Lebanon Passes Sweeping Reforms to Strengthen Financial Sector

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In a significant move aimed at bolstering the country’s financial sector, Lebanon has passed a raft of new laws and regulations. These reforms, which took effect on August 17, 2011, are designed to combat money laundering and terrorist financing.

Regulatory Reforms

• Prohibit insider trading based on material non-public information
• Establish the Financial Markets Commission to regulate and monitor the functioning of the financial markets
• Update the country’s anti-money laundering and combating the financing of terrorism (AML/CFT) framework with Law No. 44
• Authorize Lebanon to join the International Convention for the Suppression of the Financing of Terrorism with Law No. 53

Tax Transparency and Reforms

• Implement the automatic exchange of information for tax purposes with foreign authorities through Law No. 55
• Increase corporate income tax rate from 15% to 17%

Corporate Sector Reforms

• Regulate partnerships between the public and private sectors with a new law
• Abolish bearer shares and promissory notes
• Broaden the concept of terrorist financing in the penal code

Monetary Inflation Mitigation Measures

• Allow companies to carry out an exceptional revaluation of their fixed assets, with 50% of the value able to be accepted in banks’ tier two capital
• Set terms for applying Article 49 of Law No. 66 by the Ministry of Finance
• Clarify that bank deposits with the Central Bank of Lebanon (BDL) are not exempt from a 7% tax on interest and income

Conclusion

The Lebanese government’s recent reforms demonstrate its commitment to strengthening its financial sector and combating money laundering and terrorist financing. These measures aim to increase transparency, regulate the financial markets, and mitigate monetary inflation, ultimately contributing to a more stable and secure economic environment in Lebanon.