Any foreign company operating a renewable energy plant in Libya will be considered as 'carrying on business' in Libya and would need to register a presence in Libya.
Pursuant to Decree 207/2012, a local presence of a foreign company can be set up either as a branch (provided the activity falls into one of the permitted branch activities) or a joint venture company with a Libyan partner. Additionally, the project can be set up under the Investment Law.
Decree 207/2012 only permits the "construction and maintenance of a power plant" as a branch activity but does not allow the operation of a renewable energy plant.
In view of the above, a project sponsor has the option to either set up a joint venture with a Libyan partner or to apply for an investment license. In a joint venture, the Libyan partner must have participation of at least 51%, unless the Ministry of Trade grants an exemption – which would allow up to 60% foreign participation. These permissions are granted only in exceptional cases.
Alternatively, a renewable energy project can be set up under the Investment Law. In this case there are no restrictions on foreign ownership. However, on the business side there often would be an expectation that a Libyan partner is a shareholder in the project company.
Additionally, PIB restricts the issuance of the investment license in certain sectors to JVs with participation of private (or public) Libyan shareholders. Until now there is no such restriction for the renewable energy sector. It should be noted, however, that the Libyan "investment map" and investment sectors are currently under review by PIB.
The benefits for establishing the project under the Investment Law regime are mainly that the project can be owned 100% by a foreign entity or person. In addition, the project will be exempted from all taxes and customs duties for a period of five years subject to renewal for a further three years (Articles 11 and 13 of the Investment Law and Articles 24 and 26 of the Executive Regulations).
An investment project requires an investment license that is issued by PIB. To this end, the project must have a budget of at least five million LYD and must additionally fulfill the following conditions as provided in Article 7 of the Investment Law:
- Transfer of technology or intellectual property
- Enhancement of the integration of already existent commercial projects and activities
- lowering the production costs or providing raw materials for the said projects
- Utilizing or helping to utilize local raw materials
- Participating in the development of rural areas
- Producing exportable products or enhancing the export of products
- Providing, developing or rehabilitating a service needed by the national economy
- Providing a workplace for Libyan nationals (minimum of 30%)
We understand that PIB has thus far only issued investment licenses to solar energy investors.
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