Legal Framework for Starting a Business in Lebanon

Grace FattalSenior 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

Setting Up a Business in Lebanon

Request

ID

Address

Commercial Circular

Fees: approx LBP 1,250,000

 

Individual Merchant

Registration as a merchant is a prerequisite

Request

Address

Social Security Discharge

Fees: approx LBP 1,350,000

Business Concern

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

Onshore Entities: Most Commonly Used

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 three-quarters of the company’s capital

- Social Security Discharge for each transfer of parts

- Notarized – 3 per mil stamp duty

Onshore Entities: Most Commonly Used (SARL)

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

Onshore Entities: Most Commonly Used (SARL)

2. Joint-Stock Company (SAL)

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

Onshore Entities: Most Commonly Used

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

Onshore Entities: Most Commonly Used (SAL)

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

Onshore Entities: Most Commonly Used

Exemption from tax on capital gains Exemption from stamp duty Tax on royalties (10%), interest on loans

granted to subsidiaries (10%), management fees (5%)

Onshore Entities: Most Commonly UsedHOLDING

4. Branch

License from the MOET Unit of Parent Company Taxes: 25% of income derived in

Lebanon

Onshore Entities: Most Commonly Used

5. Representative Office for Marketing Purposes

License from the MOET No capacity to carry out commercial

activities No taxes

Onshore Entities: Most Commonly Used

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

Offshore Entities

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

Commercial Representation

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

Real Property

1. SAL Bylaws Bank Account Constitutive General Assembly First Board of Directors Commercial Circular Address Fees Certificate of Incorporation

 Registration Procedure

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

Registration Procedure

3. Branch Bylaws Corporate resolution resolving to:1. Open a branch in Lebanon2. 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

Registration Procedure

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

Moubasharat Aamal (within 2 months)

Territoriality principle

Income tax subdivided into 2 categories:

1. Tax on the income of physical persons2. Tax on the profits of companies

INCOME TAX

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

INCOME TAX

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

INCOME TAX ON WAGES AND SALARIES

Withholding tax of 7.5% for services

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

NON RESIDENT TAX

As of February 1st, 2012:

• Official monthly minimum wage is 675,000 LBP

• Minimum wage for daily workers is 30,000 LBP

Labor Matters

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

 

LABOR MATTERS

Foreign Worker

Work permitCategories of work permitEmployer work permit v/s employee

work permitNegative list of Ministry of LaborGeneral Police Formalities

LABOR MATTERS

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

NSSF

Sickness and maternity branch• 7% of salary ceiling of LBP 1,5 M -

employer• 2% of salary ceiling of LBP 1,5 M -

employeeFamily Allocation Branch 6% of salary ceiling of LBP 1,5 M -

employerEnd of Service Indemnity Branch8.5% of salary and other benefits -

employer

NSSF CONTRIBUTIONS

1. Lebanese Citizens2. 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

NSSF BENEFICIARIES

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

IP LEGISLATION

Thank You