Syria Amends its Investment Law

Copyright : Mazen Khaddour 2002
Law Office of M. Khaddour & Associates
mnklaw@net.sy 

Syria has amended its Investment Promotion Law (Law No. 10) after nine years of its implementation.

Legislative Decree No. 7 of 13 May 2000 amended 10 articles of the previous Investment Law No. 10 in an effort to further promote foreign and local investment. The new amendments were enacted to circumvent the practical problems and obstacles faced by investors under the previous law. The following is a summary of these amendments:

  - The previous law has no specific indication as to the right of Arab and foreign investors to own and rent land and estate necessary for the establishment of their projects. Whereas the new decree specifically grants the Supreme Investment Council the authority to grant to Arab and foreign investors all licenses necessary for the ownership or rent of land and estate and contrary to all applicable laws.

  - Under the previous law, projects were entitled to a tax exemption period of 5 – 7 years from all taxes on income and real estate. During the past years, the question arose as to what should happen at the end of the tax exemption period? Decree no. 7 stipulates that all projects shall, after the expiration of the exemption period, benefit from all tax exemptions and advantages stipulated in other laws and regulations applicable to those projects not licensed according to Law no. 10.

  - Law no. 10 stipulates that if the establishment period of a project approved under this law exceeds three years, the excess shall be deducted from the tax exemption period (5-7 years). Practice revealed that in certain circumstances or depending on the nature of the project, more than three years is required to establish the project. Therefore, decree no. 7 authorized the Supreme Investment Council to grant additional periods for the establishment of the project amounting to 5 years. In this case, the additional period will not be deducted from the tax exemption period.

  - The new decree also grants an additional tax exemption period of two years in the following cases:

- If the project’s total exports of goods and services against foreign currencies duly transferred to Syria in cash or in kind according to exchange regulations, exceeds in value 50% of the project’s total production during the initial exemption period.

- If the project is established in a developing administrative area in Syria as listed.

- If the Supreme Investment Council decides that this project is of vital importance to national economy.

  - Under Law no. 10, the investor may open, for the benefit of his project, a bank account in foreign currency with the Commercial Bank of Syria and such bank account shall be credited with 100% of project capital paid in foreign currency and of loans obtained in foreign currency; and 75% of foreign currency income resulting from exports and services coming under the project activities. Article 5 of Decree no. 7 amended article 16 to become more flexible and fulfilling of future demands, therefore, under the new Decree, the investor is authorized to retain more than 75% of foreign currency income and investors may open foreign bank accounts.

  - According to the new amendments, the investors may determine the number and nationality of the chairman and members of the board, their age, remuneration and the process of appointment, the capital and the share value in local currency and all this contrary to all applicable laws.

  -  The new decree introduced new ways of dispute settlement between investors and public entities:

- By amicable settlement

- If an amicable settlement is not reached within 6 months of notice of amicable settlement, the parties may choose the following options:

- Recourse to arbitration.

- Recourse to Syrian courts.

- Recourse to the Arabic Investment Court established by the Unified Convention for the Investment of Arabic Capital in Arabic Countries of 1980.

- Or to settle the dispute according to the terms of the convention signed between Syria and the country of the investor for the insurance of investments.

  - The most important amendment is that the new Decree introduced the type of “Holding Companies”, which did not exist under the applicable laws in Syria and thus regulating the formation of such companies and subjecting it to rules applicable to joint stock companies in addition to additional regulations.

  - For all private and joint companies (private and public) having their principal place of business in Syria and offer shares to the public, the rate of corporate income tax on net profits of these companies is set at 25% inclusive of War Effort tax and exempted from Local Administration tax.

Courtesy of Mr. Mazen KHADDOUR
Law Office of M. Khaddour & Associates
mnklaw@net.sy

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