The Tripoli based Libyan Ministry of Economy and Trade announced today the adoption of a new mechanism for setting ceilings on companies’ foreign trade transactions.

This mechanism links the volume of letters of credit and foreign transfers to actual economic activity and the company’s level of contribution to production, employment, and public revenues.

Under this mechanism, the annual ceiling for each company is set at 30 times the average of the general income tax paid over the last three years, plus 10 times the average of the payroll tax for the same period.

The formula gives weight to activity and employment; the higher the tax compliance and the larger the number of registered employees, the higher the ceiling for foreign transactions. This is contingent upon the company engaging in actual and regular commercial activity, thus limiting the benefit of shell companies or inactive entities from foreign currency.

The Ministry explained that the mechanism aims to improve the allocation of foreign currency, increase tax compliance, encourage employment and disclosure, and link foreign trade to the actual volume of companies’ activity.

It clarified that the mechanism represents a transitional framework until a system for classifying financial solvency is completed. This system will allow, in the future, for setting ceilings based on broader indicators that include financial capacity, activity volume, regularity of transactions, and compliance with laws.

Prefer Libya Herald on Google