Workshop on Legal Framework for Starting a Business in Lebanon

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Grace Fattal

Senior Associate

Abousleiman & Partners Law Offices

Commercial activities may be exercised in Lebanon:

1.

At an individual level

2.

At a shared level

3.

Through agencies representing foreign companies

Request

ID

Address

Commercial Circular

Fees: approx LBP 1,250,000

Registration as a merchant is a prerequisite

Request

Address

Social Security Discharge

Fees: approx LBP 1,350,000

1.

Limited Liability Company (SARL)

Minimum Capital: LBP 5 M

Minimum Partners: 3

They can all be foreigners

Manager: Appointed in bylaws or by partners

Liability of partners: Limited to participation

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Transfer of Parts:

Free among partners only

Transfer to third party is subject to company’s preemptive right, failing which that of the partners

Approved by partners representing at least threequarters of the company’s capital

Social Security Discharge for each transfer of parts

Notarized – 3 per mil stamp duty

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Auditors: Not - mandatory unless:

Capital exceeds LBP 30 M

Required by partners representing 1/5 of capital

Tax: 15% income tax - 10% capital gains

Costs: Approx US$ 1,800

2. Joint-Stock Company (SAL)

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Minimum Capital: LBP 30 M

Minimum Shareholders: 3

Directors: Appointed by General Assembly

Must be shareholders

Majority must be Lebanese.

Chairman-GM: appointed by BOD

General Manager: Not Mandatory

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Liability of Shareholders: Limited

Transfer of shares:

Free or subject to preemption rights

Exempt from notarization and stamp duty

Auditors: Principal/Additional

Tax: 15% income tax - 10% capital gains

Costs: Approximately US$ 2,200

3. Holding Company

SAL - Restricted in object

No nationality requirement for Board Members

Tax: progressive

6% for capital ≤ 50,000,000 LBP

4% for capital ≤ 80,000,000 LBP

2% for capital > 80,000,000 LBP

Exemption from tax on capital gains

Exemption from stamp duty

Tax on royalties (10%), interest on loans granted to subsidiaries (10%), management fees (5%)

4. Branch

License from the MOET

Unit of Parent Company

Taxes: 25% of income derived in Lebanon

5. Representative Office for Marketing Purposes

License from the MOET

No capacity to carry out commercial activities

No taxes

In the form of SAL

Object limited to transactions outside Lebanon

No nationality requirement for Directors. Foreign

CGM non resident is exempted from work permit

Bank guarantee: LBP 100,000

Tax: LBP 1 M

Exemption from tax on capital gains

Exemption from stamp duty

Exemption from tax on interests generated by loans

1.

Requirements relating to an SARL Company:

Majority of Lebanese partners

Majority of capital owned by Lebanese

Manager must be Lebanese

2. Requirements relating to an SAL Company:

Majority of capital must be owned by Lebanese

Two thirds of board members must be Lebanese

Chairman and General Manager must be Lebanese

Restrictions for the acquisition of more than

3,000 sqm

1. SARL:

All partners must be Lebanese

No transfer of parts to non-Lebanese entities

2. SAL

Shareholders must be either Lebanese individuals or

Lebanese companies whose respective By-laws prohibit share transfers to non-Lebanese entities

1.

SAL

Bylaws

Bank Account

Constitutive General Assembly

First Board of Directors

Commercial Circular

Address

Fees

Certificate of Incorporation

2

. SARL

Similar to SAL. However:

No Constitutive General Assembly.

No Board of Directors

Separate request by manager to appoint legal counsel

Manager appointed by GA or in Bylaws

No stamp duty on capital

3 . Branch

1.

Bylaws

Corporate resolution resolving to:

Open a branch in Lebanon

2.

Appoint a branch manager

Clearance certificate by the Israeli Boycott office

Identification documents of branch manager

Address

Incorporation costs: 3,300,000 L.B.P

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Corporations:

By-laws, Commercial Registry certificate

Notification from the MOET re-foreign companies

Address

Liberal professions and private business concerns:

Commercial registry certificate, if any

ID

Practice permit or order membership card

Address

Territoriality principle

Income tax subdivided into 2 categories:

1.

2.

Tax on the income of physical persons

Tax on the profits of companies

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1. Individual Enterprises – 5 tranches

4% on profit ≤LBP 9 M

7% on profit between LBP 9 M and LBP 24 M

12% on profit between LBP 24 M and LBP 54 M

16% on profit between LBP 54 M and LBP 104 M

21% on fraction of profit exceeding LBP 104 M

2. Companies: 15% profits and 10% capital gains

Progressive tax:

2% on income ≤ LBP 6 M

4% on income between LBP 6 M and LBP 15 M

7% on income between LBP 15 M and LBP30 M

11% on income between LBP30 M and LBP 60 M

15% on income between LBP 60 M and LBP 120M

20% on income exceeding LBP 120 M

Withholding tax of 7.5% for services

Withholding tax of In sum 2.25% for commercial and manufacturing activities

As of February 1 st , 2012:

Official monthly minimum wage is 675,000 LBP

Minimum wage for daily workers is 30,000 LBP

Lebanese Worker:

Employers fills a form at the MOL reflecting the name of the employee to be hired

In the event the entity has more than 15 employees, a copy of such entity’s internal regulations must be provided to the MOL

Foreign Worker

Work permit

Categories of work permit

Employer work permit v/s employee work permit

Negative list of Ministry of Labor

General Police Formalities

Employment triggers NSSF registration

Registration of employer with the NSSF should be made within 15 days from the date of employment

Employer must declare to the NSSF any termination of employment within a period of 15 days from the date of such termination

Sickness and maternity branch

7% of salary ceiling of LBP 1,5 M - employer

2% of salary ceiling of LBP 1,5 M - employee

Family Allocation Branch

6% of salary ceiling of LBP 1,5 M - employer

End of Service Indemnity Branch

8.5% of salary and other benefits - employer

1. Lebanese Citizens

2. Expatriates: work permit is a prerequisite

If French, Belgian, Italian or British contributions for all the branches must be paid and employees benefit from all these 3 branches

Citizens of other foreign countries: the employer pays family and medical contributions but no ESI contribution and the employees do not benefit from any of the 3 branches

Law Governing Commercial and Industrial

Property dated January 17, 1924. Amended by the

Law issued on December 31, 1946

Protection of Literary and Artistic property

(Copyrights Law). Law No. 75/99 Issued on April

13, 1999

Patent Law. Law No.240 on August 7, 2000 www.economy.gov.lb

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