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Explained: Taxes, Duties, Stamps and the Reconstruction Committee

30-04-2024/in Analysis & Features, HLP /by Rand Shamaa

Law No. 13 of 2013 introduced a five percent fee on both direct and indirect taxes and fees under the title “National Contribution for Reconstruction.” This tax applies to those liable for real profit taxes and other tax and duty payers, while income tax on salaries and wages as well as electricity fees are exempted from this tax hike. In practice, the National Contribution for Reconstruction is a tax on taxes.

Law No. 13 imposed this increase retroactively on real profit taxpayers who had not settled their dues for the year 2012, while it applied to other taxpayers from the beginning of 2013. Law No. 13 established bank account number 6119 where the revenues from this tax increase are deposited. These are considered part of the general budget revenues under the heading of the “National Contribution for Reconstruction.”

Law No. 13 applied for a period of three years from the date of its enactment; it was extended through Decree No. 3 of 2016 and later by Law No. 46 of 2017. Law No. 46 increased the “National Contribution for Reconstruction” rate to 10 percent on both direct and indirect taxes and fees and did not specify an end date for this tax increase.

According to the executive instructions of Law No. 13 issued by the Ministry of Finance, the direct taxes and fees relevant to the land and property rights include: real estate and building plots income taxes, taxation of lands slated for construction, land registration fees, and irrigation fees. Indirect taxes and fees include notary fees, judicial fees and stamps. These tax increases are collected by the financial departments and authorised entities for both direct and indirect taxes and fees.

The General Director of the General Commission for Taxes and Fees at that time, Zubair Darwish, told the state-run Tishreen newspaper in July 2013 that Law No. 13 “establishes a national project based on the principle of solidarity and partnership, sharing the burdens caused by the crisis the country is experiencing, and it will not be a burden on citizens because it exempts taxes that directly affect the lives of citizens, including the salary and wage tax for both public and private sector employees.” He added that the resources collected under Law No. 13 “will be spent on supporting the reconstruction and repair of what has been destroyed, as well as supporting the resettlement of displaced families.”

To collect the increased tax on fees collected via stamps, the Ministry of Finance in 2013 issued two types of reconstruction stamps, one valued at SYP 10 and the other at SYP 50. It became mandatory to affix one or both of these stamps on any official transaction, without exception. Due to the compulsory nature of these stamps on official transactions, there has been a high demand for them, leading to shortages in the market and illegal price increases. No official transaction can be completed without these stamps, and in many cases, financial departments provide a receipt for the stamp payment to complete the transaction without actually affixing the stamp.

In November 2021, a financial department official in Damascus told state-run newspaper Al-Thawra there was a proposal to collect the duties of the stamp without affixing it, because the cost of printing the stamp is much higher than its value. The official explained that collecting the stamp value in cash from the citizen was a temporary emergency solution.

According to the Minister of Finance’s Decision No. 2045, dated October 25, 2023, the ministry began issuing an electronic sticker displaying all required fees and promised to put it into service starting from November 2023. That month, the Ministry of Finance issued decision No. 2091, adopting two new reconstruction stamps, one valued at SYP 100 and the other at SYP 200, both featuring the same image of a building under construction alongside a tower crane.

The number of stamps required varies depending on the type of transaction and the nature of the taxes and fees imposed on it. In cases where stamps are actually unavailable, employees collect varying amounts without providing a receipt for the actual value of the stamps purchased for those transactions.

Law No. 13 of 2013, its executive instructions, subsequent amending laws, and decrees and decisions from the Ministry of Finance, do not refer to any official body for managing the funds collected from the tax increase and the stamps.

However, it is worth noting that a committee called the Reconstruction Committee was formed by a decision of the Prime Minister, No. 13387 on September 23, 2012, chaired by the Deputy Prime Minister for Services – Minister of Local Administration and Environment. The committee’s responsibilities include disbursing compensation for uninsured private property damage in the governorates, advancing payments and compensation to military personnel, approving cost estimates prepared by ministries, governorates, and relevant public bodies for the rehabilitation and maintenance of public buildings, taking necessary actions for the rehabilitation and maintenance of damaged infrastructure and public facilities according to a prioritised implementation and expenditure schedule, and funding the construction of temporary housing units in the provinces through public construction companies.

Information about this committee is scarce. The last post about the committee on the Ministry of Local Administration website dates back to March 2019, stating that the committee had planned to remove debris from demolished houses in the city of Palmyra and transport the waste to designated dumps outside the city. The latest news from the Prime Minister’s website dates to August 2019, discussing the committee’s approval of an emergency reconstruction plan for the public authorities for 2019 worth SYP 25 billion.

The total financial appropriations implemented by the Reconstruction Committee since 2012 to date amounted to SYP 380 billion, according to a report published on the Ministry of Finance website on November 12, 2023, titled “Parliament refers the 2024 budget project to the Budget and Accounts Committee.” The committee has completed 11,909 projects, repaired 99,800 homes, rehabilitated 32 hospitals and 175 health centres, repaired 10 grain silos, 36 bakeries, 8 cow sheds, and 3 poultry farms, among other projects. There are no published decisions or decrees indicating the funding sources for the Reconstruction Committee, but it is likely that they come from the National Contribution for Reconstruction taxes.

Explained: New Law Mandates Transition to Modern Irrigation

04-07-2023/in Analysis & Features, HLP /by Rand Shamaa

On June 19, 2023, Syrian President Bashar Al-Assad issued the year’s Law No. 10, establishing a fund to finance the National Project for Transition to Modern Irrigation. The aim is to regulate a mandatory transition plan to modern irrigation methods in irrigated agricultural lands.

The new law supersedes Legislative Decree No. 91 of 2005 and its amendments and Law No. 20 of 2010, which previously governed the implementation of the modern irrigation transition plan. The new law restructures the committees through which the stages of a transformation pass through to the issuance of the final decision and increases the fines imposed on beneficiaries who fail to implement obligations.

Funding for the project will be managed by the Ministry of Agriculture, headquartered in Damascus, with the potential to establish branches in other governorates. Funding amounts are deposited into a current account at the Agricultural Bank. The funds will be disbursed as grants and loans to beneficiaries to finance farming equipment and expenses during the transition process. A beneficiary in this project is anyone who invests in agriculture, whether owners, beneficiaries, renters or farmers. Law No. 10 stipulates that for tenant and landowning farmers to receive loans, the owner must approve or provide another guarantee acceptable to the Agricultural Cooperative Bank.

Law No. 10 lays out a strategy for implementing the transition to modern irrigation. This strategy is carried out through four categories of committees:

Sub-committees in the governorates established by the Minister of Agriculture. Each committee is chaired by the governor, with membership consisting of representatives from the Executive Office for the Agriculture Sector, the President of the Farmers’ Union in the governorate, and directors of the Ministries of Agriculture, Water Resources, Industry, Finance and Economy in the relevant governorate. These sub-committees propose areas where irrigated land should be transitioned to modern irrigation.
A central committee established by the Minister of Agriculture and headed by the deputy minister. The committee consists of representatives from the Ministries of Agriculture, Water Resources, Industry, Finance and Economy, and the director of the Agricultural Bank. The central committee undertakes various tasks, including preparing a study of the areas required to transition to modern irrigation based on the sub-committee proposals.
The Board of Directors for the National Project for Transition to Modern Irrigation Fund acts as a committee formed by the Prime Minister and chaired by the Minister of Agriculture. The board includes representatives from the Ministries of Agriculture, Water Resources, Industry, Finance and Economy, and the director of the Agricultural Bank. The board has various responsibilities, including managing the project’s funding and proposing areas for mandatory transition to modern irrigation based on the central committee’s study.
The Higher Committee, chaired by the Prime Minister and including the Ministers of Agriculture, Water Resources, Industry, Finance, Economy, the President of the Planning and International Cooperation Commission and the President of the General Union of Farmers. This committee approves the areas for mandatory transition to modern irrigation based on the above committee’s proposals.

The assortment of committees will likely make implementation lengthier and more complex.

Law No. 10 mandates the transition to modern irrigation in the areas approved by the Higher Committee, while this transition remains optional in areas not approved. Once these areas are approved, the Minister of Agriculture decides to begin the transition process, accompanied by a plan outlining the included region’s boundaries and property numbers. If there are properties that have not undergone delimitation and census, a site map must be added for each, along with tables listing their owners, occupants, and legal documents.

Law No. 10 requires the Minister’s decision to be published in the Official Gazette and posted on the announcement board of the governorate administrative centre, the Directorate of Agriculture, the Farmers’ Union in that governorate, branches of the Agricultural Bank and agricultural associations. The law considers this publication a personal notification to the rights holders in the concerned area. Failure to personally notify may infringe on some landowners’ or occupants’ rights, especially considering that many have been displaced by the war or left the country.

Law No. 10 does not specify whether the Minister’s decision is final or if there is an opportunity to contest it. The previous law, No. 20 of 2010, explicitly stated that the Minister’s decision is final and may not undergo any review or challenge.

Under Law No. 10, those affected by the decision must consult the concerned authority in the governorate within three months from the announcement date to fulfil their obligations. The law does not specify these obligations. They are expected to be defined in the law’s executive instructions, which have not yet been issued.

Notably, Law No. 10 considers anyone whose land falls within the regions included in the transition projects and who refuses to fulfil the following obligations as violating the law. The law imposes hefty fines on violators, starting from SYP 50,000 per dunum in the first year of refusal and depriving them of all forms of support provided by the ministry to farmers. If the violation continues into the second year, the fine increases to SYP 100,000 per dunum, with a continued cutoff of the Ministry of Agriculture’s support. The fine rises to SYP 250,000 per dunum if the violation continues into the third year, up to the end of the fifth year, with deprivation of Ministry support. After the fifth year, the fine increases to SYP 500,000 per dunum.

These fines are imposed by a decision from the Minister, collected under the Public Assets Collection Law, and go to the public state treasury.

Explained: Rental Property Taxes

27-06-2023/in Analysis & Features, HLP /by Rand Shamaa

Real Estate Sales Law No. 15 of 2021 subjects rented properties to a tax calculated based on the property’s current value, as determined by specialised financial committees.

The tax rates vary, depending on whether the properties are residential, commercial or industrial. This aligns with the principle established by successive Syrian rental laws, which impose a lower rent increase on residential rented properties than on non-residential ones. However, Law No. 15 exempts agricultural lands leased for agricultural investment from the tax on rented properties.

Article 16 of Law No. 15 imposes a 10 percent tax on non-residential properties rented for commercial or industrial activities, based on the annual rent specified in the lease agreement, provided that the value of the tax paid is at least six ten-thousandths (0.0006) of the value of the property. Rented residential properties are subject to a tax rate of five percent of the annual rent specified in the lease agreement, provided the tax paid is at least three ten-thousandths (0.0003) of the prevailing value of the property. The properties subject to these taxes are those rented according to the provisions of the Rental Law No. 10 of 2006, or Rental Law No. 20 of 2015.

Law No. 15 requires both parties in the rental relationship to disclose lease agreements within 30 days from the start of the lease. The taxpayer must present the residential lease contract to the administrative unit where the property is located, and where the contract is registered. Thereafter, the unit sends a certified copy of the contract to the financial department, where the taxpayer is obligated to pay the tax. A penalty of 10 percent of the tax value is imposed on those who fail to submit the contracts as mentioned above.

If tax verification employees discover unregistered lease contracts, or if the rent declared to the administrative unit or financial department is less than the actual rent, then the provisions of Tax Evasion Law No. 25 of 2003 are applied. Law No. 25 imposes penalties of up to one month imprisonment and a fine of 200 percent of the tax for each tax year from which payment has been evaded. Law No. 15 classifies these cases as crimes violating public trust, according to the provisions of the Penal Code.

After Law No. 15 was issued, the General Commission for Taxes and Fees in the Ministry of Finance issued Circular No. 320 of 2021, including a guide to the procedures for collecting taxes on residential unit lease contracts. The circular obliges the taxpayer to submit a request to the financial directorate including property information, and then the tax administration in the directorate grants them a financial register after inspection of the rented property to determine its current value.

The financial register of the property notes the current value, the tax on the lease contract, the local administration fee and the national contribution for reconstruction fee. The financial register is sent to the administrative unit where the property is located for the completion of registration procedures. A 25 percent increase is added to the current value of the property if the rented residential property is furnished. Then the administrative unit registers the lease contracts and collects the tax and other financial costs.

These exhausting financial burdens for the landlord and tenant alike lead many to refrain from documenting lease contracts, which may result in them bearing certain problems and legal responsibilities.

Law No. 15 states that if there is a failure to declare a lease contract, a non-declaration penalty of 10 percent of the tax is imposed in case of a delay of more than one month. However, Circular No. 320 added other rates not stipulated by Law No. 15: the penalty rate increases to 20 percent in case of a delay of more than a year, and increases further to 30 percent in case of a delay for another year. This constitutes a violation of the provisions of Law No. 15 by increasing the penalty without a legal provision to do so.

In addition, Article 16 of Law No. 15 applies the Tax Evasion Law in case of discovery of unregistered contracts. This means that non-declaration or delay in contract registration for a long period is subject to the provisions of the Tax Evasion Law. However, Circular No. 320 subjects evaders to additional fines, leading to a duplication of penalties.