Tax Alert: MoF Decision #47-1 dated 8 Feb 2021-Application of laws 185 & 194 on tax exemptions following Beirut Port blast
The Ministry of Finance (MoF) issued on the 8th February 2021 the Decision #47/1 (attached scanned signed copy and another more readable non-signed copy) determining the application of the tax exemptions mentioned in the article 4 of the Law #185 dated 19th August 2020 and in the article 6 of the Law #194 dated 27th August 2020. These exemptions cover income tax, inheritance tax and built property taxes to the benefit of the taxpayers who suffered from the Beirut Port blast of the 4th August 2020.
According to the article 2 of this MoF decision, any donation granted between the 5th August 2020 and the 31st December 2021 directly or indirectly through an NGO to persons or taxpayers having suffered from the Beirut Port blast of the 4th August 2020 is considered as an income tax deductible expense for the entity granting this donation subject to certain conditions listed in the article 3 of this decision.
However, the article 4 of this MoF decision didn’t exempt the entity or person receiving this donation from the income tax contrary to the paragraph 5 of the article 6 of the Law #194/2020 that exempted all donations from any tax or fees.
On the other hand, the article 5 of this MoF decision clarifies how to record the damaged tangible assets in the accounting books of the corporate taxpayers having suffered from the Beirut Port blast:
- If the tangible asset is totally damaged, its net book value as at 31 December 2019 should be written-off as an extraordinary loss deductible from the taxable profit subject to income tax.
- If the tangible asset is partially damaged, the rehabilitation costs have to be capitalized and depreciated at the same rate used for the depreciation of the initial tangible asset.
The losses resulting from the write-off of the totally damaged tangible assets and inventory can be carried forward for 5 additional years starting from the fiscal year 2020 (i.e. till the FY 2028).
The article 6 of this decision requires from the taxpayers, who suffered a total destruction of their accounting records and archives from the Beirut Port blast, to reconstruct these accounting records for the period from the fiscal year 2012 till the 27th August 2020 (date of the Law #194/2020) by requesting copies of the destroyed documents from third parties such as bank statements, customs manifest, invoices and related documents from clients and suppliers, and from their audit reports.
This decision also exempted the families of the deceased persons from the inheritance tax and the buildings in the damaged area from the built property tax for the years 2020 and 2021.
We remain at your disposal should you need any further clarification or information on this subject.
DAHER & PARTNERS