The 2012 worldwide VAT, GST and sales tax guide

400 L EBANON
Nondeductible input tax. Input tax may not be recovered on purchases
of goods and services that are not used for business
purposes (for example, goods acquired for private use by an
entrepreneur). In addition, input tax may not be recovered for
some items of business expenditure.
The following tables provide examples of items of expenditure for
which input tax is not deductible and examples of items for which
input tax is deductible if the expenditure is related to a taxable
business use (these lists are not exhaustive).
Examples of items for which input tax is nondeductible
Business entertainment
Nonbusiness expenditure
Examples of items for which input tax is deductible
(if related to a taxable business use)
Accommodation
Advertising
Business gifts
Conferences
Purchase, lease and hire of cars, vans and trucks
Business use of home telephone
Mobile phones
Taxis
Partial exemption. Input tax directly related to making exempt
supplies is not generally recoverable. If a Lebanese taxable
person makes both exempt and taxable supplies, it may not
recover input tax in full. This situation is referred to as a “partial
exemption.” Zero-rated supplies (sometimes referred to as
“exempt with credit” supplies) are treated as taxable supplies for
these purposes.
A taxable person that makes both taxable and exempt supplies
may generally recover input tax that is related to taxable supplies
only. Input tax directly allocated to taxable supplies is deductible,
while input tax directly related to exempt supplies is not deductible.
The remaining input tax that is not allocated directly to
exempt and taxable supplies is apportioned. The apportionment
may be calculated based on the value of taxable supplies made
compared with total turnover.
However, certain VAT exempt entities, including hospitals, educational
institutions and nonprofit organizations, known as
“Article 59 entities,” are subject to a special VAT recovery regime.
Article 59 entities use fixed recovery percentages for recovering
input VAT, depending on the type of expenditure. The following
are the fixed percentages:
• 100% recovery is allowed for purchases of fixed assets.
• 100% recovery is allowed for current expenses.
Refunds. If the amount of VAT recoverable in a month exceeds
the amount of VAT payable, the taxable person earns a VAT credit.
The VAT credit is generally carried forward to offset output tax
in the following VAT period. A refund of any remaining VAT
credit may be claimed twice per year (every six months). However,
exporters may claim a refund of the VAT credit at the end of
each quarterly VAT period.