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11 Int'l Fin. L. Rev. 36 (1992)
Syria Enacts Law to Encourage Foreign Investment

handle is hein.journals/intfinr11 and id is 36 raw text is: 36

In a move to promote foreign investment and to
channel into internal investment foreign currency
held by expatriate and resident Syrians, Syria enacted
Investment Promotion Law No 10,1991 (the Law). The
Law and the Implementing Instructions issued under
Council of Ministers Order No 7 OM (the Instruc-
tions) provide tax holidays, repatriation of profits and
capital and exemptions from certain foreign exchange
regulations and duty-free imports of capital equip-
ment for qualifying investments. Unlike foreign
investment regulations of some other Middle East
countries, there is no minimum local equity required
for the project to benefit from the tax holiday and
other exemptions under Law 10.
The Law applies to agricultural, transport and
industrial projects and 'projects which the [Supreme
Investment] Council decides to include within the
scope of this Law' (Projects) except that tourism
projects are subject to other laws.
To qualify as a Law 10 Project, the fixed assets (ie
plant, means of transport and equipment) imported
from abroad for the Project must be valued at 10m
Syrian pounds minimum, a figure which the Council
of Ministers had discretion to reduce on a case by case
basis (Law, Article 4(f). SP 10m is approximately
US$238,100 at the current 'neighbouring market'
exchange rate of SP42 =US$1). A Project is also
expected to use local resources as much as possible,
increase local jobs, lead to increased exports and more
rational imports, and provide transfer of technology
(Article 4 (b)- (e)).
Tax holiday
Mixed Projects (owned jointly by the public and
private sector) are entitled to a tax holiday for seven
years. Projects owned entirely by private companies
or individuals have a five year tax holiday (Law
Article 13). In either case, the tax holiday (including
from real estate tax) commences from the beginning of
commercial production or exploitation (Instructions,
Article 19(c)). If the Project is commenced more than
three years from the date of government approval, the
start up time in excess of those three years is deducted
from the tax holiday period (Law, Article 14).
However, the investor can obtain two additional
years' tax holiday if, in the first five or seven years of
the Project respectively, the total value of exports of
goods and services in relation to the foreign currency
(not foreign capital as defined in the Law, Article 23)
imported to start the Project exceeds 50 per cent of the
value of the Project's production (Law, Article 15.
Instructions, Article 7(k) specifies that the Supreme
Investment Council (SIC) shall rely on official banking

documents of the Central or Commercial Banks of
Syria and on the Projects's balance sheets and profit
and loss accounts to determine the value of exports as
against the value of production). For purposes of the
Law, all foreign currency is calculated at the so-called
'neighbouring rate' of exchange, which currently is
SP42=US$1, in contrast to the official rate of exchange
of SP11.25=US$1. Instructions, Article 4 states the
calculation of the value of imported fixed assets will
be on the 'basis of the current exchange rate in
neighbouring countries, as published in the Foreign
Currency Exchange Bulletin issued by the Central
Bank of Syria'. Ministers, in conversation with the
author, advised this exchange rate is applied to all
foreign currency aspects of Projects, not just to value
the initially imported fixed assets.
Other exemptions
Projects are exempt from import restrictions and
foreign exchange controls and from taxes and customs
duties on imported materials, supplies, plant and
equipment except that the SIC, established under Law
10 to approve qualifying Projects, has sole authority to
approve the number of vehicles imported for the
Project (Law, Article 11 and Instructions, Articles 7(e)
and 18). The author understands that the right to
import vehicles now belongs to the state, which has
limited importation.
Plant and equipment imported f6r a Project can
only be used for the Project. The Project cannot
dispose of such items without obtaining the SIC's
prior approval and, according to Instructions, Article
18(c), 'only after payment of all taxes and duties due
and payable on them in their current state at the time
of disposal, including capital gain tax according to
laws and regulations being in force'. (emphasis
added). Such    items include   plant, machinery,
equipment, instruments, etc but not packing mate-
rials or manufacturing waste according to 'interna-
tionally acceptable proportions'.
Instructions, Article 30(b) requires the SIC to record
the number, quantities and specifications of all plant,
machinery, equipment, vehicles, buses, minibuses
and other materials imported for Projects and record
their values on the basis of official invoices and
vouchers issued by exporters and checked by the
authorities. This will be the likely basis for cap-
ital gains, taxes or other duties assessed under the
While tax and customs exemptions exist for
imported plant and equipment necessary to develop a
Project, taxes and duties are payable for such plant
and equipment imported to operate the project. The

International Financial Law Review January 1992

Syria enacts law to encourage
foreign investment
On a recent business trip to Syria, Nancy B Turck of Fulbright & Jaworski,
London office found that recent legislation has created a favourable
investment environment for foreigners

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