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THE OFFSHORE COMPANY

January 1998


TABLE OF CONTENTS

1. Object

a. Concluding Contracts
b. Using the Facilities in the Free Trade Zone
c. Preparing Studies and Consultations
d. Providing Banking and Financial Services

2. Prohibitions and Penalties

a. Prohibitions
b. Penalties

3. Legal Aspects

a. Structure
b. Capital

4. Administration

a. Board of Directors
b. Chairman
c. Auditor

5. Financial Records

6. Registration

a. General Register
b. Special Register

7. Publication

8. Bank Accounts

9. Taxation

a. Declaration
b. Fine for Delayed Declaration
c. Tax Exemptions

1. Offshore Company
2. Employees

d. Tax Base and Rates

1. The Offshore Company

i. Fixed Annual Tax
ii.Tax on Capital Gain

2. Employees of the Offshore Company

e. Settlement of Taxes Due


1. Object

 

The object of the offshore company must be restricted to the following:

a. Concluding Contracts

The offshore company can negotiate and sign contracts and agreements concerning operations and deals carried out outside Lebanon, and related to merchandise and materials which are outside Lebanon or in the free trade zone.

b. Using the Facilities in the Free Trade Zone

The offshore company can use the facilities of the free trade zone to stock imported goods for the purpose of re-exporting them.

c. Preparing Studies and Consultations

Upon the request of firms located abroad, the offshore company can prepare studies and consultations to be used outside Lebanon .

d. Providing Banking and Financial Services

The offshore company can carry out banking and financial services, activities, and intermediation to be performed outside Lebanon. The offshore company's articles of incorporation must require it to abstain from engaging in any activity other than those mentioned above.

The offshore company can rent offices in Lebanon, and own the real estate necessary for its activities, in accordance with the law on the acquisition of real estate by foreigners in Lebanon.

 


2. Prohibitions and Penalties

a. Prohibitions

The offshore company is prohibited from engaging, on the Lebanese territory, in industrial, banking, insurance, holding, or in any commercial activity that is beyond its restricted object as specified above.

It is also prohibited from earning any profits or revenues through movable or immovable assets in Lebanon, or through providing services to companies located in Lebanon, except for the interests on its banking accounts.

b. Penalties

If the offshore company engages in activities beyond its object, it becomes subject, for the year during which these activities were carried out, to the income taxes imposed on associations of capital operating in Lebanon, in addition to a penalty set at 50 percent of the initial tax.


3. Legal Aspects

 

a. Structure

The offshore company must be founded as a joint-stock company.

It is subject to the rules governing joint-stock companies in all what is not incompatible with the provisions of the decree law regulating offshore companies.

b. Capital

The minimum required capital for an offshore 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.

 


4. Administration

 

a. Board of Directors

The board of directors of the offshore company should, at least, include two Lebanese natural persons.

b. Chairman

If he is a foreigner not residing in Lebanon, the chairman does not need a work permit .

c. Auditor

The offshore company must appoint, at least, one auditor who should be a Lebanese citizen residing in Lebanon. His term of appointment cannot exceed three years. The offshore company is exempted from having an additional auditor appointed by the president of the Court of Commerce, upon the request of the board of directors, as is the case for the joint- stock company.


5. Financial Records

The offshore company must hold accounting records, and prepare annual financial statements.

It can keep its accounts and prepare its balance sheets in the same currency of its capital.


6. Registration

a. General Register

The offshore company should be registered at the General Commercial Register in accordance with the provisions of the Code of Commerce.

b. Special Register

The offshore company should also be registered at the Special Register for Offshore Companies, held at the Court of First Instance in Beirut.

In order for it to be recorded in the Special Register, the offshore company must submit a bank guarantee issued by a bank accepted in Lebanon. This guarantee should be automatically renewable, in order to meet the company's obligations toward the government, and in order to comply with the provisions of the decree law regulating offshore companies.


7. Publication

The offshore company should publish annually in the Special Register for Offshore Companies the following statements:

  • the balance sheet of the financial year,
  • the names of the members of the board,
  • the names of the auditors

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 the Lebanese joint-stock company (S.A.L).


8. Bank Accounts

All bank accounts of offshore companies are governed by the provisions of the "Free Banking Zone", which exempt these bank accounts from:

a. The income tax on interest.

b. The obligation of the banks to set aside required reserves against these accounts, and the obligation of paying the deposit guarantee fees on them.


9. Taxation

a. Declaration

The offshore company must 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 the decree law regulating offshore companies.

b. Fine for Delayed Declaration

A fine of LL. 50,000 per month is imposed on the offshore company, if there is a delay in submitting the tax declarations.

c. Tax Exemptions

1. Offshore Company

The offshore company is exempted from the following taxes:

i. income tax on profits,

ii. income tax on profit distributions,

iii. stamp duties on the contracts signed by the company in Lebanon concerning its activities outside Lebanon.

2. Employees

Thirty percent of the basic salary of foreign employees working at the offshore company is considered as a representation allowance, and is exempted from tax on wages and salaries.

d. Tax Base and Rates

1. The Offshore Company

The offshore company remains subject to the following taxes:

i. Fixed Annual Tax

A fixed annual tax amounting to LL. 1,000,000 is directly paid to the Finance Department of Income Tax.This tax is imposed on the offshore company starting the first financial year, regardless of its duration.

ii. Tax on Capital Gain

The capital gains resulting from the sale of the offshore company's fixed assets in Lebanon are taxed at a rate of 6 percent.

2. Employees of the Offshore Company

The salaries and wages of the employees working at the offshore company are subject to taxes on wages and salaries at rates varying from 2 to 10 percent.

e. Settlement of Taxes Due

The taxes due by the company should be settled in one payment, upon the declaration of activities, and within the specified period.

A penalty of 0.5 per mil is added for every day of delay.

 
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