Workshop on Legal Framework for Starting a Business in Lebanon

Grace Fattal Senior Associate Abousleiman & Partners Law Offices

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Commercial activities may be exercised in Lebanon:

1.

At an individual level

2.

At a shared level

3.

Through agencies representing foreign companies

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Request

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ID

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Address

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Commercial Circular

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Fees: approx LBP 1,250,000

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Registration as a merchant is a prerequisite

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Request

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Address

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Social Security Discharge

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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) 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 

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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

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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

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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

Bylaws  Corporate resolution resolving to: 1. 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

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Territoriality principle

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Income tax subdivided into 2 categories:

1.

Tax on the income of physical persons Tax on the profits of companies

2.

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

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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  Withholding

tax of 7.5% for services

tax of In sum 2.25% for commercial and manufacturing activities

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As of February 1st, 2012:

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Official monthly minimum wage is 675,000 LBP

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Minimum wage for daily workers is 30,000 LBP

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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  Work

Worker

permit  Categories of work permit  Employer work permit v/s employee work permit  Negative list of Ministry of Labor  General Police Formalities

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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

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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