THE HOLDING COMPANY January 1998 1. Object
6. Registration
7. Publication 8. Taxation of the Holding Company
1. Object The object of the holding company must be restricted to the following: a. Acquiring Shares The holding company can acquire shares in Lebanese or foreign joint-stock companies or limited liability companies, or participate in their establishment .
b. Managing Companies The holding company can manage companies in which it owns shares. c. Lending The holding company can lend money to companies in which it owns shares, and guarantee them towards third parties.
d. Possessing and Renting Reserved Rights The holding company can possess and rent to enterprises located in Lebanon and abroad, the following rights:
e. Possessing assets The holding company can possess movable and immovable assets in Lebanon on condition that they will be assigned only for the needs of its operations, in accordance with the provisions of the law on the acquisition of real estate by foreigners in Lebanon.
2. Prohibitions and Penalties a. Prohibitions The holding company is prohibited from engaging directly in activities beyond its restricted object as specified above. b. Penalties If the holding company engages in activities beyond its object, it becomes subject, for the year during which these activities were performed, to one of the following penalties, whichever is higher:
3. Legal Aspects a. Structure The holding company must be founded as a joint-stock company. It is subject to the rules governing Lebanese joint-stock companies in all what is not incompatible with the provisions of decree law no: 45 regulating holding companies. b. Capital The minimum required capital for a holding company is LL.30,000,000 which is the same for a joint-stock company. It must be fully subscribed to, and can be denominated in a foreign currency. c. Denomination The following expression: "Holding Company" must be mentioned next to the name of the company, in papers, announcements, pamphlets, and all other documents of the company. d. Head Office The head office of the holding company must be in Lebanon where the legal records and documents are kept. The holding company must provide either one of the following:
4. Administration a. Board of Directors The board of directors of the holding company must include, at least, two Lebanese natural persons. It is possible to convene the board outside Lebanon if the company's articles of incorporation allow it. b. Chairman If the chairman is a foreigner not residing in Lebanon,a work permit is not required. c. General Assembly It is possible to convene the general assemblies outside Lebanon if the company's articles of incorporation allow it. The annual ordinary general assembly must be held in Lebanon, within a maximum period of five months from the end of the financial year, as specified in the company's articles of incorporation. d. Auditor The company must appoint, at least, one auditor, who should be of Lebanese citizenship residing in Lebanon. His appointment cannot exceed three years. The holding company is exempted from having an additional auditor appointed by the president of the Court of Commerce, upon the request of the chairman, as is the case for the joint-stock company.
5. Financial Records The holding company is required to hold accounting records, and to prepare annual financial statements. The holding company can hold its accounts and prepare its balance sheets in the same currency of its capital.
6. Registration a. General Register The holding company should be registered in the General Commercial Register according to the provisions of the Code of Commerce. b. Special Register The holding company should also be registered in a Special Register for Holding Companies held at the Court of First Instance in Beirut. 7. Publication The holding company must publish annually in the Special Register for Holding Companies, the following:
It does not have to publish these statements in the Official Gazette, in an economic newspaper and in a daily local newspaper as is the case for Lebanese joint-stock company (S.A.L).
8. Taxation of the Holding Company a. Declaration The holding company is required to submit tax declarations, and settle the due taxes to the Finance Department of Income Tax, in accordance with the rules governing joint-stock companies, in all what is not incompatible with the provisions of decree law no: 45 regulating holding companies. b. Fine for Delayed Declaration A fine of LL. 50,000 per month is imposed on the holding company if there is a delay in submitting the tax declarations. c. Exemptions The holding company is exempted from the following taxes:
d. Tax Base and Rates The holding company remains subject to the following taxes: 1. Interest The interest collected against loans given by the holding companies to companies operating in Lebanon is subject to income taxes at the rate of 5 percent, if the maturity of the extended loans is less than three years. 2. Capital Gain The capital gains resulting from the sale of the holding company's participations and shares in Lebanese companies are taxed at a rate of 6 percent, if these participations and shares were owned by the company for less than two years. 3. Management Proceeds The amounts collected by a holding company from subsidiaries in Lebanon as management, and miscellaneous services and other fees are taxed at a rate of 5 percent, on condition that these fees do not exceed the limits set by a decree issued upon proposal of the Minister of Finance . 4. Renting Patents The revenues collected by a holding company as a result of renting patents and all the reserved rights it possesses, to enterprises located in Lebanon are taxed at a rate of 10 percent, with no additional surtax. 5. Capital and Reserves The holding company is subject to an annual fixed tax according to the rates shown in table 1 below. The amount of the annual tax should not exceed LL. 5,000,000.
Table 1 : Tax rates applied on capital and reserves
This tax is imposed on the holding company starting the first financial year, regardless of its duration. e. Settlement of taxes The taxes due on the holding company should be settled in one payment upon submitting the declaration of its operations, and within the specified period. A penalty of 0.5 per mil is added for every day of delay. |
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