Time to spice things up a little. Today, we’ll take a look at Lebanon, its full Arabic name (الجمهورية اللبنانية) literally meaning the Lebanese Republic.
Hated and loved for a banking secrecy so strict it makes Swiss bankers blush, its quasi-tax-haven status, and the tolerance for Hezbollah. This beautiful country is full of sweet delights.
This is being written at a classical Beirut café under a parasol hiding from the scorching autumn sun, armed with a tourist brochure I picked up from a nearby tourist information booth to jog my memory on the intricate history of Lebanon.
But, where do we begin?
The brochure begins Lebanon’s rich history with the Phoenicians. This is a common starting point but it’s worth noting that Lebanon has been settled since long before the Antiquity, tens probably even hundreds of thousands of years ago. There are traces of early humans and even neanderthals treading across Lebanon, which then looked markedly differently with far more vegetation and forest than presently.
Before the Phoenician civilization grew, there was the Canaanite period. Borders, if they existed, were nothing like today. Tribes, kingdoms, and sultanates rose and fell.
Enter the Phoenicians, sometime around 1200 BC. Setting up ports across the Mediterranean, the Phoenicians were some of the best seafaring traders in the region. Phoenician settlements spanned from Lebanon via Cyprus across Malta, where they left a mark in history books, all the way to Gibraltar.
With the rise of the Persian empire came the fall of the Phoenicians. The Persians held Lebanon until Alexander the Great in 332 conquered Tyre (Tyros) on the Mediterranean coast.
After the death of Alexander the Great, the Seleucid Empire took over Lebanon. They held it until the Roman Empire rose to power in the region in the last century BC. Christianity spread in the first century AD. When the Western Roman Empire fell, Lebanon became a part of the Byzantine empire.
In the 7th century, the Umayyad caliphate conquered Syria and much of the surrounding region, including Lebanon. Islam spread across the region. Around this time, the Druze faith also appeared.
My brochure doesn’t mention much about the crusades but being located near or between Syria and Palestine (the Levant) Lebanon played an important role is several of them. However, Muslim rule was re-established in the 13th century with the Mamluks.
The Mamluks held Lebanon for some 200 years, when they were ousted by Ottomans. Centuries of relative stability followed, during which Lebanon was ruled as a by the disputed the Maan rules Fakhreddine I. From The 1600s to the mid-1800s, Lebanon was ruled by the Shihabs.
Ottoman and British influenced civil unrest which led to a revolt and the upheaval of the Shihab rule. By 1860, a sectarian war between Christians and Druze broke out during which some 20,000 Christians were massacred. Large Druze and Muslim casualties also occurred but are not well documented. The conflict ended largely thanks to French intervention, under its role as proctor of Christians in the Ottoman Empire following a 1523 treaty.
The final decades of the 19th century saw relative peace and the relations between the three main religious groups (Christians, Muslims, and Druze) focused on cultural and economic growth.
Beirut was an important city of culture in the first world war. At the end of the war which saw the fall of the Ottoman Empire, the League of Nations decided that what is modern-day Lebanon should be under French control, as a separate entity from Ottoman Syria. It was during this time that Islam grew into a dominant position in Lebanon following large movements of populations in the region.
In 1943, in the midst of German occupation of France in the second world war, Lebanon gained independence.
The immediate post-war period was a time of great prosperity for Lebanon, with Beirut earning the reputation as Paris of the Middle East.
The first signs of unrest started in 1958 when an uprising required American assistance to be quelled. This led to a regime change but stability did not last long.
In 1966, one of the world’s worst then (and until today) bank collapses occurred. Much can be said about the Banque Intra affair. The most honest assessment is that details remain unclear to this day. The bank was founded in 1951 by Yousef Beidas and in the 15 years leading up to its collapse, the bank grew rapidly. Mr. Beidas had co-written the Lebanese banking legislation (or, rather, lack thereof). In 1956, he helped pen the infamous Lebanese banking secrecy law (more on that later).
Intra Bank became a poster child for the rapid economic growth in Lebanon and regional oil export. The bank opened branches across the world. It operated under many different names to skirt regulations and inspections. Remember, this was a time when due diligence and KYC policies were nothing like today and the bank was headquartered in a jurisdiction which then effectively lacked a banking legislation.
On October 14, 1966, Banque Intra stopped payments. The bank had been rumoured to be in great financial difficulty and as it held some 10 to 15% of all deposits in Lebanon, its collapse was a devastating blow to Lebanon and the entire region.
The actions from the Lebanese government lead some to believe that the problems were exacerbated to one degree or another by Mr. Beidas being a Palestinian and sectarian tensions with officials. When the damage of Banque Intra’s collapse became clear, various forms of regulations were rapidly put in place but it was not enough to quickly mend the reputational damage.
Lebanon recovered, though, and in the 1970s when OPEC enacted oil embargoes, it was a well positioned financial center. Some of the regulations enacted in the period 1966 – 1970 had successfully created a type of banking sector within a banking sector which made Lebanon domestically volatile in an already volatile region, yet it remained a strong player in international finance.
All of this went on at the same time as the Lebanese civil war raged on, from 1975 on and off to 1990. The causes of this civil war are complicated (more so than many other civil wars) but were ultimately down to religious and sectarian tensions, demographic changes, and domestic economic uncertainty. In 1982, Israel invaded Lebanon in retaliation of an attempted assassination of its ambassador in the UK.
Noteworthy, the Lebanese banks remained open throughout the war by paying off militias and bullet-proofing its offices. No other country’s banks have been through as much political and social turmoil and come out so strong as in Lebanon.
It was during the Lebanese civil war that Hezbollah cemented itself into the Lebanese society as a political party and military organization (classified as a terrorist organization by many goverments).
The two decades following the end of the civil war saw cautious group and continued internal conflict, as well as skirmishes with Syria on both a military and political level. By 2005, Syria had removed its troops from Lebanon.
In 2006, Israel invaded Lebanon again to engage Hezbollah. War was never declared on Lebanon and the operation remains highly controversial. The Lebanese army did not fire upon Israeli troops but warned it would not tolerate troops advancing too far north.
Such is the complicated relationship between Lebanon, Hezbollah, and Israel.
Lebanon has been mostly stable since then. Its economy continues to grow although the Syrian civil war has caused some slowdown. Even so, Lebanon is poised to become one of the highest earning countries in the region within the coming years.
Full Name:;Lebanese Republic (الجمهورية اللبنانية)
Other major languages:;French
Type of government:;Parliamentary Republic
Population:;5.8 million (including circa 1.5 million refugees)
GDP per capita:;17,000 USD
Currency:;Lebanese Pound (LBP)[/table]
Lebanon has a reasonably well-developed corporate sector. A Lebanese company is subject to 15% corporate tax on taxable income, but Lebanon applies a type of territorial taxation that is similar (but not equal) to Hong Kong, whereby foreign-sourced income may be exempt from tax.
There are a number of caveats and conditions that are unfortunately poorly documented in English or even French. Information is mostly limited to Arabic. There are virtually no OSPs offering Lebanon incorporation and the ones that do charge an arm and a leg for it. The best way to form a Lebanese company is through a locally-present law or accounting firm.
Lebanon is generally quite demanding to incorporate in as a non-resident foreigner. Entrepreneurs and investors who are interested in forming a company in the Middle East are more likely to find UAE (Dubai, RAK, Abu Dhabi) and Bahrain far more easy-going alternatives.
Mobile bearer shares are permitted.
Banking in Lebanon
Lebanon was for a long time the financial center of the region, sitting strategically between Europe and the Middle East. Following its civil war, Lebanon has lost much of its former glory – but it’s managed to keep all of the charm.
Many readers may not have been familiar with Lebanon in the offshore sector at all prior to reading this, yet there are billions of dollars of foreign money in Lebanon — that’s how good they are.
In my post Best Offshore Banks 2013, I listed a number of Lebanese banks. I could have added several more. Banking is something the Lebanese do very well. (Spoiler alert: there will be Lebanese bank in this year’s edition, too.)
What does that mean and what makes it so good?
Largely thanks to regulations enforced in the Banque Intra (Intra Bank) affair (see History above), banks of Lebanon are generally financially sound. While most of the rest of world did not realize this until the Basel rules came out after 2010, Lebanon has been doing it since the 1960s. Uniquely, it has a banking sector strong enough to have survived multiple wars.
Internet banking facilities are usually more advanced than those of other banks in the region and even many Western banks. Customer service, sales staff, and account managers are almost always available in Arabic, French, and English with many other languages being covered. Fees are relatively low. Lebanon uses IBAN for international transfers with other IBAN users, but it is not a SEPA member.
Non-resident business banking for smaller businesses is rare in Lebanon. Unless you are engaged in the local Lebanese market or have regional ties, you will most likely not be interesting to Lebanese banks unless you have a turnover of a couple of millions. A European resident with a small offshore company performing web design services globally is not going to be attractive to a Lebanese bank. There are as always exceptions to this but don’t hold your breath.
Instead, private banking is the strength of Lebanon’s banking sector. Some of the world’s finest private banking is available here. The banks take excellent care of your money and in my experience the returns are some of the highest in the private banking sector. Risk profiles are highly individualized based on the client’s goals, capital needs, ethical concerns, and risk.
Minimum deposit requirements vary but it will be hard to find a bank willing to accept a non-resident foreigner for under 100,000 USD/EUR, with most banks requiring 500,000 or several millions.
Numbered accounts and pseudonym accounts are available and frequently used. There are no restrictions on domestic bank transfers to and from such accounts, but international bank transfers are (usually) not possible directly to and from the accounts. International wire transfers to and from Lebanese numbered accounts are instead performed by having a second bank account opened in the name of a bearer shares company, whose true legal name appears in the transfers.
It should be assumed that a visit to Lebanon is required to open a corporate bank account. Wealth management is much more lenient.
There are as of writing 72 banks licensed in Lebanon. Below are banks I consider noteworthy, but by no means have I had the opportunity to work with all 72 banks.
- Bank of Beirut
- Banque Audi
- Banque de Crédit National (BCN)
- Banque Libano-Française (BLF)
- BLC, parent bank of USB Bank
- BLOM Bank
- Byblos Bank
- Crèdit Libanais
- Federal Bank of Lebanon (FBL), parent bank of FBME
- FFA Private Bank
- Fransa Bank
- MEAB Bank
- NECB Bank
Lebanese Banking Secrecy
The extent to Lebanon’s banking secrecy is highly controversial. The Lebanese banking secrecy law (download from Banque du Liban website) effectively means that outside of money laundering, banks in Lebanon cannot freeze assets or disclose information without consent from the account holder.
Lebanon cannot comply with requests for information for tax purposes and is not interested in doing so. The sole exception to this is FATCA. Lebanese banks are still open to US persons but they will make US persons sign a document to wave banking secrecy, thus complying with FATCA without affecting its long-standing tradition of banking secrecy. Other requests for information are routinely turned down.
Will this change? Probably not as much as one might think. OECD remains very critical of Lebanon but Lebanon is not concerned with tax matters (other than FATCA). It is mostly compliant with the FATF 40+9 recommendations. In 2002, it was removed from FATF’s list of uncooperative jurisdictions. As of 2001 and 2003 respectively, money laundering and the financing of terrorism are criminal activities in Lebanon.
Living in Lebanon
Personal taxation in Lebanon is low to medium high, with personal income tax being a progressive rate of 4% to 21%. Capital gains and sales tax both stand at 10%. Inheritance tax is tiered based on proximity to the deceased with rates going from 12% to 45%.
Although residence permits can be obtained relatively easily, residing in Lebanon is as such rarely done for tax reasons alone. However, the capital city of Beirut has a fairly big expat community of workers from all over the world and it’s a quickly growing tourist spot. It’s easy to get comfortable in Beirut. It has the best nightlife in the Middle East and – some would argue – the best cuisine as well.
While Beirut is typically quite safe as of late, the country as a whole has volatile neighbours, with Syria in the north and Israel in the south. There are parts of Beirut a foreigner wouldn’t want to spend too much time in, especially in the Hezbollah-controlled neighbourhoods.
Something I was told on one of my earliest visits to Lebanon is that as an offshore financial center, Lebanon is best enjoyed from a distance. And I very much agree.Although it is a fantastic country to be in, there are little to no benefits of incorporating or residing in Lebanon for someone seeking to internationalize. Banking is where it’s at in Lebanon, and that can just as well be done as a non-resident person (or company).
- OECD Peer Review of Lebanon (also has a list of TIEA and DTA)
- Financial Secrecy Index Lebanon
- FATF documents on Lebanon
- MENAFATF documents on Lebanon