|Doing Business in Lebanon
I. ENTERING THE LEBANESE
has a liberal and open economy, particularly by Middle East
standards. It is a free market economy, with liberal laws designed
to encourage foreign investment and stimulate commercial activity.
There are various types of companies and offices available to
foreigners seeking to conduct business in Lebanon.
Generally, all companies are governed by the Lebanese Commercial
Code and its regulations and are required to retain the services of
a lawyer. The government encourages cooperation between foreign and
Lebanese companies. Unlike many countries in the region, Lebanese
law does not require joint ventures to have a specific percentage of
II. FORMS OF DOING BUSINESS
The following forms of entry into the Lebanese market are available
to foreign nationals and foreign entities:
A. Joint Stock Company (Société Anonyme Libanaise (S.A.L.)
To form a Joint Stock Company a minimum capital investment of LL
30,000,000 (Approximately US $20,000) is required, along with at
least three (3) founding members. The Board of Directors may have
between 3-12 members, as long as the majority of the members are
Lebanese. The company’s head office must be in Lebanon and a
foreign-national chairman may only hold office if he has a work
permit (this rule does not apply to the chairmen of banks, and
offshore or holding companies, which are usually formed as joint
Generally, the law does not place minimum requirements on the
percentage of Lebanese ownership of joint stock companies. However,
if the company’s objectives include trading real estate in Lebanon,
fifty percent (50%) of the company’s capital must be owned by
Lebanese nationals. Furthermore, there are specific ownership
requirements relating to the purchase of real estate in Lebanon (See
discussion under the heading “Real Estate Company”).
In terms of tax liability, a joint stock company is subject to a ten
percent (10%) tax on its net profit and a five percent (5%) tax on
the distribution of dividends (See Tax discussion under Section II
for more details).
B. Limited Liability Partnership Company (Société à
Responsabilité Limitée (S.A.R.L))
The formation of a Limited Liability Partnership requires a minimum
capital of LL 5,000,000 (Approx. US $3,333). The partnership must
have at least 3 partners of any nationality; a manager who can be a
non-partner; and an auditor if its capital exceeds LL 30,000,000
(Approx. US $20,000). If the number of partners exceeds thirty (30),
the company must change its registration to a Joint Stock Company
within two (2) years or be forced to dissolve. A Limited Liability
Partnership may not engage in any activities involving the business
of insurance, savings, banking, capital investments, and air
The Limited Liability Partnership must register with the Commercial
Register in the district where it is located, as well as with the
Patent Office of the Ministry of National Economy and Commerce. The
Limited Liability Partnership is taxed at a flat rate of 10% on
generated net profits.
C. Holding Company
Law No. 45/83 governs the establishment of holding companies. Under
this Law, the activities of a holding company are limited to the
- the acquisition of
- management and granting of loans
to companies operating within Lebanon in which the holding company
owns at least twenty percent (20%) of the shares;
- holding and leasing of patents,
inventions, concession rights, and registered trademarks; and
- the purchase of goods and real
estate needed for its operations.
A holding company must be
established in the form of a joint stock holding company and it must
have its head office in Lebanon. A minimum capital investment of LL
30,000,000 (Approximately US $20,000) is required. Its board must
consist of at least two (2) members who are of Lebanese nationality.
A non-Lebanese chairperson, provided he is resident abroad, may
operate without a work permit. Board and shareholders’ meetings may
be held abroad. The company must be registered in the Commercial
Register and in a special register for holding companies.
Holding companies are exempt from income taxes on their profits and
on profit distribution. They are subject to capital gains tax
(currently taxed at 6%) if the shares sold were owned by the holding
company for less than two years. Annual fixed taxes on capital and
reserves are calculated on a sliding scale and range from 2-6%.
D. Offshore Company
Law No. 46/83 governs the establishment of offshore companies.
Pursuant to this law, the activities of an offshore company are
limited to the following:
- negotiating and concluding of
contracts and agreements to be executed outside of Lebanon or in
the free trade zone areas;
- storage of goods and products in
customs free zone;
- preparation of studies or
undertaking consulting for use abroad; and
- banking, financial and brokerage
activities to be executed outside Lebanon.
An offshore company is specifically
prohibited from engaging in industry, banking operations, insurance
or any other commercial activity in Lebanon. It is also prohibited
from earning any profits or revenues through movable or immovable
assets in Lebanon, or through providing services to companies
located in Lebanon, except for the interests on its bank accounts.
The offshore company must be formed as a joint stock company and a
bank guarantee of LL 100,000 (Approx. US $66.50) is required upon
formation. At least two Lebanese nationals must occupy positions on
the company’s Executive Board. The chairman may be a non-Lebanese
resident abroad and may operate without a permit. The company must
be registered both in the Commercial Register and in a special
register for offshore companies.
Profits are tax exempt but the company is subject to an annual flat
tax of LL 1,000,000 (Approx. US $666). The capital gains resulting
from the sale of the offshore company's fixed assets in Lebanon are
taxed at a rate of 6 percent. The salaries and wages of the
employees working at the offshore company are subject to taxes on
wages and salaries at rates varying from 2 to 10 percent. (See Tax
discussion under Section II for more details).
E. Branch or Representative Office
A foreign company doing business in Lebanon may set up either a
branch office or a representative office. These offices must be
registered at the Commercial Register of the district in which they
A representative office is a liaison office that offers technical
assistance in the market and handles public relations. The office
may not engage in any commercial activity or generate any
business/profit. As such, all expenses and costs of the office must
be covered by foreign transfer from the outside head office. Because
of its nature, the representative office is only subject to personal
A branch office, on the other hand, may undertake any commercial
activity, except that which by law requires a certain legal form
and/or that which is exclusively reserved for Lebanese nationals
and/or companies. A branch office is subject to both corporate and
personal income tax.
F. Real Estate Company
This type of company is subject to government regulations relating
to the acquisition of real estate. Companies established and
existing under the laws of Lebanon may purchase real estate in
Lebanon if the following conditions are met:
- For limited liability
partnerships, the capital must be totally owned by Lebanese
persons and/or wholly-owned Lebanese companies.
- For joint stock companies, the
shares should be nominative and totally owned by Lebanese persons
or wholly-owned Lebanese companies whose articles of association
prohibit the assignment of shares to non-Lebanese nationals or
Notwithstanding, a foreign person
or entity may acquire real property in Lebanon upon prior government
authorization in the form of a decree issued by the Council of
G. Insurance Company
Special authorization from the Ministry of Economy is required to
establish an insurance company. They must take the form of joint
stock companies. Minimum capital of LL 300,000,000 (Approx. US
$200,000), is required, with basic reserves of LL 90,000,000
(Approx. US $60,000) and cautionary reserves of LL 750,000,000
(Approx. US $500,000).
In order to conduct business in Lebanon, a foreign insurance company
must demonstrate that its country of origin provides reciprocal
treatment for Lebanese companies doing business there. Once it has
done so, it will be licensed to do business in Lebanon in the same
types of insurance it is licensed to pursue in its home country. The
foreign company may appoint a representative who must be Lebanese.
Banks must be formed as joint stock companies and require prior
authorization from the Central Bank. The Central Bank sets the
specific capital requirements. One-third of all bank shares must be
held by Lebanese nationals or Lebanese companies with foreign
participation. The transfer of all bank shares is subject to Central
Lebanon also has very strict banking secrecy laws that, with few
exceptions, prohibit disclosure of client information by bank
employees and others with access to the client’s banking details.
The Code of Banking Secrecy governs this area and sets out the
additional advantages, as well as exceptions, to this system.
I. Commercial Representation
If a foreign company elects not to incorporate in Lebanon or
establish a branch office, it must engage the services of a Lebanese
representative in order to pursue commercial activities in Lebanon.
Representatives and their agreements are regulated by specific
Where the representative is a natural person, he must be of Lebanese
nationality and duly established as a merchant in Lebanon. With
respect to representative companies, the law provides that these
companies are for the exclusive use of Lebanese nationals or
companies controlled by Lebanese nationals. As such, these entities
must meet certain conditions. In limited liability partnerships, the
majority of the partners must be of Lebanese nationality, the
majority of the capital must be Lebanese-owned and the authorized
signatory of the partnership should be Lebanese. For joint stock
companies, the shares should be nominative with the majority owned
by Lebanese nationals and two-thirds of the Board members, as well
as the general manager, should be Lebanese.
The Law also provides for the following:
- The commercial representative
agreement must be in writing, may be for either a limited or an
unlimited term, and can be exclusive or non-exclusive.
- The commercial representative is
entitled to indemnity/compensation for wrongful termination of the
agreement, even where the termination is a result of the natural
expiry of the agreement.
- The Lebanese courts have
exclusive jurisdiction over all commercial representative
agreements and all choice of law clauses are invalid unless they
designate Law No. 34/67 as the applicable law.
The primary tax law in Lebanon is Law No. 144/59, as amended by Law
No. 282/94. All legal entities, both Lebanese and foreign, are
subject to the tax law, whether or not they are based in Lebanon.
Generally, the maximum income tax rate for corporations is 10% of
net profits and 5% on the distribution of dividends. Companies
deriving income in Lebanon, but not having a place of business
there, are subject to a 10% tax on their net taxable income.
The Lebanese laws provide for numerous tax exemptions. The most
- Educational institutions;
hospitals, orphanages and shelters that admit patients for free;
and mental institutions receive an indefinite exemption.
- Agricultural ventures and
agricultural consumer cooperatives also receive an indefinite
exemption under the Tax Law.
- Profits generated by an
industrial entity in Lebanon receive a ten (10) year tax exemption
if the entity: (1) is established in Lebanon after 1980; (2) is
established in an area the government is seeking to develop; (3)
produces products not produced in Lebanon before January 1, 1980
and (4) owns more than LL 500,000,000 (Approx. US $333,333) in
production assets. This exemption requires a government decree
based on a recommendation by the Ministers of Finance and Industry
- Holding companies are
exempt from the tax on profits and distributions described above,
however, they do pay tax on their capital at the following rates:
-6% of capital up to LL 50,000,000 (Approx. US $33,333)
-4% of capital between LL 50,000,000 and LL 80,000,000
-2% on any amount over LL 80,000,000 (Approx. US $53,333)
Additionally, holding companies are assessed various other
specific taxes on revenues and fees generated from their
- Offshore companies are
exempt from tax on their actual profits, but the law does mandate
that they pay an annual flat rate of LL 1,000,000 (Approx. US
$666). Furthermore, foreign employees of offshore companies
benefit from a thirty percent (30%) exemption on earned income
tax. It is important to note that if an offshore company engages
in unauthorized activity, it will be taxed as a joint stock
company and subject to a penalty equal to fifty percent (50%) of
Penalties: Penalties for violations of the tax requirements
can be found in the Tax Law itself (Law No. 144/49, as amended by
Law No. 282/59), as well as Law No. 156/83. The penalty for
violations of the tax law provided for in Law No. 144 consists of
fines ranging from LL 200,000 (Approx. US $133) and LL 500,000
(Approx. US $333). Under Law No. 156, penalties include imprisonment
ranging from 3 months to 3 years and/or fines ranging from LL
1,000,000 (Approx. US $666) to LL 30,000,000, (Approx. US $20,000)
depending on the offense committed.
IV. BEIRUT STOCK EXCHANGE
The BSE has three markets: the official market, the junior market,
and the unlisted market (which covers securities not quoted on the
In order for a registered joint stock company to be listed on the
BSE, it must comply with specific conditions, including the
submission of full financial statements for the previous three years
and a minimum capital requirement, which varies depending on the
market (official, junior or unlisted) the company is listed on.
V. INTELLECTUAL PROPERTY
Lebanon’s Intellectual Property Rights law dates back to 1924 and
the French occupation of Lebanon. The law covers all aspects of
intellectual property, including trademarks, author’s rights
(copyright), patents, and industrial designs and models. In early
1999, Parliament enacted a long-awaited Copyright law, which repeals
and replaces those provisions of the 1924 law that relate to
copyright issues. The new law gives broad copyright protections and
provides for civil and criminal remedies for violations of the same.
Parliament is discussing a bill on the protection of trademarks to
replace the 1924 law. Patent legislation to replace that aspect of
the 1924 law is also expected soon in an effect to conform to World
Trade Organization requirements and facilitate accession.
Registration of a trademark is open to all natural persons or
corporate bodies, both Lebanese and foreign. Foreigners, however,
are required to appoint a local agent to arrange all registration
formalities and to receive the registration certificate and service
of process. An application for registration, as well as other
specifics, must be filed at the Office of Protection of Commercial
and Industrial Property at the Ministry of Economy and Trade. The
registration, which is open to opposition for five years, is valid
for 15 years and renewable for additional periods of 15 years.
Lebanon is a signatory to several international agreements relating
to intellectual property rights and has begun the process for
accession to the World Trade Organization which, once completed,
will subject Lebanon to the standards and obligations of the
Agreement on Trade-Related Aspects of Intellectual Property.
VI. PUBLIC BIDS
Generally, foreigners do not need to have a local agent or partner
in order to participate in public bids. However, if the object of a
joint stock company (established by foreigners) is to operate a
public service in Lebanon, at least one-third (1/3) of that
company’s capital must be controlled by Lebanese-owned nominal
shares which are not transferable to foreign third parties.
Tenders are governed by Decree No. 2866 dated December 16, 1959 (as
amended by Decree No. 8703 dated February 10, 1962 and Decree No.
13221 dated June 28, 1963). This decree applies to all State tenders
over LL 25,000, except for those to the Ministry of Defense,
Security Force and Public Security.
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