Libya company registration is both difficult and expensive, due to the country’s complex regulatory environment. That said, the country is a major oil producer, a member of the Organisation of Petroleum Exporting Countries (OPEC), and is slowly opening its doors to foreign investment. As a result, some international entrepreneurs are now looking seriously at incorporating a Libya company.
Advantages of Libya company registration
- The Libyan government has stated its intentions to reform its economy and join the World Trade Organisation (WTO), both likely to encourage investors interested in Libya company formation;
- Libya is rich in natural and mineral resources, a possible basis for many potential industrial, agricultural and tourism projects;
- Libya’s continued economic reforms are making it an attractive venue for foreign investment;
- The Foreign Investment Law of 1997 opens up various sectors previously closed to the private sector and foreign investment along with certain exemptions from customs duties and tax;
- With Libya company incorporation, the corporate tax rate is on a sliding scale and ranges from 15 – 40%. There is also a tax jihad of 4% that applies to annual taxable income;
- There is opportunity for 100% foreign equity ownership of companies licensed under the Foreign Investment Law. However, there are restrictions on what industry sectors the business can operate in and the minimum capital requirements can be very high;
- Libyan banks are increasingly open to supporting company formation in Libya. Foreign investors can now borrow up to 50% of their investment capital from local banks;
- It is easy to open global corporate bank accounts to support a Libyan company. Healy Consultants works with internationally recognised banks such as HSBC, Standard Chartered and Citibank to provide corporate bank account services.
- Libya has signed double tax agreements and social security reciprocal agreements with UK, India, Italy, Malta, Pakistan, Tunisia, France, Russia, Belarus and Ukraine;
- Libya corporate tax rate is 20% and there is no withholding tax other than on wages and salaries;
- Libya is accessible by land and sea, therefore businesses can utilize the most cost effective mode of transportation;
Disadvantages of Libya company registration
- Libya company incorporation is complex and time-consuming due to the country’s heavy bureaucracy. Libya dropped to the 160th least corrupt country in the world, according to the 2012 Corruption Perceptions Index by Transparency International, a global measure of corruption amongst public officials and politicians;
- Under Libya company law, a company can have a maximum foreign shareholding of 65%. However, the board of directors may now be comprised of a foreign majority;
- All documentation related to registering a company in Libya is in Arabic. Investors planning a Libyan company should therefore factor the additional time and expense of translating documents into the overall engagement;
- The most lucrative markets in Libya – telecommunications, the financial sector, retail and wholesale operations – are closed to foreign investors planning Libya company formation. Libya was not included in the Heritage Foundation’s 2013 Index of Economic Freedom, due to the political turmoil in Libya;
- Available qualified local workers in Libya must replace foreign investor’s own technically qualified staff;
- Following Libya company formation, a Libya company is required to submit its accounts to the Foreign Investment Board;
- Investors planning to start a business in Libya should note that Libyan business culture is heavily reliant on personal contacts;
- Following Libya company formation, businessmen find difficulty in obtaining visas for foreign staff, registering branch companies and declaring goods through customs;
- Libya is poorly ranked as the world’s 108th most competitive economy in the Global Competitiveness Report 2013 – 2014.
Incorporation costs in Year 1 amount to US$10,370 and annual company costs in Year 2 and thereafter amount to US$0. The average total fees per Libya engagement amounts to US$20,670, including company incorporation, company secretary and corporate bank account. Refer to draft invoice embedded here.
Success tips when doing business in Libya
- Your joint venture partner or Libya shareholder must not merely be a nominee for the sake of meeting the rules of foreign company incorporation. You should choose a partner that actually brings a lot to the table, including local knowledge your business would need in Libya;
- To optimize the success of your new business venture in Libya, Healy Consultants recommends your firm i) complete a feasibility study ii) prepare a detailed business plan iii) communicate with the Libya Chamber of Commerce iv) speak to your local embassy in Libya and v) communicate with Healy Consultants Clients who successfully launched their business in Libya;
- Foreign companies should be aware i) Libya statistics and market data are usually imprecise ii) transactions tend to take longer than expected iii) more frequent and longer market visits are required, at least initially iv) complex business procedures are common;
- An essential factor in starting a business in Libya is to thoroughly research the business sector you are planning to invest in. Healy Consultants recommends our Client prepare a detailed business plan including an extensive market study and evaluation of competitors.