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
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