DOING BUSINESS IN LEBANON
Since 2003, Healy Consultants has assisted our Clients with starting their business in Lebanon. Our services include i) Lebanon business registration ii) government license registration iii) business bank account opening iv) employee recruitment v) visa strategies and vi) office rental solutions.
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Advantages and disadvantages
Advantages of Lebanon company registration
- A Lebanese limited liability company can be registered within 2 weeks with 1 director and 3 shareholders, who can be of any nationality. The minimum paid-up share capital required is US$3,400 and our Clients do not need to travel to complete the engagement;
- It is easy to start a Lebanese company because:
- It takes only 2 weeks to register a Lebanese LLC, compared to an average of 1 month in other Arab countries;
- Our Clients will be able to fully own their Lebanese LLC, avoiding the hassle related to the search of national shareholders often suffered in other Middle Eastern countries;
- The Lebanese government automatically grants work permits for directors and expatriate staff, provided a minimum investment of i) US$200,000 for companies with IT-related activities and ii) US$1 million for other companies.
- Market opportunities for a startup should not be overlooked in Lebanon because:
- While Lebanon represents only 4.3 million consumers, their purchasing power, worth US$10,000 annually, is high compared to other Middle Eastern markets;
- Healy Consultants believe that Lebanon has a great potential for tourism as the country boasts i) over 1 million foreign visitors in 2013 and ii) Beirut, a great capital city with historical landmarks, great food and beaches;
- Market opportunities will be growing fast in Lebanon in the coming years. The International Monetary Fund expects the Lebanese economy to grow at a 4.5% rate per year until 2020.
- Lebanon-based companies benefit from a low-cost, quality workforce because:
- The workforce in Lebanon is highly-skilled with i) a 92% literacy rate ii) 25% of university degree holders and iii) full fluency in at least 2 and often 3 languages including Arabic, English and French;
- Lebanese businesses benefit from low labor costs as i) the minimum wage is only US$470 per month and ii) the average wage is only US$500, according to the International Labor Organization;
- More than 800,000 Syrian and Iraqis are currently fleeing their war-torn country, providing hard-working employees who will be grateful to earn a living;
- Our Clients will find plenty of well-performing Lebanese graduates to hire, as youth unemployment rate is recorded at 35%.
- Global entrepreneurs registering a Lebanon company also enjoy these tax advantages:
- Investment projects benefit from i) reduced corporate tax of up to 0% for 10 years and ii) approval for work permits, if their initial amount is over i) US$200,000 in IT and ii) at least US$1 million in tourism and industry;
- Larger projects also benefit from i) an exemption from requirement to appoint Lebanese directors and ii) 50% discount on construction permits fees. These projects must represent i) over US$400,000 and 25 created jobs in IT and ii) over US$2 to 15 million and at least 60 jobs created in other sectors.
Disadvantages of Lebanon company registration
- Our Clients find that doing business in Lebanon is currently risky because:
- Lebanon-based entrepreneurs are worried about the war in Syria. If it degenerates, Lebanon state may collapse, as i) Hezbollah strongly backs the Assad regime and ii) Israel considers Lebanon as Syria and Iran’s puppet state;
- Our Clients will need to provide i) high salaries and ii) safe living conditions to their expat staff in Lebanon;
- Lebanese-based companies should setup stringent procedures to prevent management and employees to use their company for i) money laundering and ii) financing of terrorism. Authorities abroad will closely monitor all funds remitted from a Lebanese company as the country is i) a major narcotics producer and ii) home for Hezbollah;
- For all the reasons above, Lebanon is currently ranked as 10th most politically unstable country in the world.
- Daily business operations are hindered by disastrous infrastructure in Lebanon, including:
- Lebanese roads are ranked as the worst in the Middle East and the country has no railroads;
- Our Clients will not be able to truck their products abroad by land as i) the frontier with Israel is closed ii) the frontier with Syria is highly risky;
- Lebanese businesses suffer from blackouts lasting i) 3 hours per day in Beirut and ii) up to 9 hours in other main cities. Lebanon is indeed ranked as the world’s worst country for electricity supply, since the 2006 war with Israel;
- For reasons above, Lebanon’s infrastructure is ranked as the 25th worst in the world.
- Corruption and red tape hinder businesses because:
- Lebanese companies must legally appoint a company attorney, whom must be a Lebanese citizen registered at the Beirut Bar Association. Healy Consultants will be pleased to provide this service to our Clients, for an annual fee of US$7,000;
- In order to manage their LLC from Lebanon, our foreign Clients must obtain a work permit with requirements including i) share in the company’s capital of US$66,000 and ii) at least 3 Lebanese citizens hired;
- Business registration documents must be translated into Arabic. Healy Consultants will assist our Clients with complying with this requirement;
- Our Clients will have to face a painfully slow customs administration. It takes an average of one month to receive products bought abroad;
- Our Clients facing difficulties with customers and suppliers cannot count on Lebanese Courts to solve them. On average, it takes 721 days to enforce a contract, the 3rd highest figure in the Middle East;
- Hezbollah, a militia and a terrorist group, controls the south and northeast parts of Lebanon. Our Clients may henceforth be requested to make “donations” to this organization.
- Foreign entrepreneurs need to carefully choose management for their Lebanese company because:
- Lebanese PLCs must appoint at least 51% of Lebanese nationals amongst their directors. Healy Consultants will be pleased to assist our Clients with selecting a Lebanese director, for an annual fee of US$3,600;
- Owners of a Lebanese company have no legal recourse against bad management decisions. According to Lebanese Company Law, i) directors are not legally liable for damages caused by their management to the company ii) shareholders have no power to nullify a transaction approved by directors (unless fraudulent) and iii) a director will not have to repay lost profits/damages related to transactions he approved;
- Our Clients should carefully select their company’s chairman. Most businesses are indeed family-owned in Lebanon and true decision-making power lies with them, rather than directors. Local businessmen will henceforth feel uncomfortable dealing with a director without close ties with the business owner.
- Our Clients will not have any access to the Israeli market from Lebanon because:
- Lebanese companies are forbidden to buy and sell goods to Israel. Non complying companies are often i) prosecuted by the authorities and ii) considered as traitors by Lebanese militias;
- Lebanese companies are also forbidden to sign contracts with a blacklist of U.S. firms believed to contribute to Israel’s military;
- Our Clients and their staff won’t be able to enter Lebanon with a passport containing an Israeli stamp. Likewise, Israeli authorities often refuse entry to people with a Lebanese stamp.
- Our Clients pay high taxes in Lebanon because:
- Standard tax rates are: i) corporate tax – 15% ii) VAT – 10% iii) Social Security-13% iv) payroll tax – up to 20% and withholding tax on interest and dividends – 10%;
- All included, these taxes represent on average 30% of a Lebanese company’s profits. This rate is higher than in most Middle East countries including Qatar – 11% ii) Kuwait – 12% iii) Bahrain – 14% iv) Saudi Arabia – 14% v) United Arab Emirates – 15% vi) Oman – 22% and vii) Jordan – 29%.
Best uses for a Lebanese company
- Our Clients often choose Lebanon to register a trading company in the Middle East because:
- Lebanon-based trading companies can easily sell their products overseas, thanks to the country’s excellent port infrastructure, ranked as the 9th best amongst Middle Eastern countries;
- Trading companies also enjoy generous tax incentives, as Lebanon’s three busiest harbors host Free Trade Zones offering i) custom exemptions on all imports and exports and ii) subsidized warehousing space;
- While selling Lebanese products abroad, our Clients may tap into a 15 million-strong Lebanese diaspora, who will i) buy their products and ii) promote them to their community. Numerous Lebanese live in i) Brazil ii) Argentina iii) France and iv) the United States, where they are praised as model immigrants and successful entrepreneurs;
- Although Lebanon is not a member of the WTO, our Lebanon-based Clients still have access to numerous overseas markets including i) the European Union ii) Egypt, Saudi Arabia, the UAE and other members of the Arab League iii) Russia and iv) China, as Lebanese products benefit from reduced/waived tariffs duties in all of these countries.
- Our Clients often choose Lebanon to register a trading company in the Middle East because:
- Time to incorporate: Two weeks
- Cost to set up: US$17,860
- Minimum capital: US$3,400
- Physical office required: No
- Shareholders: 3
- Directors: 1
- Company secretary: No
- Resident director: No
- Corporate tax rate: 15%
- Corporate tax base: Territorial
- Shelf companies: No
- Main company type: SARL