Banking crisis continues: New tax rules for loan repayments

Report by Bassam Abou Zeid, English adaptation by Yasmine Jaroudi

In October 2019, as Lebanon faced a banking collapse, the total amount of loans issued by banks stood at $38 billion, sourced from depositors' funds. 

According to the Association of Banks in Lebanon (ABL), $32 billion of these loans have been repaid in Lebanese lira or via checks, known as "lollars," which do not reflect their original value.

The Finance Ministry has stated that individuals and entities who repaid dollar-denominated loans in currencies other than fresh dollars are expected to pay taxes to prevent tax evasion. 

However, housing loans are exempt from this requirement.

For instance, a company that borrowed $1 million before the crisis and repaid it during the crisis with checks worth 20% of their original value essentially settled the debt with the equivalent of $200,000. This means the company saved $800,000 and is now expected to pay taxes on this amount.

ABL indicated that it currently lacks detailed statistics on the beneficiaries of these repayments and the total amount saved. They noted that the Finance Ministry will not receive the necessary information until the issuance of implementing decrees for the tax procedures law.