Offshore companies in Lebanon Q&A
Offshore companies in Lebanon Q&A
Offshore companies in Lebanon are entities with specific regulations regarding their permissible and prohibited activities.
They can engage in business activities outside of Lebanon, such as negotiating contracts, managing foreign companies, conducting international trade, and owning foreign assets.
However, they are prohibited from conducting business within Lebanon, engaging in insurance or banking activities, or generating income from Lebanese sources.
These companies are subject to specific regulations, including those related to their articles of association, bank accounts, and financial reporting, and they benefit from a distinct tax regime.
The following is a comprehensive Q&A that further details the regulations and operational guidelines for offshore companies in Lebanon:
Permitted Activities
What are the activities that offshore companies in Lebanon can engage in?
The business activities of an offshore company are limited to:
- Negotiating and signing contracts for operations and transactions outside of Lebanese territory, involving funds located abroad or in free zones.
- Managing companies and institutions with activities are restricted outside Lebanon and exporting professional, administrative, and organizational services, as well as IT services and programs, to institutions located outside Lebanon.
- Conducting multilateral trade operations outside Lebanon, including negotiating, signing contracts, shipping goods, and re-issuing invoices for foreign operations.
- Engaging in maritime transport activities.
- Owning shares, stocks, bonds, and participations in non-resident foreign institutions and companies, and lending to non-resident institutions in which the offshore company owns more than 20% of the capital.
- Owning and/or benefiting from rights related to agencies for materials and goods and representing foreign companies in external markets.
- Opening branches and representative offices abroad.
- Constructing, investing in, managing, and owning all economic projects, except for Prohibited Activities.
- Opening credits and borrowing to finance the aforementioned operations and activities from banks and financial institutions located in Lebanon or abroad.
- Leasing offices in Lebanon and owning real estate necessary for their activity, within the boundaries of the law on foreign ownership of real estate rights in Lebanon.
Prohibited Activities
What activities are prohibited for offshore companies in Lebanon?
Offshore companies are prohibited from engaging in the following activities:
- Engaging in insurance operations.
- Engaging in operations and activities carried out by banks, financial institutions, and all institutions subject to the supervision of the Lebanese central bank.
- Carrying out activities in Lebanon other than the Permitted Activities.
- Generating any profit, revenue, or income from movable or immovable funds located in Lebanon, or from providing services to institutions located in Lebanon, except for income from their bank accounts and income from subscribing to and trading in Lebanese treasury bills.
Regulations and Procedures
What regulations apply to these companies?
They are subject to the same regulations as joint stock companies, as long as they do not conflict with the provisions of decree-law 46/1983.
What must the company’s articles of association state?
The company’s articles of association must state that it is not permitted to engage in any activity other than those specified in Article 1 of decree-law 46/1983.
How are the company’s bank accounts regulated?
All bank accounts of these companies are subject to the provisions of the law published in Decree No. 9976 dated 1/4/1975 and the regulatory texts issued under its provisions. Their accounts can be in Lebanese pounds.
Can the company’s capital be in a foreign currency?
Yes, the company’s capital can be denominated in a foreign currency, provided that its accounts are maintained in the same foreign currency.
Can the offshore company be established by a single person?
Yes, this partner is called the “single shareholder.”
What are the powers and responsibilities of a single shareholder?
The single shareholder can be a natural or legal person, manages the company, and exercises all the powers and responsibilities assigned to the Board of Directors and the Ordinary and Extraordinary General Assembly, and signs individually on all decisions taken in this capacity. The single shareholder may appoint one or more managers to manage the company in accordance with legal principles.
Can the board members or the single shareholder be non-Lebanese?
Yes, the board members or the single shareholder can be non-Lebanese.
Do the chairman of the board, the single shareholder, or the person authorized to sign on behalf of the company need a work permit if they are non-Lebanese?
No, they do not need a work permit if they are non-Lebanese and non-residents in Lebanon.
Are there any exemptions for foreign employees?
Foreign employees working in Lebanon are exempt from the work permit requirement, provided that the off shore company’s annual budget is not less than one billion Lebanese pounds; otherwise, this right is forfeited.
What are the requirements for auditors?
The company must appoint at least one principal auditor residing in Lebanon and holding Lebanese nationality, who can be appointed for a period of 3 years. The company is exempt from the requirement to appoint an additional auditor.
Where is the company registered?
The company is registered in the general commercial register in accordance with the provisions of the Commercial Code. A special register is also created at the Court of First Instance in Beirut for offshore companies, in which these companies are registered and in which the statements and information that the Commercial Code requires joint stock companies to publish are listed.
What financial information does the company need to publish?
The company can suffice with publishing the balance sheet of the fiscal year and the names of the members of the Board of Directors or the single shareholder and the auditors in the special offshore company register.
Taxation
What are the company’s accounting and tax obligations?
The offshore company must keep accounting records, prepare annual financial statements, submit declarations and pay the taxes due to the relevant income tax department, in accordance with the legal provisions relating to joint stock companies, as long as they do not conflict with the provisions of decree-law 46/1983.
How are offshore companies taxed in Lebanon?
The company is exempt from income tax on profits and is instead subject to a fixed annual tax of fifty million Lebanese pounds (50,000,000 L.L.). This tax applies to the company from the first fiscal year, regardless of its duration.
Are contracts and documents related to the company’s activities outside Lebanon subject to fiscal stamp duty?
Contracts and all documents signed by the company in Lebanon and related to its activities outside Lebanon are exempt from stamp duty.
How are profits distributed by offshore companies taxed?
The distributed profits of the companies are exempt from tax on income from movable capital, and the companies are exempt from tax on movable capital due on their income and revenues resulting from the investment of their funds outside Lebanon and those due on interest paid to legal or natural persons residing abroad.
What about taxes on salaries and wages of employees working abroad?
The company is also exempt from tax on the salaries and wages of employees working abroad.
Are there any exemptions on shares?
The company’s shares and shareholders are exempt from all transfer and inheritance taxes and related fees of any kind.
How are the salaries and wages of employees working in the company taxed?
The salaries and wages of employees working in the company are subject to the tax of the second chapter of the Income Tax Law.
Is there any tax exemption for representation allowances for foreign employees?
30% of the basic salary of a foreign employee working in the company is considered a representation allowance not subject to tax on salaries and wages.
When are taxes due, and what happens in case of non-compliance?
The taxes due on the company are paid in one installment upon declaration of the works and within the specified period, and in the event of the company’s violation of its tax obligations, the fines stipulated in Law No. 44 dated 11/11/2008 (Tax Procedures Law) apply.
What happens if the company violates the provisions of Article 2 of decree-law 46/1983?
In the event of the company’s violation of the provisions of Article 2 of decree-law 46/1983, the company becomes subject, for the fiscal year in which the violation occurred, to the income tax applied to capital companies operating in Lebanon on its entire annual net profits resulting from all its activities, plus a fine of 50% of the value of the tax due on it.
Are offshore companies exempt from Corporate Income Tax (CIT) and Withholding Tax (WHT) on dividends?
Yes.
What is the fixed annual tax that offshore companies are subject to?
They are subject to a fixed annual tax of LL 50 million.
Are contracts related to offshore activities conducted outside Lebanon subject to stamp duty?
No, contracts related to offshore activities conducted outside Lebanon are exempt from Lebanese stamp duty.
How must offshore companies be registered?
Offshore companies must be registered as joint stock entities.
What regulatory framework governs offshore companies?
They are governed by the same regulatory framework applicable to SAL companies.
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