Basic Decision No. 12625: Automatic Exchange of Information for Tax Purposes (Common Reporting Standard)

Date: 21 July 2017 | Circular No.: 139 Issued by: Banque du Liban (Central Bank of Lebanon) Governor: Riad T. Salamé

The Governor of Banque du Liban, pursuant to the Monetary and Banking Law and Articles 70, 174, and 182 thereof; pursuant to Urgent Law No. 55 dated 27/10/2016 (Law on the Exchange of Information for Tax Purposes) concerning the automatic exchange of information in implementation of obligations stipulated in any international agreement entering into force, and “ninth” thereof; pursuant to Decree No. 1022 dated 7/7/2017 specifying the details of implementing item (3) of paragraph “sixth” of Urgent Law No. 55 dated 27/10/2016 (Law on the Exchange of Information for Tax Purposes); in line with international recommendations issued by the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) and the Organisation for Economic Co-operation and Development (OECD); and based on the decision of the Central Council of Banque du Liban taken in its meeting held on 19/7/2017, hereby decides as follows:

Article 1: Definitions

First: For the purpose of applying the provisions of Law No. 55 dated 27/10/2016 (Law on the Exchange of Information for Tax Purposes) and this Decision, the following definitions apply:

1. Law: Law No. 55 dated 27/10/2016.
2. Decree: Decree specifying the details of implementing item (3) of “sixth” of Urgent Law No. 55 dated 27/10/2016 (Law on the Exchange of Information for Tax Purposes).
3. Standard: The Common Reporting Standard and its interpretations, approved by the Council of the Organisation for Economic Co-operation and Development on 15 July 2014, which includes procedures relating to reporting and due diligence for the automatic exchange of information, including any subsequent amendments and interpretations published by the OECD on this “Standard”.
4. Participating Jurisdiction: Any country listed in Table No. (3) of the “Decree”.
5. Financial Institution:
   • (a) A bank or financial institution, or any company or body subject to the supervision of Banque du Liban, carrying out activities similar to those of a Financial Institution as defined in Section VIII of the “Standard”.
   • (b) This definition does not include foreign branches of financial institutions referred to in item (a).
   • (c) The definition in item (a) includes branches operating in Lebanon of non-resident financial institutions carrying out the activities of a “Financial Institution” as defined in Section VIII of this “Standard”.
6. Reporting Financial Institution: Any “Financial Institution” that is not a “Non-Reporting Financial Institution” as defined below.
7. Non-Reporting Financial Institution:
   • (a) Any “Financial Institution” as defined in sub-paragraphs (b)(1), (a), (b), (d) and (e) of [1B] of Section VIII of the “Standard” or “ ”;
   • (b) Any entity listed in Table No. (2) of the “Decree”.
8. Financial Account: Any account that falls within the meaning provided in Section VIII of the “Standard”.
9. Pre-existing Account: Any financial account held by a “Reporting Financial Institution” as of 30 June 2017.
10. New Account: The “Financial Account” opened by a “Reporting Financial Institution” after 1 July 2017, including.
11. High Value Account: A “Pre-existing Account” belonging to one or more natural persons whose aggregate balance or value exceeds US$1,000,000 ($1,000,000) as of each of 30 June 2017 and 31 December 2017, or 31 December of any subsequent year.
12. Low Value Account: A “Pre-existing Account” belonging to one or more natural persons whose aggregate balance or value does not exceed US$1,000,000 ($1,000,000) as of 30 June 2017.
13. Excluded Account:

• (a) Accounts as specified in sub-paragraphs (c)(f) to (v) of [17C] of Section VIII of the “Standard”;
• (b) Any account listed as an excluded account in Table No. (1) of the “Decree”.

14. Information Return: A statement containing the information specified in Section I of the “Standard”.
15. Account Holder: Any person to whom the definition in sub-paragraph (e)(1) [1E] of Section VIII of the “Standard” applies.
16. Controlling Person: Any person to whom the definition in Section VIII of the “Standard” applies.
17. Change in Circumstances/Update: Any change resulting in additional information relating to the status of a person or conflicting with that status. In addition, the term “Change in Circumstances/Update” includes any change or addition to information relating to the account of the “Account Holder” (including any addition, substitution or other change in the “Account Holder”) or any change to information relating to any account associated with such account (as provided in sub-paragraphs 1(c) to 3(c) [3 to 1C] of Section VII of the “Standard”), in case such change or addition affects the status of the “Account Holder”.

Second: For the purpose of applying Section I of the “Standard”, the Reporting Jurisdiction is considered any country listed in Table No. (4) of the “Decree”. 2 - For the purpose of applying the due diligence procedures provided in Sections II to VII of the “Standard” and this Decision, the Reporting Jurisdiction is considered any country other than Lebanon and the United States of America. 3 - For the purpose of applying this Decision, if the date to be specified in the definition of the term “Competent Authority” in sub-paragraph (b)(8) [8B] of Section VIII of the “Standard” is 1 July 2017, including.

Third: Any term defined in the “Standard” but not in “Second” of the “Law” or this Decision shall have the same meaning as in the “Standard”.

Article 2: Special Provisions on Due Diligence Procedures

1 - “Reporting Financial Institutions” shall comply with the following:

• a) Establishing, maintaining and documenting the due diligence procedures provided in Sections II to VII of the “Standard” as well as those stipulated in Articles Two and Three of this Decision.
• b) Identifying the financial accounts to be reported through applying the due diligence procedures provided in Sections II to VII of the “Standard”, subject to item (2) of this Article.
• c) Considering a financial account as one subject to reporting from the date it is determined, in accordance with the due diligence procedures provided in Sections II to VII of the “Standard”, and in case no other deadline is specified, information relating to the account shall be reported annually starting from the year following the year related to such information.
• d) For the purpose of applying this Decision, an account with a negative balance or value is considered to have a balance and value equal to zero.
• e) To determine the balance or value of an account opened by a “Reporting Financial Institution”, this “Financial Institution” must convert the balance or value of this account to US dollars according to the official exchange rate announced by Banque du Liban, in order to determine accounts subject to the threshold (threshold) as of 30 June, 2017; 31 December 2017 or 31 December of any subsequent year.
• f) For the purpose of this Decision, a “Financial Account” belonging to a person in their capacity as a partner in a partnership and used by them for partnership purposes is considered an account of a pass-through entity.
• g) When a “Reporting Financial Institution” relies on information collected under anti-money laundering (KYC/AML) procedures through the “Know Your Customer” model, in order to determine the “Controlling Person” of a “New Account” of an entity (sub-paragraph (b)(2A) [C to A] of Section VI of the “Standard”), these procedures must be consistent with FATF Recommendations Nos. 10 and 25 (in the version adopted in February 2012).

2 - A “Reporting Financial Institution” may take the following measures:

• a) Applying the “Residence Address Test” on “Low Value Accounts” belonging to natural persons as defined in Section III of the “Standard” (sub-paragraph (b)(1) [B1]).
• b) Applying sub-paragraphs (a) to (c) [C to A] of Section V of the “Standard” to determine whether a “Pre-existing Account” belongs to an entity subject to the due diligence procedures specified in Section V of the “Standard”.
• c) Regarding “New Accounts” belonging to an entity, exclusive reliance may be placed on a written self-certification (Certification-Self) from the “Account Holder” or the “Controlling Person”, to determine whether information should be reported about the “Controlling Person” of an account belonging to a Passive NFE, according to the definition in Section VIII of the “Standard”.

3 - Due diligence procedures apply to the sections and paragraphs of the “Standard” as follows, for the following dates:

• a) In Section III (Due diligence procedures for “Pre-existing Accounts” belonging to natural persons): 1 - Sub-paragraph (c)(6) [6C]: 30 June 2017. 2 - Sub-paragraph (d) [D]: 31 December 2017 “for Low Value Accounts” and 31 December 2018.
• b) In Section V (Due diligence procedures for “Pre-existing Accounts” belonging to entities): 1 - Sub-paragraph (a) [A]: 30 June 2017. 2 - Sub-paragraph (b) [B]: 30 June 2017 for both dates. 3 - Sub-paragraph (e) [E]:
  • Sub-paragraph (e)(1) [1E]: Successively 30 June 2017 and 31 December 2018.
  • Sub-paragraph (e)(2) [2E]: 30 June 2017.
• c) When applying the provisions of sub-paragraph (c)(6) [6C] of Section III and sub-paragraphs (a) and (b) [B and A], sub-paragraph (e)(2) [2E] of Section V, and sub-paragraph (c)(15) [15C] of Section VIII of the “Standard” only for this purpose: the phrase “last day of any subsequent year” and the phrase “31 December of any subsequent year” mean 31 December of the year 2017 and 31 December of any subsequent year.
• 4 - When determining the “Controlling Person”, the definition of “Beneficial Owner” provided in the system for monitoring financial and banking operations to combat money laundering and terrorist financing attached to Basic Decision No. 7818 dated 18/5/2001, as well as the determination method provided in said system, shall be relied upon.

Article 3: Reporting Obligation

1 - “Reporting Financial Institutions” shall directly submit the “Information Return” to the Ministry of Finance, regarding information for the calendar year 2017 and each subsequent year, relating to any “financial account” determined as an account subject to reporting held by a “Reporting Financial Institution” at any time during the year, provided that Banque du Liban remains the sole supervisory authority responsible for the proper application of the “Law”, “Decree” and this Decision. 2 - If a “Reporting Financial Institution” applies the due diligence procedures provided in Article Two of this Decision during a calendar year and no account is determined as subject to reporting, the “Reporting Financial Institution” shall submit a statement confirming the absence of accounts subject to reporting in the “Information Return” for that year. 3 - “Reporting Financial Institutions” must submit the “Information Return” directly to the Ministry of Finance electronically within a period not exceeding 30 June of the year following the calendar year concerned for submission to the relevant authority of each country specified in Table No. 4 of the “Decree” within a period not exceeding 31 July of the year following the calendar year concerned, with the first exchange to be completed by 30 September 2018 at the latest. Exceptionally, the “Information Return” regarding information for the year 2019 shall be submitted to the Ministry of Finance within a period not exceeding 30 September 2020, for submission to the relevant authority of each country specified in Table No. 4 mentioned above within a period not exceeding 31 December 2020.

Article 4: Records

1 - Each “Reporting Financial Institution” shall maintain records obtained or created to comply with the provisions of this Decision, including evidence documents and written self-certifications (Certification Self) provided by the account holder. 2 - Each “Reporting Financial Institution” shall keep records in electronic form, and upon applying this Decision, must maintain these records in an electronically readable format throughout the period stipulated in paragraph (4) below. 3 - Each “Reporting Financial Institution”, upon applying the provisions of this Decision, having obtained or created records in a language other than Arabic, must, upon request, provide a translation of these records into Arabic at its own expense. 4 - Each “Reporting Financial Institution”, upon applying the provisions of this Decision, shall keep records and documents related to entries obtained or created, in application of this Decision, for a period of not less than ten years:

• a) Regarding the written self-certification provided by the account holder, starting from the date of closure of the “Financial Account” related to this certification.
• b) Starting from the end of the last calendar year mentioned in the record, in any other cases.

Article 5: Supervision and Review of Books and Records

In addition, Banque du Liban and/or the Special Investigation Body may exercise their respective powers as supervisory authorities for purposes related to monitoring the proper application of this Decision, by requesting from a “Reporting Financial Institution” the presentation, within a period not less than 14 days, of any information and providing them with copies of any books, records or documents.

Article 6: Anti-Avoidance

If a person enters into any arrangements or participates in practices that may be considered primarily or secondarily aimed at avoiding any obligations imposed by law or under this Decision, such person shall remain subject to the obligation they sought to avoid, as if no such arrangements were entered into or no such practices participated in.

Article 7: Penalties

A fine stipulated under the prevailing laws shall be imposed on each “Reporting Financial Institution” as a result of its violation of the provisions of this Decision or non-compliance with its obligations, without prejudice to the right of Banque du Liban and/or the Special Investigation Body to impose administrative penalties and fines under the Monetary and Banking Law and Law No. 44 dated 24/11/2015.

Article 8: Interpretation of Provisions

The provisions of this Decision shall be read and applied in accordance with the “Standard” and its interpretations, and in line with any amendments thereto.

Article 9: Date of Implementation

This Decision shall take effect from 1/7/2017.

Article 10: Publication

This Decision shall be published in the Official Gazette.

Beirut, 21 July 2017 Governor of Banque du Liban Riad T. Salamé