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Lebanon 2017 | EXECUTIVE GUIDE | REVIEW: DOING BUSINESS

Lebanon's economy has long been distinctly international, with high rates of remittances from the Lebanese diaspora and foreign investment via tourism and real estate all accounting for a major part of the Lebanese economy.

Business practices in Lebanon reflect the country's position as a hub for Middle Eastern finance, with free market practices and few limitations on the movement of foreign capital. Moreover, Lebanon has made no secret of its desire to attract foreign investment to spur the economy. After a period of political instability and almost three years without a president, a new government took office in 2017 and is taking aggressive steps to clear gridlock and return Lebanon to its position as one of the Middle East's economic standouts.

Acquiring new foreign investment is one of Lebanon's foremost priorities at the moment; in January 2017, Prime Minister Saad Hariri called for more than USD10 billion in foreign investment. A combination of events have left Lebanon in urgent need of infrastructure investment. The 15-year war that ended in 1990 left infrastructure gaps in many places that have still not been repaired, and more recently systems have been stressed by the arrival of more than a million refugees from the Syrian civil conflict that began in 2011. The conflict in Syria has also badly damaged a central source of remittances and tourism revenues, putting Lebanon in a weakened financial position at the very moment it most needs to invest in new projects. Needs extend across all sectors, with transportation, telecoms, and utilities all well below regional and global standards. The Investment Development Authority of Lebanon (IDAL), the country's promotion agency, has worked to forge connections with Western investors by promoting Lebanon's economic openness, multilingual population, and strategic access to European, Asian, and African markets. Early indications are positive, with the IDAL reporting in mid-2017 that Lebanon was the only Middle Eastern country to record an increase in FDI in 2016, a mark of the country's attractiveness even in the midst of political turmoil.

Lebanon's legal and political structure is well suited to conducting business, with transparency and practices on par with the region's best. IDAL plays a major role in managing foreign investment, serving as both advisor and regulator; though primarily involved as a coordinating authority, IDAL has the power to award licenses for investment. The majority of foreign operations in Lebanon are in the form of joint stock companies and LLCs, which are allowed to be owned and operated in full by non-Lebanese citizens. Lebanon's government requires that a majority of a firm's board of directors be Lebanese but otherwise places no restrictions on foreign-owned firms. Lebanon complies with international banking secrecy laws but does not investigate sources of FDI and foreign investors have the same legal protections as Lebanese citizens with regard to private property; the law makes no distinction between foreign and domestic investors. Home to more than 141 diplomatic missions and an observing member of the WTO, Lebanon's strong international relationships are at the heart of the country's identity.

The Lebanese tax code differentiates between income derived from commercial and industrial activities, wages, and profits from capital. The current corporate income tax is set at 15%, but Lebanon's foreign investment law has set up tax incentives for capital investment in technology, telecoms, and tourism, among other industries. These tax breaks range from 50% income tax reduction for five years to waivers of all income taxes for a decade, depending on the scale of the project. Additional industrial tax incentives include a six-year income tax exemption for firms that establish operations in rural areas. Lebanon's government has recently taken action to reduce the tax burden in the industrial and infrastructure development sectors, passing a law in 2014 to reduce income tax on industrial exports by 50% and reducing tax dividends for companies listed in the Beirut Stock Exchange. Lebanon has two free trade zones that offer exemptions on customs duties and lover land and utility costs for investors, as well as double taxation agreements with 32 countries. The Lebanese Ministry of Finance has also taken steps to streamline the tax code and increase ease of payments in recent years, offering new electric methods of declaration and payment to increase the ease of doing business.