Syria: Banking, Currency & Taxation
Banking and Currency
Foreign Currency Control
Exchange control is carried out on behalf of the government by the Central Bank, which may authorize certain banks and agencies to deal in foreign exchange.
While the import of foreign currency by non-residents into Syria is not restricted, the exportation of Syrian currency abroad is, in most circumstances, prohibited. On leaving Syria, non-residents are only permitted to take out of Syria the amount of foreign currency that they declared as carrying upon entering Syria.
Non-residents employed in Syria are allowed to remit abroad in foreign currency 50 percent of their salary (including benefits) and 100 percent of their severance pay after paying Syrian income tax.
Non-resident companies registered and operating in Syria may open bank accounts in both foreign and Syrian currency. The source of such bank accounts must be currency transferred from abroad or Syrian earned currency, respectively. Only 50 percent of the net profits of foreign investment may be remitted abroad. Foreign funds of a capital nature require the approval of the Central Bank in order to be sent abroad. Furthermore, real property may not be owned by non-residents without prior approval from government authorities.
The Syrians banking system is controlled entirely by the government, and no private or foreign bank may operate in Syria. There are five banks: the Commercial Bank of Syria, the Agricultural Cooperative Bank, the Industrial Bank, the Real Estate Bank, and the People’s Credit Bank. Banking operations and the money supply is regulated by the Central Bank.
The Central Bank of Syria, Commercial Bank of Syria, Industrial Bank, Agricultural Cooperative Bank, Loan and Savings Bank, Real Estate Bank, the General Syrian Insurance Agency and the General Postal Savings Establishment, however, provide the usual services provided by banks elsewhere with the notable exception that the specialized sector banks listed are designed to provide services specifically for businesses dealing in a particular sector.
The services offered to non-resident companies by Syrian banks are generally limited to providing bank accounts in foreign and Syrian currency and bank guarantees; non-resident companies that obtain a bank guarantee based on their existing funds on account may, however, receive loans from Syrian banks in Syrian currency.
Interest rates in Syria are low (between 2 and 10 percent); in real terms, given the average yearly inflation rate, they are negative. The private sector can borrow at rates of 7 to 10 percent, but the government’s priority is to lend to the public and mixed sector at favorable rates. Credit, therefore, is limited.
As the Syrian economy becomes more privatized and continues to grow, the high costs for finance available through the banks in Syria may become a burden on development. Nevertheless, presently there are no measures that will allow private banks.
Syria also does not have an organized capital, foreign exchange and financial market. The government is currently studying a number of proposals for the formation of a stock exchange for the benefit of firms operating under the new Investment Law but no decision has been taken.
Other projected reforms include scrapping Law No. 24, which prohibits Syrians from holding foreign currency but which is also contradicted by Law No. 10 which permits investors to deal in foreign currency
Patents and trademarks can be registered with the Patent and Trademark Office. Syria is a signatory to the Paris Convention for the Protection of Industrial Property and to the Madrid Agreement concerning the suppression of false statements of origin.
Law No. 47 of 1946, amended by Legislative Decree No. 28 of 1980, provides that a patent is valid for a period of fifteen years from the date of application, but an extension of its validity is possible. Renewal fees must be paid every year for the first five years and then consecutively for each five year period thereafter. Working of a patent within two years of its grant is compulsory, and working of a patent within three years of filing the application is compulsory in order to claim priority.
Protection for trademarks is provided under Legislative Decree No. 28 of 1980. It grants protection for ten years from the date of registration and is renewable for ten year periods thereafter. The international classification of goods and services is followed in Syria for trademark registrations. The use of trademarks in Syria is not compulsory for filing applications for registrations or for maintaining trademark registrations in force.
Trademark applications are examined initially to determine that the mark is not identical to or closely resembles previously registered trademarks covering the same goods or services. Thereafter, the applicant may be requested by the Boycott of Israel Office to provide a declaration regarding the Arab boycott of Israel. Failure to provide the boycott declaration will result in delay in registration. Once the file is complete and cleared, the Trademark Office registers the trademark immediately.
There is no official system of copyright protection in Syria. In the book industry, however, major political infringements do not appear to be a problem as most books are in Arabic and by Arab authors. There are some individual entrepreneurs who copy records, cassettes and videos for resale. These operations are not sanctioned by the Syrian government.
Syria's system of income tax is apportioned into three main income categories: (1) profits from an industrial, commercial, or non-commercial activity; (2) wages; and (3) income derived from movable capital assets.
Legislative Decree No. 85 of 1949 regulates income tax. It is subject to wide interpretation by tax officials and tax committees. The Tax Department administers Syria's tax laws and is supervised by the Ministry of Finance.
Taxation of Companies
A business profits tax is charged on net profits derived from professional and industrial, commercial and non-commercial activities, as well as on net profits from all other activities not specifically subject to the wage tax, to the tax on income from personal property or to the real property tax. The business profits tax is levied on the profits of individuals as well as on the profits of corporate entities. Non residents are subject to the business profits tax on all profits arising from sources or activities in Syria.
The business profit tax is applied in progressive rates between 10 percent to 45 percent, depending on the amount of taxable income. Shareholding companies and industrial limited liability companies are taxed at a flat rate of 32 percent and 42 percent respectively.
Dividends are not subject to a withholding tax provided such dividends are paid from company profits. The company profits from which dividends are paid are taxed under the business profits tax unless specifically exempted.
Taxation of Individuals
An individual is liable to the same taxes as a company on his business income, income from movable capital and real property. In addition to these taxes, individuals are also subject to a wage and salary tax. Income, taxable under the wage and salary tax, includes the basic salary, bonuses, overtime, allowances and foreign benefits. This income is taxed at progressive rates of 5 percent to 12.5 percent. Foreign employees working in Syria are subject to the same rules and rates as those applied to Syrian employees.
Tax on Income from Movable Capital
Tax on income from movable capital applies to interest, royalties and foreign source dividends. Royalty payments are subject to this tax and payable by the recipient, unless the royalty payments would be subject to the tax on business profits for the recipient.
The tax is levied at a flat rate of 7.5 percent on such income received by a Syrian resident and at a rate of 15 percent on such income received by a non-resident, unless reduced by an applicable tax treaty.
Real Property Tax
Real property gains are taxed at rates ranging from 17 percent to 60 percent. A property registration fee is due upon the registration of real estate, its sale, assignment or inheritance. The fee amounts to 10 percent of the value of the property, as estimated by the Ministry of Finance.
A stamp duty is imposed on the documents relating to the formation of companies, contracts, deeds and a variety of other instruments and transactions in Syria. The stamp duty is charged at a fixed or proportional rates depending on the type of transaction and is levied at a rate of 0.624 percent on contracts signed in Syria.
Treaties for the Prevention of Double Taxation
Syria has entered into tax treaties for the prevention of double taxation with Cyprus, Czechoslovakia, India and Romania. Under these treaties, business profits of a foreign company that is a resident of a signatory country, arising from its business conducted in Syria, are taxable in Syria, provided that such business is carried out by a permanent establishment of such company in Syria. Furthermore, Syria is also a party to the Agreement for the Avoidance of Double Taxation and Prevention of Tax Evasion between the States of the Arab Economic Union Council.
© 2000 Mena Report (www.menareport.com)