To be straightforward, it depends on the level of investment. Some international clients who want to have Lebanon as a Middle Eastern operations base have a representative office here instead of a Lebanese corporation. They only have admin or marketing staff in order to promote the product line, so it is not a taxable entity. The office is limited to expenses and cannot do any billing.
If it is a sizeable investment in Lebanon, we would consider setting up either a Société A Responsabilité Limitée (SARL) otherwise known as a limited liability company, or a Societe Anonyme Libanaise (SAL) as a corporate vehicle. It is, in fact, much easier to transfer shares in a SAL than in any other liability company and it works well for foreign investors who will be shareholders or sitting on the board of directors. If the investment is much larger, we would also set up a holding company, which would make it easier to extract dividends that are not taxable – capped at about USD3,400 per year. There remains the offshore scheme, which, although efficient, has been dwindling in popularity due to AML and OECD directives.
These are mostly the types of entities we would recommend, since subsidiaries are much less efficient from a tax perspective. Investors can end up paying up to 25 per cent in both income and dividends tax as compared to the standard minimum income tax rate of 17 per cent for Lebanese corporate tax. Of course, we don’t compete on a tax basis with countries like Dubai, Qatar or Saudi Arabia, since they don’t have income tax yet., but the reason people select Lebanon, besides the fact that it’s less competitive than those other jurisdictions, are numerous.
Lebanon is closer to Europe and, culturally, it’s an attractive place to be. Lebanese have a keen business sense and a culture of commerce and trade, we are also multilingual and most people speak Arabic, English and French while some also speak Spanish and German. It’s less about the tax, and more about the operating environment.
