TRIPOLI/GENEVA (Reuters) - A Libyan court handed 16-month jail terms to two Swiss businessmen for visa offences, a Libyan judicial source said on Tuesday, in a move likely to prolong a damaging rift between the two countries.

The men have been held in Libya since July 2008 following the arrest in Geneva of a son of Libyan leader Muammar Gaddafi on charges of mistreating two domestic employees.

Libyan prosecutors charged the two businessmen last month with visa irregularities, tax evasion and failing to respect rules governing companies working in Libya.

The case has outraged many Swiss and the government has come under criticism for its handling of the affair. Swiss media have described the two businessmen as "hostages".

A Swiss Foreign Ministry spokesman confirmed the Libyan ruling in an email to Reuters. He said the sentences were handed down for alleged visa irregularities and that the two businessmen were at the Swiss embassy in Tripoli.

Swiss President Hans-Rudolf Merz visited Tripoli in August and issued a public apology to Libya for the arrest of Hannibal Gaddafi and his wife in a Geneva hotel.

But Merz failed to secure a return home for construction company employee Rachid Hamdani and Max Goeldi, Libya head of Swiss-Swedish electrical engineering conglomerate ABB.

The Libyan government says the businessmen's case and that of Hannibal Gaddafi are not linked.