The Lebanese economy functions mostly as a free market, and the operates with a primarily unrestricted exchange and trade system. Both residents and non-residents utilize wholesale freedom of movement on capital and goods. Over 80% of aggregate demand comes from the private sector, which is made up of key industries such as agriculture, manufacturing, banking, and tourism.
There are a variety of business entities available to both local and international persons. Such business types include sole ownerships, partnerships, joint stock companies, LLCs, holding companies, and offshore companies. Commercial law in Lebanon is based on the French model, but neither foreign nor local businesspeople or entities can be incorporated, and single-shareholder setups are forbidden. Every company must be registered at a commercial court no less than two months from the day business begins or from the day of formally acquiring a legitimate business address. Notification within the same time period is required for change of ownership. PwC estimates that the total time to complete registration, after all documents are properly completed and notarized, is between 10 and 15 days following receipt by the Lebanese Consulate or Embassy.
Lebanese tax authorities collect tax based on total income and profits made in Lebanon, and taxation is applicable to all corporeal and incorporeal persons in or outside of Lebanon so long as the profit was generated in the country. There are three types of income described in the Lebanese tax code, thus, with the absence of a single, all-encompassing tax code; each source of income is taxed based on the type of profit. The first type applies to profits derived from commercial, noncommercial, and industrial activities; the second is wages, salaries, and pensions; and the third is profits from movable capital. The Lebanese criteria for residency are vague, but a person or business will be considered a resident for tax purposes when he or she has a fixed place of business in their name whether or not the business is operating continuously, or if they conduct business transactions in the country despite the absence of an official place of business. Businesses are allowed to revalue their assets every five years, and any capital gains discovered in this revaluation, in addition to any gains earned from the selling off of assets, must pay a 10% capital gains tax. The same tax is applicable when disposing shares if they are determined to be part of a company’s financial assets. Withholding and declaring payroll taxes are the responsibility of the employer and is set at progressive rates of 2-20%. The country offers a 10-year tax exemption on earnings by industrial entities that have been established since 1980 in what are deemed strategic areas of the economy, as well as those that manufacture products not previously produced in Lebanon before 1980.
The government welcomes and encourages foreign investment, and the country is endowed with many lucrative factors sought after by potential investors, namely the country’s location as a transshipment point between Arab nations and the rest of the world. The country amended its banking secrecy law over a decade ago in order to better comply with international standards of anti-money laundering law. The change stipulated that the Special Investigation Committee investigate any and all suspicious transactions. Foreign investors also receive protection for private property and equity akin to the protections offered to Lebanese.
The Beirut Free Trade Zone has been a cornerstone achievement in the country’s attempt to distinguish itself as the regional trading and transport hub. Established in 1995, it provides investors an array of well-known incentives, such as 100% foreign ownership, exemptions on customs duties for imports to and exports from the free zone, long-term and low-cost land and building leases, as well as lowered utility rates for industries.