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Starting a Business in Lebanon

Below is a detailed summary of the bureaucratic and legal

hurdles faced by entrepreneurs wishing to incorporate and register a new firm in Lebanon No.

Procedure

1- Designate a Lebanese lawyer

Agency: Lawyer

Each newly formed company must retain and pay an attorney on an annual basis. On April 26 2012, the Beirut Bar Association increased the minimum annual retainer to LBP 9,000,000 effective as of January 2013. This retainer can be paid by the company during the year. Startup fees are set by the Beirut Bar Association at LBP 3,000,000.

2- Deposit the capital in a bank

Agency: Bank

This procedure can be carried out on the basis of a signed and notarized copy of the articles of association.

3- Register at the Company Registry

Agency: Commercial Register

The applicant submits the following documents to the company registrar at the Commercial Court, along with the total amount of required fees:

  • Articles of association
  • Commercial circulars
  • Minutes of the first general meeting of the partners
  • Registration application and a draft of the registration certificate to be issued
  • Document attesting the capital deposit
  • Partners’ identity cards or passports (copy)
  • Documents evidencing that the company is entitled to occupy the premises where it exercises its activities

4- Notify the Ministry of Finance of commencement of business operations

Agency: Ministry of Finance

Within 2 months of registration, the company must submit a notification of commencement of business activities to the Ministry of Finance in order to register for income tax and VAT.

5- Register at the National Social Security Fund (NSSF)

Agency: National Social Security Fund

This procedure has two functions: “Registration” of a new employee and “Confirmation” by the system. The “Registration” function entails submitting a file for each new employee at the NSSF regional office closest to the company premises and obtaining a file reference number (or a receipt acknowledging the registration) immediately upon the submission. Once this “Registration” function is completed, the business is considered to have fulfilled its legal obligations with the NSSF. The benefits to the newly registered employees, under NSSF rules, will also become immediately effective. The Time to complete this procedure is 1 day at no cost to the employer or the employee. The “Confirmation” function consists of issuing a hard copy document (printed on a special size sheet) in the name of the registered employee along with his/her unique NSSF ID. Due to the lack of printing equipment at NSSF, the confirmation documents are printed in batches every few days or so. Therefore, it could take up to 30 days for a confirmation sheet to be received by the newly registered employee.

6- File internal labor regulations (règlement intérieur) with the Ministry of Labor

Agency: Ministry of Labor

When the number of employees at a company reaches 15 then the company will have to file internal labor regulations (règlement intérieur) with the Ministry of Labor according to Art. 66 of the Labor Code.

7- Register for VAT

Agency: VAT Department

Registration for VAT is done at the VAT Department. To obtain a VAT certificate of registration, it may take between 7 and 10 days. There are specific forms to fill out for each kind of registration. The VAT department is independent from the taxes’ department. The registration in both departments is free of charge.

8- Obtain a company seal

Agency: Seal maker

Although not mandated by law, the majority of companies prefer to have company stamps. They can be order at any seal-making company.

Below is a detailed summary of the procedures, time, and costs to build a warehouse in Lebanon. This includes obtaining necessary licenses and permits, completing required notifications and inspections, and obtaining utility connections. Measure of efficiency

1- Obtain a recent planning certificate

Agency: Directorate General of Urban Planning (DGU)

BuildCo must submit a recent planning certificate (they are usually valid for 3 months) among the necessary documents to request a building permit. BuildCo must have a receipt from the municipality and should pay the value of the stamps for this procedure. 1- Land certificate stating the dimension and the content of the land 2- Cadastral plan showing the positioning of the land 3- Receipt from the municipality of the planning certificate

2- Obtain a topographic study

Agency: Topographic engineer

BuildCo needs to obtain a topographic study at the beginning of the construction in order to have accurate details about the levels and limitations of the land plot. This study is required for the construction permit application.

3- Hire a technical auditor and obtain approval of drawings

Agency: Technical Auditor

Based on Decision No. 1/1192 dated November 23, 2012, companies must hire a technical auditor accredited by the government who must review and approve the drawings related to the project before the building permit can be issued. They may request that modifications be made to the drawings. Throughout the construction phase, the auditors must also ensure that construction works are duly performed. And upon completion of the works, they must attest that the construction work was carried out properly.

4- Obtain approval of file by Order of Engineers (where engineer is registered) and pay duties to Order

Agency: Beirut Order of Engineers

The file must be submitted to the Order of Engineers if the engineer is registered (Beirut Order of Engineers or Tripoli Order of Engineers). The file should include the following:

  • A construction permit application signed by that same civil engineer or architect jointly with the real estate owner,
  • The design plans,
  • An agreement between the property owner and the architect or engineer responsible for the project described.

In order to be submitted as part of the application for a building permit, the file must bear the seal and registration number of the relevant Order of Engineers. The Order of Engineers meets twice a week. A fee schedule for the permit to start construction works from the Order of Architects and Engineers has been implemented in Beirut since 2010:

  • 1 and 3,000 sq. m., the cost is de LBP 1,500.00 per sq. m.
  • 3,001 and 6,000 sq. m., the fee is LBP 3,000.00 per sq. m.
  • 6,001 and 9,000 sq. m., the fee is LBP 4,500.00 per sq. m.
  • Above 9,001sq. m., the fee is LBP 6,000.00 per sq. m.

The cost is LBP 1,950,900.00.

5- Submit building permit application to Urban Development Department

Agency: Urban Development Department, Directorate Général d'Urbanisme (DGU)

BuildCo must submit the file described in the previous procedure to the Urban Development Department. In Beirut and Tripoli, the file is referred to as the municipal engineering department. The process takes up to 6 months. The Urban Development Department is a subdivision of the Directorate General of Urbanism.

6- Request and receive pre-approval inspection from Urban Development Department

Agency: Urban Development Department, Directorat Général d'Urbanisme (DGU)

The Urban Development Department inspects the property and the plans to ensure that they are consistent with the construction laws and regulations, and then issues its clearance for the issuance of the building permit and calculates the building permit taxes. The inspection itself is completed in a day, but it takes a while from the date BuildCo requests the inspection until the date the inspector arrives.

7- Pay building permit taxes to the municipality

Agency: Municipality

The Urban Development Department refers the file to the relevant municipality (in the case of the city of Beirut, to the Administrator of the City of Beirut). The municipality collects the construction permit taxes and issues the construction permit in the name of the property owner. Payment is made at the municipality. According to Decree No. 60 of 1988 on Municipal Taxes, the building permit taxes paid to the Municipality are a certain value per square meter of the building. However, this value per square meter is calculated based on the value of 1 square meter of construction as follows: - From the value of LBP 1 - 25,000: 1.5% of the construction value of 1 square meter - value between LBP 25,000 - 100,000: 2% of the construction value of 1 square meter - Greater than LBP 100,000: 1% of the construction value of 1 square meter In the case of Doing Business, the value of 1 square meter of construction is the total construction value / 1,300.6 sq. m. Therefore, the value per square meter without taxes to be paid is calculated as follows: (1.5% * 25,000) + (2% * 75,000) + (1% * [total construction value - 100,000]). Then a 15% municipal tax is added to the value above + 0.05% of the construction value of 1 square meter to obtain the total value to be paid per sq. m. as a municipal contribution. The second tax of 12% of the value above must be paid per square meter as a national tax. A contribution of 5% of the value above must be paid per square meter to the Order of Engineers and Architects. Therefore, the above values would all be added to obtain the total cost per square meter paid to the municipality for all building permit fees, which is then multiplied by 1,300.6 sq. m. for the purposes of the Doing Business case study.

8- Obtain a building permit

Agency: Municipality

By law, construction work can start if no decision about the building permit application has been made 15 days after the submission date. In practice, however, this is not applied, and people wait 4 months on average.

9- Obtain starting order permit from Order of Engineers

Agency: Beirut Order of Engineers

To start construction the engineer and/or architect must pay the dossier fee according to the number of professionals involved in the construction work (civil engineer, mechanic engineer, electrical engineer, geotechnical engineer, among others). The fee should not exceed LBP 200,000.00

10- Submit permit from Order of Engineers to the police

Agency: Police

11- Request and receive an inspection from the Ministry of Public Works for water and sewage

Agency: Ministry of Public Works

With follow-up, it takes 10 days from the time an inspection is requested until an inspection begins. Without follow-up, however, the inspection might never take place.

12- Submit application and receive approval for an occupancy permit from the Order of Engineers

Agency: Beirut Order of Engineers

Following the completion of construction, an application for approval of an occupancy permit must be submitted to the Order of Engineers. The Order must give a written and stamped approval first.

13- Submit application and receive approval for an occupancy permit from the Directorate General of Urban Planning (DGU)

Agency: Urban Development Department, Directorate General of Urban Planning (DGU)

Once construction has been completed, an application for approval of an occupancy permit must be submitted to the Urban Development Department. The Urban Development Department performs an on-site inspection of the building to ensure that it is in compliance with the construction permit and approved plans. The application for an occupancy permit must be accompanied by the plans related to the completed construction, signed by the engineer in charge, and stamped by the Order of Engineers. Following the clearance from the Urban Development Department, the file is forwarded to the relevant municipality (in the case of Beirut, to the Administrator of the City of Beirut) that will issue the occupancy permit in the name of the property owner. According to the law, the occupancy permit must be issued within a month. However, this time limit is not enforced in practice.

14- Receive on-site inspection from the Directorate General of Urban Planning (DGU)

Agency: Urban Development Department, Directorate General of Urban Planning (DGU)

It takes about a week to schedule the inspection.

15- Obtain occupancy permit

Agency: Urban Development Department, Directorate General of Urban Planning (DGU)

By law, the time limit for the procedure is 30 days, but in practice, it takes much longer to obtain the occupancy permit -- about 55 days with follow-up.

16- Obtain water connection

Agency: Water of Beirut and Mount Lebanon

Submit an application for a water connection accompanied by various documents.

17- Receive onsite inspection from the Ministry of Finance and obtain an estimate of leasing value of the warehouse

Agency: Ministry of Finance

Once the occupancy permit is issued, an inspector from the Ministry of Finance visits the site to prepare an estimate of the leasing value of the warehouse. This estimate is necessary to register the building.

18- Register the building with the Real Estate Registry

Agency: Real Estate Registry

According to Tables 1 and 2 attached to the Decree-Law No. 148 dated 12/6/1959 and its amendments, the registration fees consist of: (i) 1% of the leasing value of the warehouse (ii) minor taxes such as topography tax (approximately LBP 250,000) and deed and contract taxes (approximately LBP 100,000). There is an additional Municipality tax (5% of the total taxes in the aforementioned costs above), provided in Article 90 of the Law of the Municipality Duties and Taxes No. 60/88 dated 12/8/1988 and its amendments.

Getting Electricity in Lebanon

Below is a detailed summary of the procedures required for a business to obtain an electricity connection for a newly constructed building in Lebanon.

Procedure

1- Obtain neighbor's electricity bill (for address of closest building)

Agency: Neighbor

The customer needs to obtain an electricity bill from their neighbor or the identification number of the neighbor’s meter box (showing the address of the closest building. This is needed when applying for electricity connection because it allows the electricity company, Electricité du Liban, locate the construction.

2- Submit application to EDL and await estimate

Agency: Electricité du Liban (EDL), Beirut

The customer submits an application for electricity connection at Electricité du Liban’s offices. In addition to the application form, the client needs to submit:
  • copy of the title deed
  • copy of the ID card
  • the original building permit, and
  • electricity bill from the closest building (or meter box number) and its address

3- Receive external inspection by EDL

Agency: Electricité du Liban (EDL), Beirut

The application is forwarded to the relevant department at the utility for review. A site inspection is usually carried out to determine the details of the connection. The inspector then prepares a report with the specifics of the connection and awaits clearance from the relevant authority at the utility. Once clearance is obtained and the inspector has prepared an estimate of the connection fees, the client will need to make the necessary payment at Electricité du Liban’s offices. The client is then given the approved file back along with a “C23” card (with the number of connections and the temporary meter, if needed).

4- Await and receive external works and meter installation from EDL’s service provider

Agency: Electricité du Liban (EDL), Beirut

External works start after the client has paid the connection fees. For a connection of 3x200A, if the warehouse is less than 200 meters away from the closest distribution substation, the works will consist of laying out an underground cable from the building to that substation. Otherwise, a substation would be needed. Any permits needed for the works are obtained by the utility directly. The utility picks a contractor to do the external works, and possibly install the meter and turn the electricity on too. The utility however, always supervises the works. The contractor is in charge of applying for any required excavation permit with the municipality. No inspection of the entire internal wiring is done during the process.

5- Obtain final connection from EDL or its contractor

Agency: Electricité du Liban (EDL), Beirut or its contractor

Usually it is the utility that turns on electricity, but it all depends on the agreement between the contractor and the utility. The contractor might have the right to also turn on the electricity. At times when the utility is overloaded, it normally delegates the works entirely to its contractor that does the works, installs the meter, and turns on the electricity. In this case, the utility only checks the final connection at the end to make sure the installation has been done properly. Otherwise, if the agreement with the contractor does not give them this right, meter installation is done by the utility.

Registering Property in Lebanon

Below is a detailed summary of the steps, involved in registering property in Lebanon. It assumes a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute.
Procedure

1- Obtain an updated Real Estate Certificate from the Land Registry

Agency: Land Registry
Parties obtain an updated Real Estate Certificate from the Land Registry, such certificate mentions the names of the owners, a description of the property and any encumbrance or easment or inscription if any on the property. The Procedure to obtain the Real Estate Certificate is a straight forward one which only requires submission of the request, and the certificate is immediately issued thereafter.

2- Obtain an official cadastral map

Agency: Cadastre Administration (Da'irat al Massaha)

If the area is not specified in the real estate certificate and in the title deed, which is often the case, an official cadastral map and an area certificate must be obtained from the cadastre administration (in Arabic “Dairat al Massaha”). 3 Obtain an urban plan certificate from the Urban Planning Authority and the Municipality Agency: Urban Planning Authority and Municipality Parties obtain an urban plan certificate from the Urban Planning Authority and the Municipality. This is not strictly required by the law but it is usually requested by the buyer in order to make sure that no special easement or expropriation is planned on the property that he intends to purchase.

4- Obtain tax clearance from the Municipality

Agency: Municipality Obtain clearance from the Municipality to make sure that municipal taxes prior to the sale agreement have been paid. This is not required by law but it is usually requested by the buyer.

5- Preparation of the sale agreement

Agency: Notary/attorney An attorney or notary public or qualified facilitator prepares the sale agreement in the official form. The participation of a lawyer is not mandatory but it is preferred to avoid any mistakes. The sale contract is often drafted by the notary public or by a qualified facilitator. However, for complex and delicate real estate transactions where either or both parties need to protect their rights, the contract is usually negotiated and drafted by both parties’ attorneys. The Beirut Bar Association on its decision of April 26th, 2012 has set a minimum fee of LBP 2,500,000 for the drafting of a contract. Such minimum fee shall be subject to an increase taking into consideration the contract's value and importance.

6- Inspection of the property by the Tax Authority to get an official estimate of its rental value

Agency: Ministry of Finance The Tax Authority at the Ministry of Finance orders an inspection of the property by a controller. This is done to obtain an official estimate of the rental value of the property. A copy of the sale agreement should be submitted to the Ministry of Finance to obtain the official estimate of the rental value.

7- Obtain an official estimate of the rental value of the property from the Tax Authority

Agency: Ministry of Finance An official estimate of the rental value of the property is delivered by the Tax Authority at the Ministry of Finance after the inspection together with a tax discharge (clearance). Sometimes, an occupancy certificate from the Municipality is also requested.

8- Apply for registration at the Land Registry

Agency: Land Registry The contract, together with the documentation, is presented, either:
  • directly to the Land Registry officer before whom the contract is signed and then the property is registered
  • or to the notary public before whom the contract is signed and then both the contract and the documentation shall be presented to the Land Registry for registration of title.
If it is presented to the Land Registry, all taxes and duties are paid at the tax authority cashier, which is located at the same building than the Land Registry. The taxes and duties to be paid if the contract is presented at the Land Registry are as follows:
  • Proportional stamp duty: 0.3% of contract value.
  • Bar Association tax: 0.1% of contract value.
  • Various taxes, namely:
- Flat tax on contract: LBP 8,000. - Tax (called in Arabic “kaydieh”): LBP 8,000. - Flat tax on title deed: LBP 8,000. - Tax on new title deed: LBP 50,000 Total of said flat taxes: LBP 74,000 - Proportional transfer tax: 5% of contract value or of the value resulting from the official estimate, which is higher. - Proportional Municipal tax: 5% of the total amount (i.e. aforementioned 5% transfer tax + L.P. 74,000). - Flat stamp duty on new deed: L.P. 5,000 The Contract is presented to the Assistant Land Registrar, then it will go through one or two officers before it reaches the Land Registrar who would: (i)- either accept the contract if he/she agrees on the price that was set by the parties and finds that there are no irregularities in the documents, in which case the contract shall be immediately registered, and thereafter the new deed will be delivered to the buyer. (ii)- or refuse to register the contract until the price is amended (i.e. increased) or the irregularities in the documentation is rectified, in which case the Land Registrar’s request shall be satisfied and the contract is to be presented once again for review and acceptance. It is only when the Land Registrar approves the signed contract and accepts to record it that the title to property is transferred to the Buyer. Then, once the transaction is completed, the new title deed in the name of the Buyer is delivered in about 5-7 business days. As per the express and clear provisions of the law, the buyer acquires full ownership only when the sale contract is recorded (i.e. after its acceptance) in the Land Registry, regardless of when the new deed is delivered to him. In case the contract is delivered for signing to the notary public, then both the contract and the documentation shall be presented to the Land Registry for registration of title, in which case the above mentioned costs shall be increased as follows: - Notary tax: 0.1% of contract value. - Flat tax: LBP 50,000 - Notary flat tax: LBP 15,000 - Flat stamp duty on contract: LBP 10,000 - Tax (called in Arabic “Tahrir wa tanzim”): LBP 34,000 - Reconstruction tax: LBP 2,500 - Stamp duty on second copy of contract: LBP 1,000 - Notary public fees: LBP 200,000 All taxes and duties are paid directly at the notary public’s office, except for the stamp duty that is paid at the Ministry of Finance if its amount exceeds LBP 200,000

The documentation shall include:

  • Title deed, as proof of ownership (held by seller)
  • Real Estate Certificate (obtained in Procedure 1)
  • Official cadastral map (obtained in Procedure 2)
  • Official estimate of rental value of the property (obtained in Procedure 5)
  • Municipal tax clearance (obtained in Procedure 6)
  • Sale agreement (prepared in Procedure 7)

Trading across Borders in Lebanon

Export documents Bill of lading Commercial invoice Customs export declaration Packing list Customs inspection report Export documents Bill of lading Commercial invoice Customs export declaration Packing list Customs inspection report

Labor Market Regulation in Lebanon

Below is a detailed summary of some of the labor regulations that would apply to local entrepreneurs wishing to hire workers, organize working schedules, improve job quality for workers, or make workers redundant for economic reasons in Lebanon. It measures the regulation of employment, specifically as they affect a local entrepreneur running a supermarket or grocery store operating in the economy's largest business city (for 11 economies the data are also collected for the second largest business city) and employing 60 employees. 15.0 15.0 15.0 15.0 No limit but after 24 months worker is treated as indefinite term for purposes of severance pay (Art. 58).Yes Yes No Yes Paid annual leave for a worker with 10 years of tenure (working days)Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days)No Third-party approval if one worker is dismissed? 3rd-party notification if nine workers are dismissed? 3 rd-party approval if nine workers are dismissed?
Topic Answer
Fixed-term contracts prohibited for permanent tasks? No
Maximum length of a single fixed-term contract (months)
Maximum length of fixed-term contracts, including renewals (months) 24.0
Minimum wage applicable to the worker assumed in the case study (US$/month) 435.2
Ratio of minimum wage to value added per worker 0.4
Working hours
Maximum number of working days per week 6.0
Premium for night work (% of hourly pay) 0.0
Premium for work on weekly rest day (% of hourly pay) 50.0
Premium for overtime work (% of hourly pay) 50.0
Restrictions on night work? No
Whether nonpregnant and nonnursing women can work the same night hours as men Yes
Restrictions on weekly holiday? No
Restrictions on overtime work? Yes
Paid annual leave for a worker with 1 year of tenure (working days)
Paid annual leave for a worker with 5 years of tenure (working days)
Redundancy rules
Maximum length of probationary period (months) 3.0
Dismissal due to redundancy allowed by law?
Third-party notification if one worker is dismissed?
Retraining or reassignment obligation before redundancy? No
Priority rules for redundancies? Yes
Priority rules for reemployment? Yes
Redundancy cost
Notice period for redundancy dismissal for a worker with 1 year of tenure 4.3
Notice period for redundancy dismissal for a worker with 5 years of tenure 8.7
Notice period for redundancy dismissal for a worker with 10 years of tenure 10.7
Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 7.9
Severance pay for redundancy dismissal for a worker with 1 year of tenure 0.0
Severance pay for redundancy dismissal for a worker with 5 years of tenure 7.2
Severance pay for redundancy dismissal for a worker with 10 years of tenure 14.4
Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 7.2
Job quality
Equal remuneration for work of equal value? No
Gender nondiscrimination in hiring? No
Paid or unpaid maternity leave mandated by law? Yes
Minimum length of maternity leave (calendar days)? 70.0
Receive 100% of wages on maternity leave? Yes
Five fully paid days of sick leave a year? Yes
Unemployment protection after one year of employment? No
Minimum contribution period for unemployment protection (months)? n.a.