The Business Environment

Libya has declared that it will focus on encouraging investment in what it deems critical areas. The government is looking at projects such as housing, hospital refurbishment, water treatment, and power and transmission lines. It also wants to upgrade Tripoli airport, construct a railway line to Egypt and Tunisia, and build luxury hotels.

Libya needs to diversify its oil-based economy and reduce inflation and unemployment. The government enacted a 28-point law in 1997 aimed at encouraging foreign capital investment. Serious efforts have begun to attract foreign investment after the United Nations suspended a seven-year embargo on international airline flights and the oil industry on April 5 1999.

The oil industry remains crucial to Libya’s economy and Libya has also launched a program to attract investors to oil exploration and production. New offshore oil fields and associated gas fields as well as non-associated gas fields have been discovered. Extensive offshore exploration by European, Brazilian, and Canadian companies is underway.

Work has started on the construction of an underwater pipeline to Sicily. Tripoli put a new Liquid Natural Gas (LNG) extracting unit with a 3,500 bpd capacity into service late in 1994 on the Bou Attifel gas field.

Libya is North Africa’s biggest oil producer and Europe’s leading North African oil supplier. Supplies for North Africa to European destinations have the advantage of being both timely and cost effective. Over 400,000 b/d of crude are destined for Italy alone. Libya and Algeria together provided the EU with 13.4 million tons of refined products in 1995 or 17.2% of its requirements. In addition to its oil industry, Libya has an active chemicals industry, as well as being one of the larger markets in the African lubricants industry.

The oil industry in Libya remains active, contributing 99% of country’s export revenue. Current reserves are estimated to be 50 billion barrels of crude and 43 trillion cubic feet of natural gas. In 1994, production was 49.2 million tons of crude and 273,000 terajoules of natural gas

The Libyan Foreign Investment Law

Investment Incentives
The Government promulgated Law No. 5 of 1426 (1997) to encourage the investment of foreign capital. This Law aims at attracting foreign capital within the framework of the general policy of the State and the objectives of economic and social development, particularly to:-

The law is applicable to the investment of foreign capital emanating from foreign sources and from foreign capital owned by Libyan Arab citizens. Investment is being targeted in the following areas:

• Industry
• Health
• Tourism
• Services
• Agriculture
• Any other field specified by a decision of the General People’s Committee upon recommendation of the Secretary

The taxation policy in respect of projects undertaken within the scope of the Law 5 of 1997 is as follows:

a) The project shall be exempted from income tax for a period of five years from the date of commencement provided that the tax free profits are reinvested in the project. This period may be extended for an additional period of three years. Losses incurred during the exemption years can be carried forward to the subsequent years.

b) The project shall be exempted from stamp duty specified on commercial writs and documents.

The exemptions mentioned above shall not include fees relating to services such as port, storage and handling fees.

Trade Policy
Libya seeks to strike a balance between the increased pressures for liberisation of the economy, attracting foreign capital on the one hand and protecting local industry and manufacturing and other national interests on the other.

Imports and Exports
Imports are generally unrestricted except for specifically banned items. Import licences are required. Goods of Israeli origin are not permitted to be imported.

• All industrial supplies, foodstuffs and consumer goods are imported into Libya
• There are few restrictions on imports except for certain prohibited items
• Imports are subject to customs duties depending upon the category of import
• There are no official price controls
• Customs clearance procedures require the appointment of a local agent
• Libya has an annual International Trade Fair where many countries take stalls to exhibit their products

Exports are encouraged and are generally free of restrictions.

Competition with local business
As a rule, investment will be sought and encouraged in those sectors in which local business is not present. In those circumstances instances of competition between local businesses and foreign investors will be rare. On the other hand, joint ventures between foreign investors and local businesses are likely to grow.
Repatriation of Capital and Profits
The investor has the right to re-export his invested capital in the following cases:

• Expiry of the project period
• Liquidation of the project
• Sale of the project

Net profits and benefits accrued by the project shall be allowed for transfer annually.

The Libyan Foreign Investment Board (L.F.I.B.)
L.F.I.B. processes applications under the incentives package scheme and acts as a liaison between investors and the government. It provides full information to promoters that wish to consider investment in Libya. Both the initial inquiries and subsequent applications for the setting up of these projects are processed by the L.F.I.B.

Free Zones
The Government promulgated Law No. 9 of 1430 (2000 A.D) effective 1 March 2000 for organising transit & free zones. This was done to promote the transit trade and various manufacturing or processing operations that change the condition of goods or their preparation as required for exchange and market. It also includes the provision of banking, insurance, investment services and other services of all kinds.

The Free Zones are exempted from tax, customs, commercial and monetary restrictions for all those investing therein and achieving the purposes of the Free Zones.

Special Free Zones may be established for specific projects or activities in which all or some specified privileges are granted to the investors and users. A Free Zone may contain a seaport, an airport or a border inlet.

The investors, projects or users shall not be subjected to the requirements for registration in the registers of the supplier importers, exporters or the Commercial Register.

All projects, funds and transit goods of the investors and users in the Free Zones are considered as private properties. These properties are not able to be sequestrated, seized, nationalised, expropriated, confiscated or frozen or subjected to procedures giving the same effect, except by law against fair compensation.

This law is administered by the Executive Regulation For Law No. 9 of the 1430.

Petroleum Law

Tax Law

Principal Taxes
 

The principal taxes in Libya are:-

-  Revenue Duties

-  Corporate Tax

-  Salaries and Wages Tax

-  Jehad Tax and

 -  Withholding taxes

 Taxation issues in Libya are important, particularly to the foreign investor.
Rules are not always interpreted consistently and practices are prone
to change with little notice. Further, significant changes to the tax legislation are being considered by the government .
Local tax advice and assistance is therefore essential. For  more information contact us

Revenue Duty
Any contract negotiated in Libya for anything other than a direct supply must be registered with the Tax Department within 60 days of signing the contract.
 A duty of 2% of the total contract value, and 1% on sub-contracts is payable on registration.  All invoices must bear the tax department stamp to show that the registration duty has been paid.  There
is a 3% sales stamp duty on local sales added to the sales invoice. 

Corporation Tax
Corporation tax is charged under the Law 11 of  2004 previously Law 64 of 1973.
This is done in two stages:

1) Preliminary assessment
2) Final assessment

 Corporation tax rates range from 15% to 40% of the assessed profit. 

Companies are assessed to tax in two stages, a preliminary assessment when  the company’s accounts are submitted and a final assessment when the tax department examines the accounts submitted (usually within two years of the submission of the accounts)

The taxpayer can accept the Tax Department’s assessments or can object. The objection can be made to:-

1) An arbitration committee or
2) Court

Penalties for late payment

Tax not paid by due date becomes immediately due, together with all other  tax that may not yet be due for payment, and is subject to a penalty of 1% per month on the amount due plus collection charges.

Salaries and Wages Tax
Libyan Salaries and Wages tax applies to all salaries, wages, bonuses and benefits which arise from employment in Libya.Tax rates range from 8%  to 15%.

Foreign nationals employed and paid in Libya can remit 50% of the net salary  in foreign currency to his or her home country. 
The percentage is increased to 75% in exceptional cases, for example in the case of desert-based employees.

Foreign companies choosing to pay their foreign nationals overseas may do so but are required to account for these payments
and to deduct the Libyan tax due and pay it to the Tax Department.

Jehad Tax
This tax is payable under Law 44 of 1970 and is levied on personal incomes and corporation profits at 4%.

Withholding Taxes
Government bodies withhold a stamp duty of 0.5 % from all payments made by them. Further 0.2 % is also payable on any official receipt including receipts for contract registration duties, corporation tax, personal tax etc. 

Labor & Social Security

Employer/Employee Relations/Unions
The employer/employee relationship is defined in the Libyan Labor Law 1970 and its subsequent amendments and modifications. The provisions of the Libyan Labor Law 1970, deal with all employer/employee relations such as minimum wage, daily and weekly working hours, night shift regulations, dismissals and training schemes.

Labor law in Libya is fairly comprehensive and specific advice should be sought on the subject.

All employees are members of employee unions, however the relations between the employers and employees generally tend to be trouble free.

    Employee Training Programmers
All employers are expected to have formalized training programmers for the Libyan nationals they employ and are required to demonstrate the implementation of their programmers.

  Working Conditions
Working conditions are defined in the Labor Law 1970 and the Social Securities Act 1980.

  Wages & Salaries
The levels of salaries and wages payable in the public sector are stipulated by Law 15 of 1981. However the salaries in the private sector vary according to the degree of skills, professional qualifications and experience.

     Hours Worked
The normal working week is 42 hours, although the law permits a maximum of up to 48 hours per week. Overtime is paid at the rate of time and a half for week days and double time for Fridays and public holidays.

     Paid Holidays & Vacations
The minimum statutory period for annual vacation is 24 working days.

     Equal Opportunities
The Libyan government is committed to promotion of equal opportunities for all its people.

    Termination of Employment
A minimum prescribed notice of termination of employment is required under the law. If it is considered that a particular dismissal is unfair, the employee may take the case to court. If the court finds in favour of the employee, it may order reinstatement or compensation.

Social Security
Social Security System  “INAS”

Social Security contributions are due in accordance with Law 13 of 1980 as amended by Law 1 of 1991.

Coverage
The contributions are payable by all employees working in Libya whether local or foreign, based on gross income.  Contributions may be made either weekly or monthly.  The gross salary with regard to foreign nationals is required to include an amount for housing and subsistence, regardless of whether this is paid to the employee or not.

Contributions
INAS is payable on the 10th of the month following the payment of salary. Late payment carries a fine of 5 %.  The rate of INAS effective from 1st June 1991 are as follows :-

Work Permits
Foreigners who work in Libya require a work permit which must be applied for in advance by the prospective employer. Permission is normally granted, provided the skills and qualifications are those that are permitted and required in Libya, and are not specifically prohibited by the Labour Office.

The approval for a work permit is usually given one week after the application is received .

 Entry Visas

Visitors Visas
Visitors require a visa, normally valid for 3 months and to be used within 45 days of issue. Visa allocation is carefully controlled, and mostly confined to those actually working in Libya, or those visiting as part of groups run by local tour operators.
Visas are required by all except the following:
°    Nationals of Arab League countries and Maltese nationals for stays of up to 3 months;
°   Transit passengers continuing their journey by the same or first connecting aircraft within 24 hours provided they hold valid onward or return documentation and do not leave the airport.
 
Visa application requirements
°   Completed typed visa application forms in duplicate.
°    Recent, passport-size photos (two).
°    Visa authorization telex/invitation with reference number.
°   Valid passport which must be translated into Arabic. A rubber stamp for this can be obtained from the passport office in the relevant country.
°    Business visitors should be sponsored by a Libyan company who will organize the issue of a Business visa.


Tourist and Business visa are subject to a fee of  £20 and are valid for 3 months.
 
Applications must be made to any of Libya's diplomatic missions in the relevant country or abroad. Ten working days are required for the issue of visa to be processed.
 
Entry restrictions
1.Holders of Israeli passports, or holders of passports containing a valid or expired visa for Israel will be refused entry or transit.
 
2.Travelers holding a Tourist or Business visa will be refused entry if they do not possess at least US$500 or equivalent.
 
3.Women married to, and children of, nationals of Arab League countries will be refused entry if they are traveling alone, unless they are met at the airport by their husband/father or unless they are holding a 'No Objection Certificate', issued by the Libyan Immigration Department, and are met at the airport by the resident relative who made the application.
 
Passports
A passport, valid for a minimum of 6 months, is required by all except nationals of Arab League countries (Algeria, Bahrain, Comoros, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Mauritania, Morocco, Oman, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, United Arab Emirates and Yemen) holding valid ID cards.

Libya Profile
Libya stretches along the northeast coast of Africa between Tunisia and Algeria on the west and Egypt on the east; to the south are the Sudan, Chad, and Niger. It is one-sixth larger than Alaska. A greater part of the country lies within the Sahara. Along the Mediterranean coast and farther inland is arable plateau land. Climate: Dominant climate influences Mediterranean Sea and Sahara Desert. In coastal lowlands, where 80 percent of population lives, climate Mediterranean, with warm summers and mild winters. Climate in desert interior characterized by very hot summers and extreme diurnal temperature ranges. Precipitation ranges from light to negligible; less than 2 percent of country receives enough rainfall for settled agriculture.