Ministry of Finance Clarifies Claim Against Banks for $600 Million

The Ministry of Finance issued an explanatory statement regarding "the truth behind its demand from banks for /600/ million dollars in unrealized profits."

The statement read: "In response to what was reported in several newspapers and television interviews regarding demanding taxes from banks on unrealized Eurobond profits, the Ministry wishes to clarify the following points to the public:

Firstly: The Association of Banks in Lebanon requested, in a letter registered at the Ministry of Finance under number 10623 dated 23/9/2024, clarification on the possibility of applying the provisions of Paragraph /8/ of Article /7/ of the Income Tax Law, specifically regarding treating provisions formed by banks to cover potential losses as deductible expenses from the taxable base. Although the Revenue Directorate had a clear opinion that the provisions of Paragraph /8/ of Article /7/ of the Income Tax Law could not be applied to those provisions, it deemed it appropriate to seek the opinion of the Legislation and Consultation Committee, which aligned with the Revenue Directorate's view (Consultation No. 11/2025 dated 14/01/2025).

Secondly: The Ministry of Finance communicated this opinion to the Association of Banks and requested them to make the necessary tax adjustments to their declarations in accordance with applicable laws, regulations, and the Committee's opinion. It did not proceed to study the tax files of those banks and issue assessments out of concern for maintaining constructive communication between the tax administration and taxpayers.

Thirdly: There is confusion between the concept of unrealized losses and realized losses. All that the Ministry of Finance demands is not to burden the tax result of those banks with unrealized losses, as stated in the aforementioned opinion of the Legislation and Consultation Committee. A clear example of the correctness of the Ministry's view is the case of Eurobonds. For instance, when the value of Eurobonds dropped from /1/ USD to /0.06/ USD, banks recorded the difference of /0.94/ USD as losses against the tax result, despite the fact that these bonds were still held without being sold. When the bond price rose to around /0.25/ USD, i.e., an increase of /0.19/ USD per bond, banks did not return the difference to the tax result account. In other words, they recorded the full unrealized loss and deducted it from the tax result, but when book profits were realized, they did not add them to the tax result.

This is a clear contradiction and double standard in applying criteria that the Ministry of Finance cannot accept. Rather, it is committed and will remain committed to what is decided by applicable laws and regulations to preserve the rights of the public treasury, any infringement upon which constitutes a violation of the rights of all citizens without exception."