Legislative Decree 61/2007 (LD 61), when enacted in 2007, was promoted as the family business law in Syria; it provided incentives to enhance corporate governance and ensure sustainability after third generation. However, it is safe to say that LD 61 served as the foundation of M&As in Syria.
LD 61 allows for (i) revaluation, (ii) conversion of legal form and/or (iii) merger and acquisitions while limiting tax impact on such transactions. To be able to benefit from the exemptions under LD 61, any conversion of legal form, merger or acquisition must be preceded by a valuation of assets to reflect the real market value of the company.
In 2008, Company Law 3/2008 introduced the concept of mergers in brief, and provided for the concept of transfer of shares as a method of acquiring ownership and control of a company. However, LD 61 was more comprehensive in defining M&A mechanisms.
Under LD 61, a 2% capital gain fee on the difference between book value and valuation value is levied on the transfer of shares. This fee is reduced to 1% if the transfer is made to first-degree relatives or if the company is converted into a public shareholding offering 35% of its shares to the public.
Outside the scope of LD 61, any conversion of legal form, merger or acquisition is subject to the applicable business and tax laws which levy a capital gain tax ranging between 10 and 28% in addition to a stamp duty amounting to 0.5% on such transactions.
LD 61was made effective for three years only, ending by the end of 2010. However, with the interest shown by the local and international businesses, and the increasing number of applications registered at the Ministry of Economy, it is hoped that its application will be extended for another period.