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.
|