stones, gold, works of art, antiques), must keep records of operations that exceed the threshold designated by the “Special Investigation Commission” (hereinafter referred to as “the Commission”) that was established pursuant to Article 6 of this Law. Such institutions must also comply with the obligations specified in Article 4 above and with the regulations and recommendations issued by “the Commission” for the purpose of implementing the provisions of this Law.

Certified accountants and notaries must implement these obligations, when preparing or carrying out on behalf of their customers any of the following activities:

• Buying and selling of real estate.
• Management of customers’ movable and immovable assets, in particular transactions consisting of money accumulation and joint investment.
• Management of bank accounts and securities accounts.
• Organization of contributions for the establishment or management of companies.
• Establishment or management of legal persons or unique legal arrangements, and buying and selling of single person enterprise or companies.

The same obligations shall apply to lawyers when they carry out any of the above-mentioned activities. The implementation rules of these obligations shall be specified pursuant to a mechanism to be set by the Beirut Bar Association and the Tripoli Bar Association, taking into account the particularities and rules of the Legal Profession.

Article 6
An independent, legal entity with judicial status shall be established at Banque du Liban, referred to as “the Special Investigation Commission” or “the Commission”, which shall discharge its functions without being subject to Banque du Liban’s authority.

1. The “Special Investigation Commission” shall consist of:
   • The Governor of Banque du Liban or, in case of impediment, one of the Vice-Governors he designates
     Chairman
   • The judge appointed to the Higher Banking Commission or, in case of impediment, an alternate judge appointed by the Higher Judicial Council for a period equal to the term of the initially appointed judge.
     Member
   • The Chairman of the Banking Control Commission or, in case of impediment, a member of the latter designated by its Chairman.
     Member
   • A principal member and an alternate member appointed by the Council of Ministers upon proposal of the Governor of Banque du Liban, provided each of them has an experience of at least 15 years in financial or banking law.
     Member
2. The mission of the “Special Investigation Commission” is:
   • To receive suspicious transaction reports (STRs) and requests of assistance; to investigate operations that are suspected to be money-laundering or terrorist financing offences; to decide on the seriousness of evidence and circumstantial evidence related to the commission of any such offence(s); to take in this regard the adequate decision, particularly the precautionary and temporary freezing of the suspicious accounts and/or transactions, for a maximum period of one year renewable once for six months concerning foreign requests of assistance, and for a maximum period of six months renewable once for three months concerning local STRs and requests of assistance.
   • To ensure compliance by the parties referred to in Articles 4 and 5 above with the obligations stipulated in this Law and in the regulations issued in relation thereto, except for lawyers, certified accountants and notaries, without prejudice to the provisions of Paragraph 2 of Article 17 of this Law.
   • To collect and retain the information received from the parties referred to in Articles 4 and 5 above, as well as the information received from Lebanese and foreign official authorities, and all other collected information, and to share such information with the Commission’s counterparts, in its capacity as the competent authority and the official center to undertake such a task.
   • To issue regulations on the implementation of the provisions of this Law addressed to the parties referred to in Article 5 above, and to issue recommendations to all concerned parties.
3. After conducting the necessary audit and analysis, “the Commission” is the solely certified to decide:
   • To permanently freeze the concerned accounts and/or transactions, and/or to lift the banking secrecy in favor of the competent judicial authorities and the Higher Banking Commission represented by its Chairman on accounts or transactions suspected to be related to money laundering or terrorist financing.
   • To keep suspicious accounts as traceable accounts.

   “The Commission” may withdraw any of its decisions, in whole or in part, in case it obtains any new relevant information.

4. “The Commission” is entitled to:
   • attach an encumbrance on the records and entries pertaining to movable or immovable assets, indicating that such assets are under investigation by “the Commission”. The encumbrance shall be kept until doubts are erased or until a final decision in this regard is taken,
   • request the Public Prosecutor of the Court of Cassation to take preventive measures concerning the movable and immovable assets that have no records or entries, so as to prevent the use of such assets until a final judicial decision in this regard is taken,

   when there is a suspicion that these assets are related to money laundering or terrorist financing, and/or during the precautionary, temporary freezing of suspicious accounts and/or transactions, as specified in Paragraph 2 of this Article, and/or during the permanent freezing of these accounts and/or transactions, as specified in Paragraph 3 of this Article.

5. “The Commission” requires from concerned persons and parties, whether public or private, to take the necessary measures to prevent the use of movable or immovable assets belonging to any names designated or to be designated on the national lists issued by the competent Lebanese authorities or any other lists it circulates concerning terrorism and terrorist financing and any acts related thereto.
   The concerned persons and parties, whether public or private, must comply without any delay to this requirement.
6. “The Commission” shall meet, upon its Chairman’s call, at least twice a month and when needed. The legal quorum requires the presence of three members at least.
7. “The Commission” shall take its decisions at a majority of the attending members. In case of a tie, the Chairman shall have a casting vote.
8. “The Commission” shall appoint a full-time Secretary General, who shall be responsible for the tasks assigned to him by “the Commission”, for implementing its decisions and for directly supervising its regular and contractual staff and the persons delegated by “the Commission” for a specific mission. The provisions of the Banking Secrecy Law of September 3, 1956 shall not be opposed to any of them.
9. The members of “the Commission”, its regular and contractual staff, as well as the persons delegated by “the Commission” for a specific mission, shall be bound by the obligation of confidentiality.
10. “The Commission” shall set its operating rules, as well as the internal rules governing its regular and contractual staff, who are subject to private law.
11. The expenses of “the Commission” and its ancillary bodies shall be borne by Banque du Liban as part of the budget prepared by “the Commission”, provided the budget is approved by the Central Council of Banque du Liban.

Article 7
The parties referred to in Articles 4 and 5 of this Law, including certified accountants and notaries, when preparing or carrying out on behalf of their customers any of the activities mentioned in Article 5 above must promptly report to the Chairman of “the Commission” the details of operations undertaken or attempted to be undertaken that are suspected to be related to money laundering or terrorist financing.

The same obligations shall apply to lawyers, according to a mechanism to be set by the Beirut Bar Association and the Tripoli Bar Association, taking into account the particularities and rules of the Legal Profession.

The supervisors of the Banking Control Commission must, through the Chairman of the latter, report to the Chairman of “the Commission” any operations they suspect to be related to money laundering or terrorist financing and which they are aware of while performing their duties.

The auditors of the parties referred to in Article 4 above must promptly report to the Chairman of “the Commission” the details of the operations they suspect to be concealing money-laundering or terrorist financing and which they are aware of in the course of performing their work.

Article 8

1. “The Commission” shall convene after receiving information from the parties referred to in Article 7 above, or after receiving information from Lebanese or foreign official authorities.
2. After the assessment and analysis of the information relating to the case under examination, “the Commission” shall either decide to take notice, or conduct the required investigation, particularly by auditing the accounts or operations, or investigating the suspicious assets. “The Commission” shall conduct its investigations through a delegated person chosen amongst its members or its concerned officers, or through its Secretary General or an appointed auditor. All these persons shall perform their duties subject to confidentiality obligations, and without being opposed to the provisions of the Banking Secrecy Law of September 3, 1956.
3. Upon the completion of its audit and analysis, “the Commission” shall take its decisions in accordance with the provisions of Paragraphs 2, 3, and 4 of Article 6 of this Law.
4. If “the Commission” decides to lift the banking secrecy off the concerned accounts and/or to freeze them permanently and/or to request the maintain of the prohibition to dispose of the assets, it shall send a certified true copy of its decision to the Public Prosecutor of the Court of Cassation, the Higher Banking Commission through its Chairman, the concerned party, and the concerned local or foreign bodies, either directly or by the same means/ body through which the information was received.
5. In case the Public Prosecutor of the Court of Cassation decides to drop the case of money laundering and discontinue the proceedings, the frozen accounts and all other assets shall be deemed free. The decision to drop the case shall be notified to “the Commission”, and the latter shall not be entitled to maintain the lifting of the banking secrecy, the freezing and the prohibition to dispose of the assets, and shall immediately notify the concerned banks and any other concerned parties thereof. However, if “the Commission” finds, before implementing the decision, any new evidence or circumstantial evidence that justifies the maintain of the freezing, of the prohibition to dispose of the assets, and of the lifting of the banking secrecy, then it must send a justified report, along with the documents containing such evidence or circumstantial evidence to the Public Prosecutor of the Court of Cassation who may decide, where applicable, to widen the investigation in light of the new information.
6. In case the Instruction Judge or the Chamber of Accusation issues a final decision dismissing any legal prosecution, as well as in the case of a final judgement or decision that ceases the legal proceedings or states the innocence of the holders of frozen accounts or assets not to be disposed of, these accounts and assets shall be deemed free, and a copy of the judgement or decision shall be notified to “the Commission” through the Public Prosecutor of the Court of Cassation. “The Commission” shall in turn notify the ruling or the decision to the concerned banks and other concerned parties. “The Commission” shall not be empowered to lift again the banking secrecy off the accounts or to reinstate the freezing decision and to prevent again the use of the accounts and assets, covered by the decision dismissing the legal prosecution, except through the mechanism stipulated in Article 127 of the Code of Criminal Procedures.

Article 9

The Chairman of “the Commission” or any person delegated by the Chairman may directly communicate with any Lebanese or foreign authority (judicial, administrative, financial, or security) in order to request information or take cognizance of the details of previously conducted investigations that are linked or related to ongoing investigations by “the Commission”. The concerned Lebanese authorities must promptly respond to this information request, and shall not be subject to any confidentiality obligation.

Article 10

The Chairman of “the Commission” or any person delegated by the Chairman may directly request from the parties referred to in Articles 4 and 5 above to provide “the Commission” with all the documents and information needed to perform its duties. Such parties must respond to this request within a reasonable period of time.

Article 11
Reporting entities, as well as their Board members, officers and employees, are prohibited from disclosing or insinuating to anyone that a suspicious transaction report or other relevant information is submitted or intended to be submitted to “the Commission”, or that “the Commission” is inquiring about customers or auditing their operations or accounts.

Article 12
Within the scope of their work, the Chairman, members, staff and delegates of “the Commission”, shall enjoy immunity. Thus, they may not be prosecuted or sued, neither collectively nor individually, for any civil or criminal liability related to the performance of their duties, including offences specified by the Banking Secrecy Law of September 3, 1956, except in case such secrecy is breached. The parties referred to in Articles 4 and 5 above and their staff, as well as the supervisors of the Banking Control Commission and auditors, shall also enjoy the same immunity in performing their duties under the provisions of this Law or according to the decisions of “the Commission”, particularly when they report in good faith to “the Commission” the details of operations they suspect to be related to money laundering or terrorist financing.

Article 13
Any party that violates the provisions of Articles 4, 5, 7, 10, and 11 of this Law shall be punishable by imprisonment for a period of two months to one year and by a fine not exceeding one hundred million Lebanese pounds, or by either penalties. “The Commission” may address a warning to the parties who are in violation of the provisions of the regulations issued for the purpose of implementing this Law, and may request from these parties periodic reports about the measures taken to rectify their situation. “The Commission” may as well, in case of violation, refer the parties mentioned in Article 4 to the Higher Banking Commission, and correspond with the supervisory or oversight authorities concerning the parties mentioned in Article 5. The Higher Banking Commission may impose on the parties that were referred to it a fine for non-compliance with the regulations issued for the purpose of implementing this Law, provided this fine does not exceed two hundred times the official minimum wage. Fines shall be collected to the benefit of Banque du Liban. The foregoing shall not preclude the enforcement of the administrative penalties stipulated in Article 208 of the Code of Money and Credit on the parties referred to in Article 4, nor shall it preclude the enforcement of the sanctions stipulated in all other laws and regulations on the parties referred to in article 5.

Article 14

The movable or immovable assets that are proved, by a final Court ruling, to be related to, or derived from, a money-laundering or terrorist financing offence, shall be confiscated to the benefit of the State, unless the owners of the said assets prove in a Court of Law their legal rights thereupon.
The confiscated assets may be shared with other countries, whenever the confiscation results directly from coordinated investigations or cooperation between the concerned Lebanese authorities and the concerned foreign body(ies).

Article 15
The reservations specified in Paragraphs 2, 3 and 4 of Article 1 of Law No 426 of May 15, 1995, on authorizing the ratification of the 1988 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, are repealed, as well as the provisions of Article 132 of Law No 673 of March 16, 1998, on Narcotic Drugs and Psychotropic Substances.

Article 16
Upon the enactment of this Law, all provisions that are contrary to, or are in contradiction with the provisions of this Law, especially those specified in the Banking Secrecy Law of September 3, 1956, and those of Law No 673 of March 16, 1998, on Narcotic Drugs and Psychotropic Substances, shall cease to be applicable.

Article 17
The auditors of banks, financial institutions and other companies and institutions specified in Article 4 of this Law must verify the compliance by all these companies and institutions with the provisions of this Law and with the implementation regulations issued in relation thereto, and must also notify the Chairman of “the Commission” of any violation thereof. The Ministry of Justice, the Beirut Bar Association, the Tripoli Bar Association, and the Certified Accountants Association, shall be responsible for verifying the compliance by notaries, lawyers, and certified accountants, as far as each is concerned, with the measures stipulated in this Law and in the implementation regulations issued in relation thereto.

Article 18
This Law shall enter into force upon its publication in the Official Gazette.

Law of September 3, 1956

On Banking Secrecy

The Parliament has adopted, and

The President of the Republic is promulgating the text of the following Law:

Article 1:

Banks established in Lebanon in the form of joint-stock companies, and banks that are branches of foreign companies, are subjected to professional secrecy, provided that the said Lebanese and foreign banks obtain, for this purpose, a special approval from the Minister of Finance.¹

The Agricultural, Industrial and Real Estate Credit Bank shall not be governed by the provisions of this Law.²

Article 2:

The managers and employees of the banks mentioned in Article 1, and any person who, owing to his/her capacity or position, has access by any means to the banks’ books, operations and correspondence, are absolutely bound by banking secrecy in the interest of the clients of the said banks. These persons may not disclose any information known to them about the clients’ names, funds, or personal matters to any party, be it an individual or a public authority, whether administrative, military or judicial, except when authorized in writing by the concerned client, his/her heirs or legatees, or in case the client is declared bankrupt, or there is a lawsuit involving banks and their clients over banking operations.3

Article 3:
Banks mentioned in Article 1 are entitled to open for their clients numbered deposit accounts whose holders’ identity shall be only known to the manager of the bank or his deputy. The identity of a numbered deposit account’s holder shall be disclosed only with his/her written authorization, or that of his/her heirs or legatees, or in case he/she is declared bankrupt, or there is a lawsuit involving banks and their clients over banking operations. These banks are also entitled, under the same conditions, to lease numbered safes.

Article 4:
The funds and assets deposited with the banks mentioned in Article 1 may not be seized without a written authorization from their holders.

Article 5:
The granting of the authorization mentioned in the previous Articles may be priorly agreed upon in any type of contract. Such authorization may not be revoked without the agreement of all contracting parties.

Article 6:
In order to safeguard their invested funds, banks mentioned in Article 1 may exchange confidentially, and only between themselves, any information related to their clients’ debit accounts.⁴

Article 7:
Banks mentioned in Article 1 may not invoke professional secrecy, as stipulated in this Law, upon receiving requests from judicial authorities in relation to illicit enrichment lawsuits, introduced pursuant to Legislative Decree No. 38⁵ of February 18, 1953 and the Law of April 14, 1954.

Article 8:
Any person who intentionally violates the provisions of this Law shall be punishable by imprisonment for a period of three to twelve months. The same punishment shall apply to any attempt of violation⁶.

Public prosecution shall be only instituted through a complaint by the injured party.

Article 9:
All legal texts inconsistent with the provisions of this Law, or at variance with its content, are repealed.

Article 10:
This Law shall become effective two months following its publication in the Official Gazette.

Beirut, September 3, 1956

Signed: Camille Chamoun

Promulgated by the President of the Republic
The President of the Council of Ministers
Signed: Abdallah Al-Yafi

The Minister of Finance
Signed: George Karam

1- The obligation to obtain a special approval was repealed pursuant to the provisions of Article 139 of the Code of Money and Credit.
– See the Law published by Decree 5439 of September 20, 1982 (On Adopting Tax Exemptions for the Development of the Financial Market).
2- See Article 43 of Law 28/67 of May 9, 1967 (On Amending and Completing the Banking Legislation, and Establishing a Mixed Institution for the Guarantee of Bank Deposits).
3- See Article 15 of Law 2/67 of January 16, 1967 (On Imposing Special Provisions on Banks with a Payment Suspension Status)
– See Article 2 of the Law published by Decree 9976 of April 1, 1975 (On Empowering the Government to Exempt Deposits and all other Banks’ Liabilities in Foreign Currencies from some Taxes, Fees and Obligations
(creating a free zone between banks)).
– See Article 49 of Legislative Decree 153 of September 16, 1983 on Associations (the right of the Ministry of Finance or the Ministry of Interior to take cognizance of bank accounts held by political parties).
– See Articles 6 and 17 of Law 110 of November 7, 1991 (On the Adjustment of the Banking Situation)
– See Article 3 of Law 192 of January 4, 1993 (On Facilitating Merging Operations between Banks).

4- See Article 3 of Law 192 of January 4, 1993, on Facilitating Merging Operations between Banks.
5- Repealed by Law 154 of December 27, 1999, on Illicit Enrichment.

6- See Article 127, Paragraph 3, and Article 203 of the Code of Money and Credit.