Investment Regulations

Openness to Foreign Investment
Lebanon is a country open to foreign direct investment by tradition. Over the last five years, the GOL passed several laws and decrees to encourage investment. The Investment Development Law grants the Investment Development Authority of Lebanon (IDAL), a public agency under the Prime Minister, the authority to award licenses and permits for new investments, as well as to grant special incentives, exemptions and facilities to large projects. In an attempt to attract foreign investments, IDAL launched in 2003 the “Investors Matching Service” to facilitate the creation of strategic international-local partnerships through joint venture, equity participation, acquisition, and others. IDAL is currently setting up the Investor Support and Information Center (ISIC), a data bank that provides comprehensive, reliable, and up-to-date investment related information to prospective investors.

Lebanon has many investment enabling strengths that have encouraged foreign companies to set up offices in recent years. Lebanon’s key advantages include a free market economy, the absence of controls on the movement of capital and foreign exchange, a highly educated labor force, good quality of life, and limited restrictions on investors.

The government has expressed a strong commitment to improving the business environment in its reform program submitted at the Paris III International Donors’ Conference in January 2007. In January 2006, the Ministry of Economy and Trade (MOET) signed an agreement with the IFC to help streamline business registration procedures in Lebanon. A short-term business registration simplification solution was endorsed in September 2007 and is expected to reduce time, cost, and number of procedures by 50 percent. The MOET is working on new legislation to further reduce time, costs, and procedures in the long run.

In 2007, 44 foreign companies opened offices, representative offices, or branches in Lebanon, according to statistics from the MOET.

Lebanon received mixed results in the recently released World Bank report on governance. The report, entitled "Governance Matters 2007: Governance Indicators for 1996-2006," uses six dimensions of governance to rank 212 countries. Lebanon’s MENA ranking improved in terms of freedom of expression, accountability, and regulatory quality on a yearly basis; it declined in the categories of government effectiveness and control of corruption. Lebanon’s rank was unchanged for political stability, violence, and rule of law.

Privatization is a key component of the current Siniora government’s economic reform program, and the government is eager to attract foreign investors. In the last quarter of 2007, the government moved forward in privatizing the telecommunications and power sectors. The Telecommunications Regulatory Authority (TRA) made available an online data-room for potential bidders for the country's GSM network. Information on the auction for the two cellular licenses is available online at The deadline for bidding is currently undetermined and will not be decided until the current political crisis is resolved. In order to privatize power production and distribution at Lebanon's national power company, Electricite du Liban (EDL), the government has contracted three separate advisory teams to help corporatize EDL and set up the regulatory framework for its privatization within 18 months. Moreover, the Ministry of Energy and Water (MEW) signed two memoranda of understanding on November 9, 2007, with two separate local private companies to build private power plants, in line with the government's plan to privatize the electricity industry and switch to cheaper and more environmentally friendly fuels. One company will build a new 50 megawatt plant to supply the national power grid and the other company will construct the country's first wind-powered plant in the Biqa' region.

There are opportunities for attracting foreign investors in infrastructure projects. The government pledged at the Paris III Conference to maintain an appropriate level of investment spending. The Council for Development and Reconstruction (CDR) is responsible for tendering and procuring funding for government physical infrastructure projects (electricity, telecommunications, roads and public transport), social infrastructure (education, public health, social and economic development, land use and environment), basic services (water supply, wastewater, solid waste management), and productive sectors (agriculture, irrigation, ports, airports, tourism, and government buildings). According to the latest CDR progress report (September 2007), there are 650 projects in progress for a value of $2.376 billion. Public infrastructure opportunities mainly lie in roads and highways, ports, electricity, education, solid waste, wastewater, and water supply.

A foreigner can establish a business under the same conditions that apply to a Lebanese national, provided the business is registered in the Commercial Registry. Foreign investors who do not manage their business in Lebanon do not need to apply for a work permit. However, foreign investors who own and manage their business in Lebanon must apply for an "Employer Work Permit" and a residency permit. The Employer Work Permit stipulates that the investor's share in the capital not be less than $67,000 and that the investor pledges to hire three Lebanese and register them at the National Social Security Fund within six months. All companies established in Lebanon must abide by the Lebanese Commercial Code and regulations, and are required to retain the services of a lawyer. There are no sector-specific laws on acquisitions, mergers, or takeovers, except for bank mergers.

Lebanese law does not differentiate between local and foreign investors, except in land acquisition. Foreign investors can generally establish a Lebanese company, participate in a joint venture, or establish a local branch or subsidiary of their company without difficulty. Specific requirements apply for holding and offshore companies, real estate, insurance, media (television, political newspapers), and banking.

Lebanese laws allow joint-stock corporations, limited liability, and offshore and holding companies. A joint-stock corporation (Societe Anonyme Libanaise - SAL) is governed by Decree Law No. 304, dated January 24, 1942, on Commercial Law. There are some limitations connected with foreign participation: a general limitation on management participation (Article 144 stipulates that the majority of the Board of Directors should be Lebanese), indirect limitation with regard to acquisition of capital shares (Article 147), limitation on capital shares with regard to public utilities (Article 78), and limitation on capital shares and management with regard to exclusive commercial representation (Decree-law 34/67, dated August 5, 1967). In the financial sector, most establishments, including banking and insurance, should take the form of a joint stock company.

A limited liability partnership (Societe a Responsabilite Limitee - SARL) is governed by Decree Law No. 35, dated August 5, 1967, can be fully owned by non-Lebanese and the management of the company can be conferred to non-Lebanese.

Holding and offshore companies follow the legal form of a joint-stock corporation and are governed by Decree Law No. 45 (on Holdings) and Decree Law No. 46 (on Offshore companies), dated June 24, 1983. A foreign non-resident Chairman/GM of a holding or an offshore company is exempt from the obligation of holding work and residency permits. The recent Law No. 772, dated November 2006, exempts holding companies from the obligation of having two Lebanese persons or legal entities on their Board of Directors. All offshore companies must register with the Beirut Commercial Registrar. Offshore companies must have at least two Lebanese on their Board of Directors; this obligation should be abrogated when parliament endorses a new law governing offshore companies to make it WTO compliant. The draft has been pending in parliament since October 2005.

Law No. 296, dated April 3, 2001, which amended the 1969 Law No. 11614, governs foreign acquisition of property. The new law eased legal limits on foreign ownership of property to encourage investments in Lebanon, especially in industry and tourism, abolished discrimination for property ownership between Arab and foreign nationals, and lowered real estate registration fees from six percent for Lebanese and 16 percent for foreigners to five percent for both Lebanese and foreign investors. The law permits foreigners to acquire up to 3,000 square meters of real estate without a permit; acquiring more than 3,000 square meters needs Cabinet approval. Cumulative real estate acquisition by foreigners may not exceed three percent of total land in each district. Cumulative real estate acquisition by foreigners in the Beirut region may not exceed 10 percent of the total land area. The law prohibits acquisition of property by individuals not holding an internationally recognized nationality.

Conversion and Transfer Policies
There are no restrictions on the movement of capital, capital gains, remittances, or dividends, or on the inflow and outflow of funds. The conversion of foreign currencies or precious metals is unfettered. Foreign currencies are widely available and can be purchased from commercial banks or money dealers at market rates. There are no delays in remitting investment returns except for the normal time required by the banks to carry out transactions.

Expropriation and Compensation
Land expropriation in Lebanon is relatively rare. The Law on Expropriation (Law No. 58, dated May 29, 1991, Article One), as well as Article 15 of the Constitution, clearly specifies the purpose of expropriation and calls for fair and adequate compensation. The Government may expropriate property for public utility projects, such as enlarging highways and streets. Compensation is paid at the time of expropriation. The Government does not discriminate against foreign investors, companies, or their representatives, in expropriation.

Performance Requirements and Incentives
There are no performance requirements on investment imposed by law. There are no requirements on foreign investors regarding geographic location, amount of local content, import substitution, export expansion, and technology transfer, or source of financing. Investors are not required to disclose proprietary information as part of the regulatory approval process, except in the case of banks, which must have the Central Bank's approval for transfer of ownership.

Foreign investors enjoy the same incentives as local investors. Foreigners doing business in Lebanon through establishment must have work and residency permits. Registration with a Chamber of Commerce is required for the import and handling of a limited number of products that are subject to control requirements for safety reasons. These products with special import regime constitute less than one percent of total tradable goods. Registration at the Chambers of Commerce is required for ensuring that established facilities meet safety, handling, and storage requirements.

The Investment Law divides Lebanon into three investment zones located outside Beirut, with different incentives provided in each zone. The Law encourages investments in the fields of technology, information, telecommunications and media, tourism, industry, and agriculture. Incentives include: (a) facilitating issuance of permits for foreign labor; (b) tax incentives ranging from 50 percent tax reduction for five years on income tax and tax on the distribution of dividends until total exemption of these taxes for ten years starting from the date of operation (issuance of first invoice); and (c) exempting companies that list 40 percent of their shares on the Beirut Stock Exchange from income tax for two years. The Investment Law allows the introduction of tailor-made incentives through package deals for large investments projects regardless of the project’s location, including tax exemptions for up to 10 years, reductions on construction and work permit fees, and total exemption on land registration fees. IDAL can exempt joint-stock companies that benefit from package deal incentives from the obligation of having a majority of their Board of Directors being Lebanese (Law 771, dated November 2006). Investors who seek to benefit from facilities in the issuance of work permits under "package deals” must hire two Lebanese for every foreigner and register them with the National Social Security Fund.

Other laws and legislative decrees provide tax incentives and exemptions depending on the type of investment and its geographical location. Industrial investments in rural areas benefit from tax exemptions of six or ten years, depending on specific criteria (Law No. 27, dated July 19, 1980, Law No. 282, dated December 30, 1993, and Decree No. 127, dated September 16, 1983). Exemptions are also available for investment in south Lebanon, Nabatiyeh, and the Biqa' (Decree No. 3361, dated July, 2, 2000). For example, new industrial establishments manufacturing new products will benefit from a 10-year income tax exemption. Factories currently based on the coast that relocate to rural areas or areas in south Lebanon, Nabatiyeh, and the Biqa' benefit from a six-year income tax exemption.

The Government reduces to five percent the tax on dividends for: (a) companies listed on the Beirut Stock Exchange (BSE); (b) companies that open up 20 percent of their capital to Arab companies listed on their country's stock exchange or foreign companies listed on the stock exchange of OECD countries; and (c) companies that issue GDRs (Global Depository Receipts) amounting to a minimum 20 percent of their shares listed on the BSE.

Domestic and foreign investors can benefit from five to seven percent $10 million) provided by banks, financial institutions and leasing companies to industrial, agricultural, tourism, and information technology establishments.

Custom exemptions are granted to industrial warehouses for export purposes. Companies located in the Beirut Port or Tripoli Port Free Zone benefit from a 10-year corporate tax holiday and are not required to register their employees with the National Social Security Fund if they provide equal or better benefits. Right to Private Ownership and Establishment
The right to private ownership is respected in Lebanon. Foreign private entities can establish, acquire, and dispose of interests in business enterprises and can engage in all kinds of remunerative activities.

Protection of Property Rights
The concept of a mortgage exists, and secured interests in property, both movable and real, are recognized and enforced. Such security interests must be recorded in the Commercial Register and the Real Estate Register. Lebanon has a Real Estate Law that governs acquisition and disposition of all property rights by Lebanese nationals; Law No. 296, dated April 3, 2001, governs real estate acquisition by non-Lebanese.

Lebanon has legislation to provide adequate intellectual property right protection. Existing intellectual property right laws cover copyright, patent, trademarks, and geographical elements.

  • Lebanon's 1999 Copyright Law largely complies with WTO regulations and needs minor amendments to become fully compatible. The new law allows educational institutions and students to copy legitimately acquired software for non-commercial use. Registration of copyrights in Lebanon is not mandatory. Copyright protection is granted without the need for any registration.

  • A modern and TRIPS-compatible Patent Law, approved in 2000, provides general protection for semiconductor chip layout designs, plant varieties, and trade secrets. The Lebanese legal regime does not require examination, prior to registration, of patents for novelty, utility, and innovation. Simple patent deposit is required at the Ministry of Economy and Trade. The application is examined only for conformity with general laws and ethics.

  • The Council of Ministers approved the drafts for a new Industrial Designs and Trademark Law in October 2007 and Geographical Indications in May 2007. These now await Parliamentary ratification. The 1924 Law on Industrial Property does not require examination of trademarks, but calls for simple deposit. However, examination of trademarks prior to registration became the norm starting in 2001. Registration of industrial trademarks takes about one week.

  • Lebanon signed the Singapore Treaty on Trademark in December 2006.

  • Lebanon has not signed any WIPO internet treaties yet.

Efficient Capital Markets and Portfolio Investment
Lebanon places no restrictions on the movement of capital in or out of the country, whether for investment or other purposes. The Government permits the free exchange of currencies, precious metals, and monetary instruments, both domestically and internationally. According to the UN report "Sending Money Home: Worldwide Remittances to Developing Countries,” the inflow of expatriate remittances into Lebanon for 2006 reached $5.72 billion, the second largest in the MENA region. As a percentage of GDP, remittances were estimated at 25.2 percent, the highest in the MENA region.

Credit is allocated on market terms, and foreign investors can get credit facilities on the local market. The private sector has access to overdrafts and discounted treasury bills, in addition to a variety of credit instruments, such as housing, consumer, or personal loans, and loans to small and medium enterprises. The International Finance Corporation (IFC) and the European Investment bank (EIB) have been separately extending financial facilities through the Lebanese banking sector to help small and medium enterprises (SMEs). In 2007, the EIB and the French Development Agency (French counterpart of USAID) have separately extended loans to the Lebanese banking sector to help the private sector recover from the impact of the July 2006 war. In late 2006, the Overseas Private Investment Corporation (OPIC) extended $108 million in credit line guarantees through Citibank to selected Lebanese banks for private sector lending.

In 2006, the MOET launched an EU-financed project to upgrade the quality of local manufacturing to match international standards as well as build the capacity of manufacturers and producers. The Ministry also launched incubators for SMEs in four regions in Lebanon (North, South, Biqa', and Mount Lebanon) through an EU-financed project.

The Beirut Stock Exchange (BSE) quotes six commercial banks, four investment funds, 16 sovereign Eurobond issues (13 in dollars, two in Euro, and one in Lebanese Pounds), and five companies, including “SOLIDERE,” one of the largest publicly held companies in the region. Trading is a combination of auction and continuous trading. Legislation allows the listing of tradable stocks or papers on the BSE. Lebanon is now the headquarters of the Arab Stock Exchange Union.

The regulatory system is transparent and consistent with international norms. Banks conform to Bank for International Settlement (BIS) standards. Lebanon has legislation regulating issuance of and trading in bank equities. Parliament passed Law No.308, dated April 3, 2001, on unification of bank shares whereby banks may increase their capitalization and shareholder base as well as optimize trading of bank shares on the BSE. New laws governing the operation of the stock market, such as the formation of a Financial Market Authority to oversee Lebanon’s stock market operations, await Parliament’s approval. Parliament ratified in November 2005 a new law on asset securitization. There are no restrictions on portfolio investment; foreign investors can invest in Lebanese equity and fixed income paper.

The banking system is sound and enjoys a high capital adequacy ratio of about 22 percent, almost triple the ratio set by Basel I (eight percent). The CBL and the Banking Control Commission (BCC) have set up a committee to prepare the banking sector to comply with the three pillars of Basel II recommendations. As of January 1, 2008, the Lebanese banking sector complied with Pillar I of Basel II (new capital adequacy ratio). The CBL and the BCC are currently issuing new circulars for banks to comply with Pillar II and III of Basel II in 2008. The Association of Lebanese Banks has separately set up a committee to follow-up on this issue.

The Lebanese banking sector, encouraged by the CBL, continues to consolidate. Over 25 bank mergers have taken place in the past decade, and additional mergers are anticipated after Parliament approved a revised Bank Mergers’ Law. International firms established in Lebanon, such as Standard Chartered Bank, BNP/Paribas, HSBC, Citibank and Merrill Lynch, remain active. Many sectors are dominated by traditional businesses in the hands of commercially powerful families. The Government is trying to improve the transparency of such firms in order to help solidify an emerging capital market for company shares.

The total assets of Lebanon's five largest commercial banks reached about $8.3 billion in 2006, or 54.9 percent of total banking assets. At the end of 2006, about 18.5 percent of total loans were estimated as non-performing, compared to 20.8 percent at the end of 2005. By the end of September 2007, the total assets of Lebanon’s five largest commercial banks reached about $56.8 billion, or roughly 59 percent of total banking assets. Banks continue to maintain more than two-thirds provisions against non-performing loans, while the remaining provision is covered by adequate collateral.

Bilateral Investment Agreements
Lebanon has signed bilateral investment agreements with the following countries (in alphabetical order): Armenia, Austria, Azerbaijan, Bahrain, Belarus, Belgium/Luxemburg, Benin, Bulgaria, Canada, Chad, Chile, China, Cuba, Cyprus, Czech Republic, Egypt, Finland, France, Gabon, Germany, Greece, Guinea, Hungary, Iceland, Iran, Italy, Jordan, Kuwait, Malaysia, Mauritania, Morocco, Netherlands, Oman, Pakistan, Romania, Russia, South Korea, Spain, Sudan, Sweden, Switzerland, Syria, Tunisia, Turkey, Ukraine, the U.A.E., the U.K., and Yemen. Lebanon has signed bilateral tax conventions with over 30 countries.

Lebanon signed the Euro-Mediterranean Partnership agreement in 2002, and the interim agreement entered into force in March 2003. The final agreement came into force in April 2006. In 2004, Lebanon and the European Free Trade Association (EFTA) signed a free trade agreement. Lebanon and Syria have four bilateral cooperation agreements in the fields of economics, transport, agriculture, and health. Lebanon has also signed the Pan Arab Free Trade Zone Agreement (PAFTA), as well as bilateral Free Trade Agreements with Egypt, Iraq, Kuwait, Syria, and the UAE.