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SYRIA |
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How to invest in Syria? |
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After thirty years (1960-1991) of strong restrictions on private investment (both national and foreign), followed by fifteen years of relative opening (1991-2006), the Syrian authorities promulgated at the end of 2006 a new investment law... |
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How to invest in Syria? |
After thirty years (1960-1991) of strong restrictions on private investment (both national and foreign), followed by fifteen years of relative opening (1991-2006), the Syrian authorities promulgated at the end of 2006 a new investment law which:
- authorises the investors to repatriate the benefits on the capital introduced into the country via Syrian banks;
- provides for an exemption of the customs taxes on the means of production, including the means of transport;
- considers the creation of an investment promotion organisation in Syria.
This new law and its application decrees (dated January 26, 2007) are replacing and complementing the Law n°10 of 1991, symbol of shy country opening conceded by President Hafez Al Assad in the 90s. It is accompanied by a series of new provisions: new customs code, law creating an open Damas Stock Exchange on November 1, 2006, public-private partnerships and multiplication of private investment opportunities, starting with the bank and insurance sectors.
It is too early to explain all the details of the new regulations. The law n°10 of 1991 already made investment in Syria more attractive by offering some tax holidays, loosening restrictions on hard currency, reducing income taxes for share-holding companies, and incorporating additional sectorial and regional incentives. This law and its amendments provided for foreign ownership without limits or control in numerous sectors.
The terms of this law applied to economic and social development projects in the following fields: agriculture and agro-industry, private and joint (public-private) industrial projects, initiatives in the field of transport, and any other undertakings authorised by the Council within the limits of the law. Profits remain tax-free for five years and companies that export over 50 percent of their production enjoy a seven-year tax holiday. Capital goods and transport equipment needed for the project are exempt from customs duty. The law was amended by decree 7, which grants foreign investors the right to own the land where their business is located.
Almost all sectors of the economy are open to foreign direct investment, except for power generation and distribution, air transport, port operations, bottling of water, telephony, and oil and gas production and refining. Power generation and cement factories were recently opened to private investors.
All legal forms of companies, from limited liability to holdings, are authorised. In matters of trade, Syrian authorities have over the past few years started to gradually open up the country, in particular by signing a number of free trade agreements with its neighbours.
The Arab free trade zone (GAFTA), in force since 2005, will give investors based in Syria tariff and customs free access to more than 14 other Arab countries. The pending EU association agreement will provide similar access to the EU market.
A “negative” list of prohibited imports is gradually replacing compulsory export and import licenses. The exclusive right of commissioned agents to manage imports has come to an end. Customs duty on imported raw materials has been reduced and the harmonised NHS system introduced. Investors can open foreign currency accounts at the Commercial Bank of Syria. Decree 7 allows exporters to retain 100 percent of income from exports.
Investors targeting export markets can set up operations in any of the country’s seven free trade zones. There are free zones near the border town of Dar'a, in Adra (north of Damascus), Aleppo, Damascus, and at Damascus International Airport. There are also free zones at the ports of Latakia and Tartus.
The government provides the following benefits to companies operating in free zones: no import licensing requirement for inputs and goods entering these zones, imports cleared with only a manifest as documentation and for inspection purposes; all goods entering and stored in the zones exempt from local taxes and duty; free foreign exchange transactions; any commodity eligible for import into Syria can be acquired from free zone manufacturing facilities, but an import permit is required; and access to private banks operating in free zone areas.
Regarding taxation, the tax on corporate profits is applied at progressive rates ranging from 10 percent to 45 percent, depending on the amount of taxable income. Shareholding companies and industrial limited liability companies are taxed at a flat rate of 32 percent and 42 percent respectively. Foreign branches are taxed as well as resident companies.
All imported hard currency must be deposited in an account at the Commercial Bank of Syria, along with 75 percent of income from exports. Restrictions on the repatriation of capital have been eased in the framework of law n°10 and foreign investors can freely repatriate their profits annually. Outward capital transfers and profit remittances are currently prohibited, unless approved by the Prime Minister or sanctioned under law 10 or a special arrangement, as is the case for production sharing agreements signed with oil exploration companies.
Under decree 7, the actual value of the project can be repatriated five years after completion of the project (six months, if the project fails due to events beyond the control of the investor). Expatriate employees are allowed to transfer abroad 50 percent of their salary and 100 percent of severance pay. For foreign oil companies, "cost recovery" for exploration and development expenditure is governed by formulas specifically negotiated in the applicable concession agreement. |
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