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Foreign Direct Investment Law in Libya
Libya is entering a new world of relations and is starting up to bring in investment; but the country finds itself in a difficult position where it has to do things differently from how it was done in the past. Before the revolution, Libya had a legal system which was strictly based on Egyptian Civil Law. Towards 1970, a drastic change was seen in the way governmental activities were carried out in the past. The old system was changed and moved towards a new system of government which had an enormous impact on its system of law. Through different conferences, the government adopted this new policy where the direct rule of people was witnessed. The 21st century saw another different approach to the government. The central authority was decentralised and local governments were established. In the late 1990’s itself, the Libyan Government had started bringing in these changes in the legal system. These new policies helped in enacting new laws and rules and the important among these was the enactment of “Foreign Investment Law”.
“Foreign Investment Law” (Law no.5) was enacted in Libya for attracting direct investments from abroad. The Foreign Investment Law in Libya tries to attract not foreign investments alone, but also the country’s private funds abroad. The investment law in Libya offers chances for 100 percent foreign evenhandedness rights for the possession of licensed companies. It also provides for exemption from Commercial taxes and Customs Duties for a period of five years and also relief from Excise taxes.
Through the new law enacted, that is, the law no. 5 of 1997, the government has tried to enhance training of Libyan people in the technical field. The law also attempted for improvements in the field of Industry, Farming, Health, Tourism, and Transportation etc. the Libyan Foreign Direct Investment Law created an executing agency called the “Libyan Foreign Investment Board” in order to supervise and control Libya’s Foreign Investment in the field of Industry, which by, its Improper management, careless safeguarding and slow reformation; was getting outdated. The main function of the Board is to serve as a broadcasting instrument for attracting foreign direct investment. Any projects and activities undertaken under the law no.5 needs an endorsement by the Libyan Foreign Development Board.
The new law has made a drastic change in the field of Industry, Agriculture, Communication, transportation, oil export and import etc. Foreign applicants who are interested in setting up themselves in these areas in Libya are required to create joint business enterprises with a Libyan Body. Foreign Companies are subject to particular levy provisions. In stamp tax, they are required to give a special tax of 0.5 to 3 percent on the value of objects obtained by them in Libya. Apart from this, there is a 4 percent tax on business profits. But these taxes on commercial profits are subject to changes. It can be negotiated between the firms and the Libyan tax officials, especially for well established and huge companies. The Foreign Direct Investment law in Libya also provides benefits for some companies doing their work in Libya; but the necessities to get these tax benefits are not properly given in the law.
The Foreign Direct Investment law has been able to bring in new policies and undertaking. Libya kept up a twofold exchange rate from the beginning of the year 1999 to the end of December 2001. In June 2003, the Libyan government made some advancement in the import requirement which marked an end to the policy of 15 percent Exchange tax. Individuals who have a dwelling permit or residence permit are allowed to keep with them foreign currency in Libyan accounts. Non-residents who are employed and working in Libya are allowed to open domestic accounts to save earnings; but for all other credits, an approval is required by the Central Bank. Each transaction withdrawals are restricted to 5000 American Dollars and 10,000 dollars in Bankers Checks. All companies having joint ventures with Libya under law no.5 have a legal right to start a new account in a transferrable currency in commercial banks. These Banking laws in Libya allow people and companies to Libya to keep foreign exchange and carry out exchanges in the same currency. The commercial banks are permitted to start accounts in foreign exchange and carryout payments and transfers. They also give in credit in foreign exchange and manage foreign exchange among themselves. The companies involved and taking part in foreign exchange must also be given a license by the central bank.