Doing Business in Qatar - IMC · Qatar officially the State of Qatar is a sovereign country located in Southwest Asia, ... up to 12 new stadiums as well as new roads and transportation

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Doing Business in Qatar- IMC

Doing Business in

Qatar

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ContentsIntroduction 4

Key Regulatory Entities 7

Legal Environment 9

Establishing a legal presence 11

General Legal Considerations 18

Initial Public Offerings 23

Taxation 24

About IMC 30


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Introduction

Qatar officially the State of Qatar is a sovereigncountry located in Southwest Asia, occupying thesmall Qatar Peninsula on the north eastern coastof the Arabian Peninsula. Its sole land border iswith Saudi Arabia to the south, with the rest of itsterritory surrounded by the Persian Gulf. A straitin the Persian Gulf separates Qatar from thenearby island of Bahrain, as well as sharing seaborders with the United Arab Emirates and Iran.Qatar is a hereditary monarchy. It is a high incomeeconomy and is a developed country, backed bythe world's third largest natural gas reserves andoil reserves.

Qatar is one of the most prosperous countries inthe world and has the fastest growing economy inthe Gulf Cooperation Council (the GCC). Qatar’sreal GDP compounded annual growth rate was13.9 per cent between 2007 and 2011.

Oil and gas products played a crucial report inGDP of the nation but more recently, Qatar hasdistinguished itself from other GCC nations byfocusing on hosting sporting events and becominga major hub for sports entertainment in theregion. Notably, Qatar hosted the 2006 AsianGames, the 2010 IAAF World IndoorChampionships and the 2011 AFC Asian Cup. In2010, Qatar won the right to host the FIFA 2022World Cup which will necessitate majorinfrastructure works including the construction ofup to 12 new stadiums as well as new roads andtransportation facilities

With Limited Liability (W.L.L.)Much of the growth in the economy has beendriven by an expansion in the production of oil,liquefied natural gas (LNG) and condensates,coupled with increases in hydrocarbon prices,with the oil and gas sector constituting 51.7 percent of Qatar’s total nominal GDP in 2010.


Qatar has also been diversifying its economy byallowing further development in both the realestate and construction sectors. Qatar haswitnessed a substantial increase in economicgrowth and returns due in part to investment inthe infrastructure, tourism, financial services andpetrochemicals sectors. Consequently, the non-oiland gas sector contributed 48.3 percent of Qatar’snominal GDP in 2010 compared with 39.6 percent in 2003.

Quick PointsCurrency : Qatari Riyal (QAR) where 1QAR is $0.27 approx.Official Language: Arabic (English is usedcommonly in business)Population: Approx. 2 million (80% Populationcomprise of expats)Religion: Main Religion of state is Islam but thereis also small population of foreigners such asChristians, Jews, Hindus, Bahais and others.

ClimateThe climate is characterized by a mild winter anda hot summer. Rainfall in the winter is moderate,averaging some 80 millimetres a year.Temperatures range from 7 degrees Celsius inJanuary to around 45 degrees at the height ofsummer. The weather is generally mild during the

period from October until May.

Social CustomsThe heritage of Islam is deeply rooted in theQatari character and society. The importation andconsumption of alcohol is strictly regulated.However, liquor permits may be obtained byforeign employees and the major hotels are 9allowed to serve alcohol to guests in restrictedareas. Qatar prohibits the brewing and traffickingin alcohol.

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Introduction

Foreign RelationsWhile maintaining its identity and autonomy,Qatar has always regarded itself as an integralpart of the Gulf Community. Even prior toindependence, it was one of the most activeadvocates of economic and social co-operationand of a unified Arab voice in internationalforums. The State has always maintained a goodrelationship with the rest of the Arab world.Housing and Real Estate Commercial andresidential rental rates have both increased.

AdministrationQatar gained full independence in 1971 and hasbeen ruled since June 1995 by the Emir HisHighness Sheikh Hamad bin Khalifa Al-Thani. Thehereditary successor to the Emir is the Emir’sfourth son, the Heir Apparent His Highness SheikhTamim bin Hamad bin Khalifa Al-Thani.The permanent Qatar Constitution (theConstitution) came into effect in 2005, replacingthe constitution that had been created shortlyafter independence. The Constitution separatespowers between the executive branch, which iscomprised of the Emir with assistance from hiscabinet (the Council of Ministers), the legislature(the Advisory Council) and the judiciary. TheConstitution guarantees all residents of Qatarequality before the law, regardless of their origin,language, religion or gender.

The Constitution assures personal freedom andprivacy, guarantees freedom of expression,association and the media, and prohibits anyamendment to individual rights and publicliberties (except for the purposes of grantingadditional rights and guarantees).The Council of Ministers is responsible forproposing draft laws and decrees, forimplementing these laws and for supervising thefinancial and administrative affairs of theGovernment. The Advisory Council consists of 35members chosen from all sectors of Qatari societyand reviews the draft laws proposed by theCouncil of Ministers prior to their ratification byH.H. the Emir. The Advisory Council has fivepermanent committees: Legal & LegislativeAffairs, Financial & Economic Affairs, PublicServices and Utilities, Domestic & Foreign Affairs,and Cultural Affairs and Information.


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Introduction

Banking and Financial ServicesThe banking sector is supervised by Qatar Central Bank (QCB) and comprises of acombination of national and foreign banks. A total of 15 banks currently operate inQatar, seven of which are Qatari owned institutions, including five commercial banks (AlAhli Bank, Commercial Bank, Doha Bank, Grindlays Qatar Bank, and Qatar NationalBank) and two Islamic institutions (Qatar Islamic Bank and Qatar International IslamicBank and Masiat Al Rayan. Also represented in the local branches of foreign banksincluding Arab Bank, HSBC Bank, Mashreq Bank, Bank Saderat Iran, BNP Paribas, UnitedBank and Standard Chartered Bank. Qatar Industrial Development Bank was established1997 and provides financing to small and medium scale industries. The insurance sectoris one of the savings and investment facilities available within the country’s economicstructure and participated with the national banks in the establishment of the privatelyowned companies. There are eight insurance companies currently operating in Qatar, inwhich four are joint stock companies, while the rest are representative agencies ofoverseas insurance companies.


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Key Regulatory Entities

Ministry of Business and TradeThe Ministry of Business and Trade (the MoBT) isQatar’s key commercial and insurance regulatorand the scope of its authority is wide-ranging.Among other things, the MOBT is responsible forthe planning and execution of the State’s generalbudget, monitoring the Government’s accountsand expenditure, evaluating and implementingtaxation policy, coordinating with the QatarCentral Bank with respect to monetary policy,approving new commercial registrations andapproving the registration of trademarks.

Qatar ExchangeIn June 2009, Qatar Holding LLC (QH), a whollyowned subsidiary of the QIA, and NYSE Euronextformed a strategic partnership. This came aboutfollowing the US$200 million acquisition by NYSEEuronext of a 20 per cent stake in the QatarExchange (the QE) (known prior to the transactionas the Doha Securities Market or DSM). QHretained an 80 per cent stake in the QE. The QEcurrently lists equity securities only. As of January2011, there were 42 companies listed primarilyfrom the banking and financial services, insuranceand industrial sectors.

Qatar Central BankThe Qatar Central Bank (the QCB) was establishedin 1993 and operates in coordination with theMinistry of Economy and Finance. The QCB ismanaged by a board of directors and chaired byits governor. In its supervisory capacity, the QCBoversees the activities of all of Qatar’scommercial banks and non-banking financialinstitutions (with the exception of insurancecompanies) with a view to minimizing bankingand financial risk in Qatar’s financial sector. TheQCB conducts regular inspections of and reviewsreports and other mandatory data submitted bycommercial banks, including monthly capitaladequacy compliance reports.

Qatar Financial Markets AuthorityThe Qatar Financial Markets Authority (theQFMA) was established in 2005 as anindependent regulatory authority for Qatar’scapital markets. The QFMA is mandated to(i)regulate and supervise the QE and thesecurities industry in Qatar and(ii)implement a new regulatory framework forQatar’s capital markets and securities industrybased on international best practices.

The QFMA’s primary objective is to ensure marketintegrity and transparency through impartialmonitoring and independent regulation of Qatar’scapital markets. The QFMA also sets regulatorypolicy for the securities markets, drafts and issuesrelevant rules and regulations, overseesadmission to listing and enforces relevant lawsand regulations applicable to market participants.


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Key Regulatory Entities

Qatar Financial Centre Authority / Qatar Financial Centre Regulatory AuthorityThe QFC was established in 2005 with the objective of attracting international financial serviceproviders to Qatar. Unlike other financial centers in the Middle East, the QFC has no physicalboundaries and QFC-registered entities may conduct business internationally and throughout Qatar.QFC-registered entities can locate anywhere in Qatar, subject to approval by the QFC and the Council ofMinisters. Much of Doha is already authorized as a “QFC zone” and the authorization process isgenerally straightforward. The Qatar Financial Centre Authority (the QFCA) is the commercial arm ofthe QFC and is responsible for the licensing, registration and incorporation of QFC entities amongstother things. The QFCRA is the independent regulatory arm of the QFC. Any QFC entity that is engagedin a regulated activity (including banking, asset management and insurance activities) must beauthorized to conduct such activity by the QFCRA. The QFCRA has a broad range of regulatory powersto authorize, supervise and discipline QFC firms and individuals.


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Legal Environment

The judiciary is independent, and is currentlydivided into two court systems; the civil,commercial and criminal system and the ShariaCourt system which administers Islamic laws. Thecivil courts are required to apply Qatari Laws asestablished by Emiri Decrees, in enforcingagreements between parties. In 2004, the judicialsystem witnessed radical changes as per the newJudiciary Law issued in 2003, which becameeffective in October 2004. The new Judiciary Lawwill see the current two court systems merge intoone. A Higher Court called the Court of Cassation(Supreme Court) will be established, which will beconsidered the highest court of appeal in thecountry.

Labour and Social Insurance LawsThe Labour and Social Insurance Laws, introducedin 1962, are important reference material forbusinessmen operating in Qatar. Social insurancecontributions are levied on all businesses withmore than ten employees, and all employees areentitled to the protection offered by the LabourLaw. Labour Law deals with hiring andtermination, hours of work and entitlements toannual leave. It has now been made optional forbusinesses with less than 10 employees toregister with the Social Insurance. The courtsgenerally rule in favour of the employee if there isany leeway or ambiguity in interpreting the law,although the majority of disputes arising aresettled out of court through the conciliationefforts of the Minister of Labour. Social insurancecontributions payable by the employee are leviedon all salaries of foreign workers at a rate of 3%and on those of Qatari workers at a rate of 10%.The latter also contribute 5% from their salariesrepresenting the employee’s share ofcontributions. The main cost arising under theprovisions of the Labour Law is an end of serviceindemnity, payable to foreign workers only, whichare calculated as being 15 days of salary for eachof the first three years of service and 30 days ofsalary for each subsequent year.

Investment IncentivesQatar welcomes foreign participation in jointventures through technology supply, marketadministration and equity participation. TheGovernment offers several attractive incentivesfor joint ventures, such as: Natural gas priced at$0.60 - $0.75 per million Btu;•Electricity at $0.0178 per kwh;•A developed infrastructure;•Industrial land at a nominal rent of one QatariRiyal (US$1 = QR 3.64) per square metre per year;•No custom duties on imports of machinery,equipment and spare parts;•No export duties;•No taxes on corporate profits for pre-determined periods.In addition to the above, the Government alsooffers the following incentives:• 10-year tax holidays;• No income tax on salaries paid to expatriates;• No exchange control regulations - the Qatari

Riyal is freely convertible at an amount of$1=Qatari Riyals 3.64, a rate of exchangewhich has been stable for two decades;

• Excellent medical and educational facilities;• Low rates of inflation;• Easy access to world markets with first class air

and sea connections;• Excellent telecommunications facilities;• Liberal immigration and employment rules to

enable hiring of skilled and unskilled labourfrom abroad.

Economic liberalization measures have beenintroduced to encourage inward investment. Theprivate sector has been given a greater role toplay in the development drive. In the pursuit ofdeveloping a strong private sector with anenhanced industrial base, the Qatar IndustrialDevelopment Bank (QIDB) was established in1997, with an authorized capital of QR 200million ($54.9 million). QIDB is 100% owned bythe State of Qatar and provides loans atcompetitive rates of interest.


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Legal Environment

Generous incentives have also been 10 granted toprivate investors and measures were taken toencourage grassroots projects and joint-ventureinvestments. Non-Qatari capital is welcomed inbusiness and industrial investments in thecountry. Economic reform decrees have beenissued to activate industrial investment activitiesand to accelerate further the current rapid pace ofdevelopment. These include proposals forliberalizing the present restrictions upon foreignownership of Qatari enterprises and plans for there-codification of the principal commercial lawstatutes in order to meet future requirements. ANew Foreign Investment law was approved inOctober 2000. The new law allows foreigners toown up to 100% share in certain projects. ForeignInvestment Finance There are no restrictions onforeign investors using their own funds toparticipate in Qatari businesses. If a foreigninvestor’s own funds are insufficient to financethe business, the investor may approach a Qatarior GCC national company, or indeed any bank forfinance. Bank financing in Qatar is granted onnormal commercial terms. Foreign Trade ForeignTrade in Qatar is regulated by the Qatar CustomsLaw No. 5 of 1988. In general, a person wishing toimport goods into Qatar for sale, must beregistered in the Importers Register and beapproved by Qatar Chamber of Commerce andIndustry (QCCI). The standard rate of customsduty in Qatar is 5% (ad valorem) in accordancewith the GCC customs union put in place sinceJanuary 2003. Certain goods which compete withlocally manufactured products are subject to ahigher customs duty tariff as a protectionmeasure.

These include the following:•General Items 5%•Cement 20% Steel 20%•Urea 30%•Tobacco 100%•Records and musical instruments 15%

Goods manufactured in GCC countries areexempt from customs duty provided they areaccompanied by a certificate of origin issued bythe Chamber of Commerce in the GCC state oforigin. Customs Exemptions from customs dutyapply to the following items:•Personal effects and used household appliancesand furniture belonging to foreign employeesarriving in Qatar for the purpose of residence;•Equipment, materials and other suppliesbelonging to Government entities or statecompanies;•Food products such as grains, livestock, tea,coffee, sugar, rice, milk for infants and otheressential consumer items;•Goods imported by embassies and consulates.•The following documents are required forreleasing imports:•An Invoice and shipping document;•A Certificate of origin;•The Producer’s declaration of observance of theIsraeli boycott rules; and•A Full description of goods;•A Health and quality certificate, if applicable.

ValuationThe basic value The basic value of the assessmentof duty is the CIF value of the goods. In event thatonly the FOB price can be established, duty iscomputed based upon the FOB price plus 15%.


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Establishing a legal presence

The following commercial arrangements may beused by a foreign investor to establish a legalpresence and conduct business activities in Qatar:• Incorporating a local entity under (Law No. (5)

of 2002) (the Commercial Companies Law);• obtaining a license for a temporary branch or

representative office;• incorporating or registering with the QFC;• incorporating or registering in the Qatar

Science and Technology Park (the QSTP);• appointing a commercial agent;• appointing a distributor; or• Appointing a commercial representative.Further details are set out in Sections B(i) to B(viii)below and a matrix providing a summary of themain characteristics of these different options isset out in Schedule 1.

Incorporating a Local Entity under theCommercial Companies LawAll entities incorporated in Qatar (other than QFCentities, as described in Section B(iii)) must beestablished under the Commercial CompaniesLaw. The Commercial Companies

Types of CompaniesThe regulations relating to the structure andgovernance of companies are governed by theNew Commercial Companies Law, Law No. (5) of2002, replacing Law No. (9) of 1998. The NewCommercial Companies Law provides for theincorporation of six different kinds of companiesin Qatar:

1.Simple Partnership CompanyA Simple Partnership Company is a companyformed by two or more natural persons who arepersonally and jointly responsible for theliabilities of the company. The name of thecompany shall be formed by reference to thename of all the partners, or the name of onepartner followed by the words “And Partners”. Acompany may have a special commercial name,provided it is connected with the fact that it is asimple partnership company. All the partners in asimple partnership company must be nationals ofthe State of Qatar. A simple partnership companyshould have a Memorandum of Association.

2.Single Shareholder CompaniesSingle shareholder companies are limited liabilitycompanies whose capital is fully owned by asingle natural or corporate person. The liability ofthe owner is limited to the extent of the capitalinvested in the company. The capital of a singleshareholder company should not be less thanQR50,000. In other respects a single shareholdercompany is governed by the same regulations asLimited Liability Company.

3.Joint Partnership CompanyA Joint Partnership Company is a companyconsisting of two types of partners:i.Joint partners who are empowered toadminister the affairs of the company, and arejointly and personally responsible for thecompany’s liabilities.ii.Trustee partners, who merely contribute to thecompany’s capital without being responsible forits liabilities except to the value of their shares inthe capital. All the Joint partners in a jointpartnership company must be nationals of theState. A Trustee partner shall not interfere in themanagement of the company.


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4.Joint Venture CompanyA Joint Venture Company is a company formed bytwo or more persons. It is an un-incorporatedentity, without liability against third parties andhas no legal personality and is not subject to anyregistration procedures in the commercialregister. A Memorandum of a joint venture maybe proved by all evidential means includingsubstantive and circumstantial evidence. Theresolutions of a Joint Venture Company aredecided by the unanimous vote of all thepartners, unless stated otherwise by theMemorandum. If non-Qataris are partners in aJoint Venture Company, then the company isallowed to carry out only those business activitiesstipulated by law for non-Qatari.

5.CorporationCorporations can take the form of closed stockcompanies or public stock companies. The closedstock company may be 100% foreign - owned,while the foreign ownership of a public stockcompany is restricted to a maximum of 49%.Every company registered in Qatar should have itshead office in the country.

6.Public Shareholding CompanyA Public Shareholding Company is a companywhose capital is divided into shares of equalvalue, which are transferable. Shareholders of aPublic Shareholding Company are not liable forthe company’s obligations except for the amountof the nominal value of the shares for which theysubscribe.

A Public Shareholding Company should have aminimum of five shareholders and in all cases thename of the company should be followed by thewords “Qatari Public Shareholding Company” APublic Shareholding Company shall have adefinite term, which should be indicated in theMemorandum of Association and in the Articlesof Association, in accordance with a formatissued by a Ministerial Decree. The fixed term ofa Public Share holding Company may be extendedby an extra ordinary resolution of the GeneralAssembly. The capital of a Public ShareholdingCompany should not be less than QR10,000,000/- (Ten Million Qatari Riyals).

7.Limited Shares Partnership CompanyA Limited Shares Partnership Company is acompany formed by two groups, namely: i. JointPartners comprising of one or more joint partnerswho are personally liable for the debts of thecompany. ii. Trustee Partners comprising of notless than four share holding partners whoseliability is limited to the value of shares held inthe capital. The company should have aMemorandum and Articles of Association signedby all founding partners. In all cases, the words“Limited Shares Partnership Company” should beadded to the name of the company. 26 For thejoint partners, the company shall be governed inthe same manner as a Simple PartnershipCompany and all the joint partners must benationals of the State of Qatar. The companyshould have a minimum capital of QR 1,000,000/-(One Million Qatari Riyals), divided into shares ofequal value that are transferable and indivisibleand should be fully paid upon incorporation. Thecompany must have a General Assemblycomposed of all joint and trustee share holdingpartners. A Limited Shares Partnership Companyis managed by one or more joint partners.



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8.Limited Liability CompanyA Limited Liability Company is a company formedwith at least two partners and not more than fiftypartners, whose liabilities are limited to the valueof shares held in the company. The shares of aLimited Liability Company are not freelytransferable. The company should have aMemorandum and Articles of Association signedby all the partners. In all cases, the words “LimitedLiability Company” should be added to the nameof the company. The company must have aminimum capital of QR 200,000/- (Two HundredThousand Qatari Riyals), divided into shares ofequal value of not less than QR 10/- (Ten Riyals)each. The management of a Limited LiabilityCompany is conducted by one or more managerswhether partners in the company or not. ALimited Liability Company may not engage in thebusiness of insurance, banking, or in theinvestment of funds, whether as a principal or anagent. Banks / Investment Businesses /Foreign investors often opt to incorporate alimited liability company (LLC) because it requiresa relatively small amount of capital (not less thanQR 200,000), it can be established reasonablyquickly and the liability of its shareholders isgenerally limited to the amount of share capitalthat they have committed. Nonetheless, LLCs willnot be appropriate for all types of businessactivity as the Commercial Companies Lawprovides that LLCs cannot undertake banking orinsurance activities nor can they makeinvestments on behalf of third parties (either asprincipal or agent). Furthermore, LLCs may notoffer their shares for public subscription.When entering into a joint venture with aGovernment or Government-owned entity, it iscustomary for the parties to establish a privatejoint stock company incorporated in accordancewith Article 68 of the Commercial CompaniesLaw.

The qualifying factor for incorporating a so-calledArticle 68 company is that at least one of thecompany’s shareholders must be a Governmentalorganization that either(1) is fully owned by the Government or ownedby the Government with at least a 51 per centshareholding; or(2) has received a waiver from the Council ofMinisters from this requirement.An Article 68 company may contract out ofprovisions of the Commercial Companies Lawthrough its memorandum and articles ofassociation and, therefore, may govern itself inany way that the shareholders wish.

Foreign InvestorsLaw No. (13) of 2000 (the Foreign InvestmentLaw) applies to non-Qatari natural or legalpersons (a non-Qatari legal person is an entitywhich is not wholly owned by a Qatari national).This definition includes GCC nationals who arenot Qatari nationals. The Foreign Investment Lawplaces two main restrictions on foreign investorswho wish to establish a legal presence in Qatar:(1) the percentage of foreign ownershippermitted; and(2) the types of business in which foreigninvestors can invest

Maximum Equity ParticipationArticle 2(1) of the Foreign Investment Lawrestricts foreign ownership to a maximum of 49per cent of a company’s capital. However, Article2(2) of the Foreign Investment Law (as amendedby Law No.(1) of 2010) provides that foreigninvestors may own up to 100 per cent of thecapital if:• The entity operates in the following sectors:agriculture, industry, healthcare, education,tourism, exploitation and development of naturalresources, energy or mining, consultancyservices, technical and information technology,cultural, sports and entertainment services ordistribution services



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• The project contributes to Qatar’s developmentplansAlthough the Minister of Business and Trade isofficially responsible for giving authorizationunder Article 2(2) of the Foreign Investment Law,the determination of the acceptable percentageof foreign ownership is generally left to theMinister covering the relevant sector. Forexample, if the investment is in the energy ormining sectors, the Minister of Energy andIndustry will determine the percentage of foreignownership. This is normally determined on a case-by-case basis.Foreign companies wishing to invest in sectors notspecifically mentioned in Article 2(2) of theForeign Investment Law may be permitted 100per cent ownership on a case-by-case basis, uponapproval by the Minister of Business and Trade. Inpractice, such approval is rare.Notwithstanding the 49 per cent foreignownership cap, foreign investors have flexibility topreserve significant control over an LLC byincluding protective provisions in its operatingagreements. Such provisions could, for example,confer on the foreign investor the power toappoint a certain number of general managers(equivalent to directors under US and Englishlaw), the right to more than 49 per cent of thecompany’s profits, the right of veto over certaindecisions and the right to retain ownership of anytrade name.

The Proxy LawLaw No. (25) of 2004 (the Proxy Law) prohibitsany natural or legal person in Qatar from“harboring” a non-Qatari. The language of theProxy Law has a wide scope of application andseeks to, amongst other things, restrict the abilityof foreign investors to use a Qatari natural personor entity to circumvent restrictions andrequirements applicable to foreign investorsunder Qatari law.

Types of BusinessForeign investment in the banking and insurancesectors is only permitted on a case by case basisupon the prior approval of the Council ofMinisters. Foreign investment in commercialagencies and trading in real estate is notgenerally permitted.Foreign investors who wish to engage inengineering activities, including engineeringconsultancy, are governed by Law No. 19 of 2005(Engineering Law). Under this law, foreignengineering firms are permitted to registertemporary branches in Qatar. There are, however,strict registration requirements. If a foreign firmcannot meet these requirements, the EngineeringLaw states that foreign investors can establish alocal engineering firm as a joint venture with aQatari partner, with a maximum of 49 per centforeign ownership. The registration requirementsfor engineering firms are regulated by the UrbanPlanning and Development Authority.

Incorporating or Registering Within theQFCEntities licenced by the QFC and operating underthe auspices of the QFC may be fully owned bynon-Qatari natural or legal persons. Fullrepatriation of profits and capital is expresslypermitted for QFC entities. Entities wishing tooperate from the QFC must be engaged inspecific QFC-permitted activities. A more detaileddescription of the permitted activities and thelicencing and authorisation process is set outbelow:

Permitted Activities for QFC EntitiesOnly entities performing certain limited activitiesare allowed to operate within the QFC.Permitted activities fall into two broadcategories:



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Regulated activitiesThe QFCRA authorises QFC entities to conductregulated activities from within the QFC. Theseregulated activities include activities relating tofinancial services, insurance reinsurance, assetmanagement, funds administration, fundsadvisory, pension funds, the provision of credit,brokerage services, financial agency, corporatefinance advisory and custodian services.

Non-regulated activitiesThe QFCA may licence QFC entities to conductpermitted activities, which are considered non-regulated activities, from within the QFC. Thesenon-regulated activities include ship broking, shipagency services, classification services, gradingservices, company administration services, thebusiness of holding companies, the formation,operation and administration of trusts andprofessional advisory services (includingaccounting, audit, tax, consulting and legalservices)

Licencing and Authorisation Process inthe QFCAn entity engaged in a permitted activity canestablish a legal presence in the QFC byincorporating a company or partnership, or byregistering a branch of a non-QFC entity. Suchincorporation or registration must be undertakenthrough the QFC Companies Registration Office.The QFC permits the establishment of varioustypes of legal entity including limited liabilitycompanies, protected cell companies, bothgeneral and limited partnerships (includingbranches of a non-QFC partnership), and thetransfer of incorporation to the QFC.

All QFC entities must be licensed by the QFCA7.In addition, all entities engaged in regulatedactivities must be authorized by the QFCRA.8Entities seeking such authorization will also berequired to appoint individuals to perform certainkey functions, including senior executive,actuarial and anti-money laundering reportingfunctions.9 The incorporation of a QFC entityrequires extensive consultation with the QFCAand applicants will need to furnish the QFCA withdetailed business plans and financial informationrelating to the proposed entity and its foundingshareholders.

Obtaining a Licence for a TemporaryBranch or Representative OfficeUnder Article 3 of the Foreign Investment Law, aforeign company can open a temporary branchoffice in Qatar if the company is awarded aspecific contract involving a project thatcontributes to public service or interest. In thissituation, the Minister of Business and Trade canlicence the foreign company to conduct businessin Qatar for the specific purpose of completingthe contract. The licence to operate thetemporary branch office will expire once thecontract is completed.A foreign company can open a representativeoffice by filing an application at the MoBT. Arepresentative office cannot conduct financialtransactions in Qatar and its activities are limitedto marketing and administrative functions.

Incorporating or Registering within theQatar Science and Technology Park(QSTP)The QSTP is, for the time being, the only freezone in Qatar.10 The capital of companiesregistered in the QSTP can be entirely owned byforeign investors. QSTP companies are permittedto trade directly in Qatar without a local agent.



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Other free zone benefits include the absence oftaxation and the ability to import goods andservices free of any Qatari added tax or customsduties. In addition, rent for QSTP premises ishighly subsidized. In order to incorporate orregister in the QSTP, the majority of an entity’sactivities must contribute to the advancement ofscience, technology or research and development.Projects that collaborate with Qatar’s universitiesand research institutes are particularlyencouraged. Permitted activities usually include amixture of technology, development andcommercial trading, with the scope of thetenant’s commercial (and non-commercial)activities defined in its QSTP licence. More than20 companies are currently listed as operating inthe QSTP, including Chevron, Cisco, GE, Microsoft,Rolls-Royce and Tata.

In order to establish a company in the QSTP,applicants must submit a description of theirbusiness and research plans to the QSTP. TheQSTP will then assess whether such descriptionfits the applicable technology-based criteria. TheQSTP will typically require applicants todemonstrate that the majority of their activities,determined by the amount invested, will bededicated to research and development. OnceQSTP approval has been received, the applicantmust either apply to incorporate or to register asa branch office. All applicants must then apply fora licence, which requires providing informationsuch as proof of financial and technicalproficiency, and they must also complete a leaseagreement. Annual financial and activity reportsmust be submitted to the QSTP.Three types of licenses are issued by the QSTP:

Standard licenseissued to businesses that incorporate in the freezone as a QSTP LLC or register as a branch office.QSTP LLCs must have at least two shareholdersand a minimum capital of QR 200,000. Theseincorporated or registered businesses are entitledto all free zone benefits.

Restricted licenseissued to various types of entities, which that donot qualify for the standard license. This licenseonly provides limited free zone benefits, asdesignated by QSTP management.

Service licenseissued to entities providing services to QSTPtenants. This license does not provide any freezone benefits..

Entering into a Commercial Agency RelationshipIf a foreign entity wishes to sell goods or servicesin Qatar but does not wish to maintain a physicalpresence in the country, it may enter into acommercial agency relationship with a Qatarinatural or legal person. A commercial agencycontract should, amongst other things, specifythe products or services covered by theagreement, the territory of the distribution andthe duration of the relationship.

A commercial agency arrangement may beregistered by the agent at the MoBT if therelationship between principal and agent meetscertain criteria laid out in Law No. (8) of 2002 onCommercial Agents (the Commercial AgencyLaw). Upon registration, the agent receives,among other things, statutory protectionsrelating to exclusivity, commission andtermination.

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An agent in a non-registered agency relationshipmay also benefit from similar protections to thoseafforded to registered agents by virtue of certainprovisions of the Commercial Companies Law.If an agency arrangement is entered into incircumstances where the agent is not a Qatarinatural person or an entity wholly owned byQataris or such arrangement has been enteredinto on a non-exclusive basis, this will precludethe agent from benefiting from the statutoryprotections available under either the CommercialAgency Law or the Commercial Companies Law.

Appointing a DistributorA distributor may be appointed by a foreigninvestor to represent him in distributing andselling certain goods in Qatar. The distributionarrangement must be agreed in writing andinclude specific details regarding the limit of thedistributor’s responsibilities, the fee, thegeographical scope of the distributionarrangement, the term of the relationship and theuse of intellectual property relating to theproducts that are the subject of the distributionarrangement.

The distribution contract between the principaland the distributor must be for a term of no lessthan five years if the distribution contractrequires the distributor to utilise showrooms,storerooms or to provide facilities for themaintenance of the products that are the subjectof the distribution. The principal cannot appointmore than one distributor relating to the sameproduct in the same geographic area.Similar to commercial agency arrangements, adistributor has certain protections under theCommercial Companies Law.

Appointing a Commercial RepresentativeA foreign investor may appoint a commercialrepresentative through an employment contractwith such person. The commercialrepresentatives perform commercial activities inQatar on behalf of foreign investors for a fee.Principals are liable for the acts of theircommercial representatives provided that therelevant commercial representative acts withinthe parameters set forth under his or heremployment contract.

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General Legal Considerations

In addition to the legal requirements outlinedabove, other general considerations are relevantto foreign investors who wish to do business inQatar. Some of the main considerations areoutlined below:

Doing Business with the Public SectorThe Central Tenders Committee (the CTC) of theMinistry of Economy and Finance processes themajority of public sector tenders in Qatar. Inaddition, some Government entities, such as theMinistry of Energy and Industry, QP and the PublicWorks Authority, have internal tendercommittees.Bids presented by entities that are not registeredin the Commercial Register at the Ministry ofEconomy and Finance and with the QatarChamber of Commerce and Industry (theChamber of Commerce) can be discarded by theCTC.Preferential treatment is given to bids that includea high percentage of local content

Import RegulationsQatar is a member of the World TradeOrganization and a party to various regional freetrade agreements, most notably within the GCC.As a result of its participation in the GCC CustomsUnion, Qatar has been applying the GCC CommonExternal Tariff Law No. (41) of 2002 thatimplements the GCC unified customs tariff inQatar, imposing a 5 per cent tariff on the invoicevalue of most imported products.The GCC unified customs tariff has allowedexemptions for approximately 400 goods,including certain basic food products. Tobaccoand manufactured tobacco substitutes are subjectto a customs duty of at least 100 per cent.

The QSTP free zone does not impose importduties. As in many GCC states, the importation ofpork is prohibited and the importation of alcoholis severely restricted.Qatar is a member of the Greater Arab Free TradeArea (GAFTA) pursuant to which Qatar eliminatedcustoms duties on certain products from GAFTAmembers states. Entities wishing to import goodsinto Qatar must generally be registered in theImporters’ Register and must be approved by theChamber of Commerce. Projects funded by theQatar Development Bank or designated by theMinistry of Energy and Industry (generally thosein the construction, oil, gas, water and electricitysectors) can be granted a customs duty waiver forthe import of machinery, raw materials andindustrial equipment.

Foreign Exchange Controls and Anti-Money LaunderingQatar does not generally have any foreignexchange controls or restrictions on theremittance of funds. Foreign investors are free totransfer profits and capital related to theirinvestments, and proceeds resulting from thesettlement of investment disputes, both into andout of the country.Law No. (28) of 2002 on Anti-Money Launderingcriminalises money laundering and imposessanctions against individuals and institutionscommitting this crime. This law also established aNational Anti-Money Laundering Committee toimplement the legislation and to promote anti-money laundering efforts.

.


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Law No. (3) of 2004 on Combating Terrorism alsocontains provisions that criminalise money-laundering. These laws, however, remain largelyuntested within Qatari courts.Both the QFC and the QE have their own anti-money laundering regulations.

TaxationProfits of business establishments that are whollyowned by Qatari individuals are not taxed. Incometax in Qatar applies only to businesses and isessentially a form of corporate tax. Tax in Qatarwas previously governed by Law Decree No. (11)of 1993 on Income Tax, which has been repealedand replaced by Law No. (21) of 2009 (the 2009Tax Law). The 2009 Tax Law states that taxableincome arising from sources in Qatar in excess ofQR 100,000 in any taxable year is taxed at a flatrate of 10 per cent (subject to certain limitedexceptions relating to contracts between theState and foreign companies in the oil and gasindustry). The 2009 Tax Law came into force on 1January 2010.The 2009 Tax Law introduced a new withholdingtax regime on payments to non-residents at thefollowing rates:•5 per cent on royalties and technical fees•7per cent on interest, commissions, brokeragefees, director’s fees and any other payments forservices conducted wholly or partly in Qatar.Withholding tax is levied on amounts paid to non-residents in relation to activities not associatedwith a permanent establishment in Qatar. As aconsequence, withholding tax requirements applyto service providers in Qatar who are unable toproduce a tax card as evidence of having a taxnexus in Qatar.Law No. (13) of 2008 provides that 2.5 per cent ofthe net annual profits of public corporations listedon the QE are to be collected by the Governmentand dedicated to the support of social, sporting,cultural and charitable activities.

Qatar has entered into a number of tax treatiesfor the avoidance of double taxation. Currentlythere are no personal taxes, social insurance orother statutory deductions from salaries andwages paid in Qatar.With effect from 1 January 2010, the QFC applieda 10 per cent rate of tax on all business profitsincurred by QFC-licenced entities operatingwithin the QFC.

Real PropertyIn recent years, the laws regulating theownership and lease of real estate in Qatar havebecome more liberal, allowing greateropportunity for investment by foreign persons.Different laws apply to: (1) foreign (non-GCC)individuals; (2) GCC citizens and (3) non- Qataricompanies.

Foreign individuals not from the GCC:Permitted, according to Law No. (17) of 2004Regulating Ownership and Usufruct of Real Estateand Residential Units by Non-Qataris (ForeignOwnership of Real Estate Law), to invest and ownreal estate in three designated areas: The Pearl-Qatar, West Bay Lagoon and the Al Khor ResortProject. Non-Qatari individuals can also obtainusufruct rights, which are registrable, for 99 yearsin certain industrial areas designated by theCouncil of Ministers and in residential areasunder terms set by the Council of Ministers


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GCC citizenspermitted the same rights as other foreignindividuals but are given additional privileges. GCCcitizens are permitted to own up to threeresidential real estate assets, although themaximum size of these assets cannot exceed3,000 square meters. GCC citizens can also ownreal property and residential units in investmentareas designated by the Council of Ministers.Three investment areas have currently beendeclared: Lusail, Al Khuraj and ThaaylebMountain.

Non-Qatari companiesNot permitted to invest or trade in real estate.However, entities that are not 100 per centQatari-owned can lease real estate for investmentprojects for up to 50 years

ImmigrationAs a country with a very high percentage ofexpatriates (around 80 per cent of the totalpopulation), Qatar is generally accommodating tolegal immigrants and visitors. Visas are availablefor business and tourist visits, transit andresidency and, in the majority of cases, a lawyer isnot required to handle the processing of visas.Visitors from approximately 30 countries canobtain visit visas upon arrival in Qatar.For an employee of a company doing businessoutside the QFC, the company must register his orher employment contract with the Ministry ofInterior before a residency visa can be issued

Each company is permitted a certain quota ofresidency visas. Employees with residency visaswho earn above a threshold salary may sponsorfamily members for residency visas. Residencyvisas are valid for up to three years. Employeescannot work for anyone other than their sponsorand sponsorship cannot be transferred until theemployee has worked for their original sponsorfor at least two years

The QFC has its own immigration laws and allapplicable arrangements are handled by the QFC.Employees of QFC companies who haveresidency visas can sponsor family members forresidency visas.Residency visas can also be obtained, accordingto Law No. (2) of 2006, by foreigners who owninterests and property under the ForeignInvestment Law and the Foreign Ownership ofReal Estate Law

Employment LawEmployment in Qatar is generally governed byLaw No. (14) of 2004 (the Labor Law), whichimposes certain minimum standards on workinghours, vacation and public holidays, health andsafety, workers’ committees, collectiveagreements and termination of employment.Employees excluded from the application of theLabor Law include employees of Ministries andpublic institutions, including the armed forcesand police. Also excluded are workers at sea,domestic workers, casual workers and workingmembers of the employer’s family. The QFC hasits own employment regulations (Regulation No.10 of 2006), and consequently employees ofcompanies registered with, or incorporatedunder, the QFC laws are subject to these specificemployment regulations.


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The Government has a strategic goal to increasethe proportion of Qataris in both the public andthe private sectors. This policy, known as“Qatarisation”, is effected by giving preference inemployment to suitably qualified Qataris. TheGovernment’s aim is to increase the proportion ofQataris in the manufacturing sector to 50 per centby 2020. Non- Qatari workers will only receivework permits if they have a residency permit andthere is no suitably qualified Qatari workeravailable to carry out the work.

Intellectual PropertyOver the last few years, Qatar has taken steps tostrengthen its protection of intellectual property(IP) rights. Trademark and Copyright laws wereintroduced in 2002 and a new Patent Law waspassed in 2006. Qatar is a member of certainworldwide conventions on IP (e.g. TRIPS and anumber of World Intellectual PropertyOrganization conventions) and, in August 2011,acceded to the Patent Cooperation Treaty.However, Qatar is currently not a signatory underthe Madrid Convention.The Ministry of Economy and Finance isresponsible for enforcing IP laws and regulations.Specific offices, such as the Trademarks Office,the Office for the Protection of Copyright andNeighboring Rights and the Patents andInnovation Section, have been established withinthis Ministry.

PatentsPatents are protected by Decree-Law No. (30) of2006 on Patents Law, which provides patentprotection for 20 years. Although the law statesthat the MoBT will establish a Qatari patentregistration office, this is yet to occur. A GCCpatent can be obtained by registering at thePatent Office in Riyadh, Saudi Arabia.

CopyrightsCopyrights are protected by Law No. (7) of 2002on the Protection of Copyright and NeighboringRights (the Copyright Law). The Copyright Lawprovides protection for 50 years after an author’sdeath, or after the first date of publication foranonymous or collective works.Owners of copyrights can register copyrights withthe Office of Protection of Copyright andNeighboring Rights, located at the Ministry ofEconomy and Finance. Failure to register with thisoffice does not, however, affect the protection ofthe copyright. Individuals who infringe theCopyright Law may be subject to fines andimprisonment.

TrademarksTrademarks are protected by Law No. (9) of 2002on Trademarks, Commercial Indications, TradeNames, Geographical Indications and IndustrialDesigns (the Trademarks Law). Once registered,trademarks are valid for 10 years and can berenewed indefinitely. If a trademark has not beenused for five consecutive years, it may becancelled. Foreign applicants have the samerights as Qataris under the Trademarks Law,provided that they are nationals of a state thatgrants Qatar reciprocal treatment. Individualswho infringe the Trademarks Law may be subjectto fines and imprisonment.In December 2006, the GCC Supreme Councilapproved a Unified Trademarks Law to harmonizethe protection of trademark rights throughoutthe GCC.


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Consequently, Qatari courts are obliged to enforce foreign arbitral decisions concluded in states that areparty to the New York Convention, in accordance with the New York Convention

The Role of the AuditorAuditors, as in the case of other businesses, are licensed to operate by the Ministry of Industry &

Commerce through the commercial registration system. Legislative Decree No: 7 of 1974 regulates theauditing and accounting profession. All quoted companies, banks, insurance companies and limited liabilitycompanies are required to have their financial statements audited and must provide a copy to the Ministryof Industry & Commerce. The QCB has the right to approve the appointment of auditors by the bank’sshareholders.The auditor’s report must be read out in the annual general meeting, and must affirm that:➢ The financial statements, and the financial information contained the Report of the Directors, are in

accordance with the books and records of the company and that proper books of accounts have beenkept.

➢ Stocktaking (where applicable) has been conducted in accordance with recognized procedures. Thecompany has complied with the provisions of the Commercial Companies Law and with its articles ofassociation in all material respects.

➢ Dividends proposed by the board of directors of financial institutions must be approved in advance bythe QCB and then by a majority of shareholders in the annual general meeting.

Auditing and Accounting Principles & PracticesThere is no officially recognized body of auditing and accounting standards in Qatar, although certainspecific accounting policies are laid down by the QCB, for example, in its annual circular to banks andmoney changers

The Insurance Law also stipulates certain accounting practices. The Ministry of Industry & Commercerequires all accounting firms licensed to practice in Qatar to adopt International Standards on Auditing andInternational Accounting Standards in performing their work. However, there will continue to be issueswhich are not addressed, or require amplification, and in these circumstances, reference will probablycontinue to be made to the US and UK authoritative statements, guidelines and exposure drafts.


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Initial Public Offerings

Which Market?The QE currently operates two markets. Prior to December 2011, qualifying entities were only permitted tolist on the QE’s “main market” (the Main Market). In December 2011, the QE announced the creation of analternative market called the “Venture Market”. Whilst the Main Market is primarily aimed at maturecompanies, the Venture Market is intended to attract small to medium sized enterprises with shortertrading histories.

There are currently 42 companies listed on the Main Market. Due to its relative infancy, there are currentlyno companies listed on the Venture Market

Entities Permitted to ListOnly public joint stock companies and partnerships with shares are permitted to offer shares to the public inQatar. Companies registered within the QFC or the QSTP are currently prohibited from offering their sharesto the public. However, we understand that changes may be made to the existing legal and regulatoryframework to permit QFC companies to offer shares to the public. Foreign companies are permitted to listtheir shares on either the Main Market or the Venture Market as part of a dual-listing. However, to date, noforeign companies have listed on either the Main Market or the Venture Market..

Applicable Rules and RegulationsThe QFMA is the primary regulator for public listings and has published regulations governing IPOs andlistings on both the Main Market and the Venture Market. The “Offering and Listing Rulebook of Securities”(the Listing Rules) govern listings on, and continuing obligations with respect to, the Main Market. Therecently issued “Offering and Listing of Securities Rulebook Second Market” (the Venture Market ListingRules) govern listings on, and continuing obligations with respect to, the Venture Market. One of theprimary differences between the Listing Rules and the Venture Market Listing Rules for a prospective issueris that the Listing Rules contain more stringent eligibility criteria than the Venture Market Listing Rules. Thelevel of disclosure required under the Venture Market Listing Rules is also lighter compared to the ListingRules.

The QFMA has published a corporate governance code (the Code) that all listed entities are expected tocomply with. The Code is based on a “comply or explain” model.In addition to the Listing Rules and the Venture Market Listing Rules, rules and regulations issued by the QEand the Commercial Companies Law are also applicable to companies seeking listings on the QE.


24

Taxation

Introduction Law No. (11) Of 1993 was issued on14 July 1993 to cover the income tax system andfiling procedure in Qatar. In general, the lawprovides that any business activity carried out inQatar will be subject to taxation. An activity hasbeen defined as any occupation, profession,service, trade or the execution of a contract orany other business for the purpose of makingprofit. Income tax is levied on partnerships andcompanies operating in Qatar whether theyoperate through branches or in partnership withforeign companies. Law No. (9) Of 1989 providesthat nationals of the Gulf Co-operation CouncilStates are, from 1 March 1989, to be treated asQatari citizens for income tax purposes.Accordingly, foreign companies wholly owned byGulf nationals are not subject to income tax inQatar. Tax is not levied on Qatari owned businessenterprises.There are no personal taxes, social insurance orother statutory deductions from salaries andwages paid in Qatar.

Intellectual PropertyOver the last few years, Qatar has taken steps tostrengthen its protection of intellectual property(IP) rights. Trademark and Copyright laws wereintroduced in 2002 and a new Patent Law waspassed in 2006. Qatar is a member of certainworldwide conventions on IP (e.g. TRIPS and anumber of World Intellectual PropertyOrganization conventions) and, in August 2011,acceded to the Patent Cooperation Treaty.However, Qatar is currently not a signatory underthe Madrid Convention.The Ministry of Economy and Finance isresponsible for enforcing IP laws and regulations.Specific offices, such as the Trademarks Office,the Office for the Protection of Copyright andNeighbouring Rights and the Patents andInnovation Section, have been established withinthis Ministry..

Direct TaxesTax shall be levied on a taxpayer’s income arisingfrom activities in the State of Qatar. The termactivity includes:i.Profits realised on any project executed in Qatar;ii.Profits realised from the sale of any of thecompany’s assets;iii.Commission due to agencies or arising fromrepresentation agreements or commercialagencies whether such commission is realised inor outside the State of Qatar;iv.Fees paid for consultancy, arbitration orexpertise and other related services;v.Rent from property;vi.Amounts received from the sale, rent or theassignment of a concession and the use of a trademark, design, know how or copyright;Amounts received from debts previously written-off; Profits realised on liquidation. In addition,interest and other bank income received outsidethe State of Qatar will be subject to tax in Qatar ifthis income relates to amounts arising from thetaxpayer’s activities in Qatar.

Direct Taxation of IndividualsThere is no personal taxation system for income,capital gains, gifts or inheritances in Qatar and,furthermore, no requirements to file any form oftax return.

Indirect and Local TaxesApart from the customs duties and fees referredto earlier, there is no indirect taxation system inQatar. Local taxes, which appear on electricitybills, are charged at 10% of the monthly rent paidfor the property.

Tax AdministrationThe Gregorian calendar is used for Qatar incometax purposes, but a taxpayer may apply to preparehis financial statements for a twelve month periodending on a day other than 31 December.


25

Taxation

Filing RequirementsTax declarations should be filed within 4 monthsof the end of the financial period. The filingperiod can be extended at the discretion of theDepartment of Taxation at the Ministry ofEconomy and Commerce, but the extensionperiod may not in any event exceed 8 months. Taxshown in the declaration becomes payable on thedate the declaration becomes due for filing withthe Department of Taxation. If the filing date isextended, the payment of taxes can be delayed toa maximum of 8 months if the taxpayer providesreasons acceptable to the Tax Administration. TheTax Administration may also agree that taxes willbe paid by instalments during the extendedperiod. Failure to submit a filing can result in thetemporary withholding of payments due undercontracts with Government ministries andGovernment owned companies. Under the termsof Decree Law No. (11) Of 1993, the TaxAdministration has the power to impound ataxpayer’s assets if taxes are not paid. The Lawalso empowers the Tax Administration to collectunpaid taxes from third parties, such as ataxpayer’s debtors, where the taxpayer fails tosettle taxation liabilities. Penalties for late filing orlate payment of taxes will be levied at the rate ofQR 10,000 per month or 2% of tax due whicheveris greater. The penalty will be calculated on thenumber of days delayed but should not exceed24% of the total tax liability. Prompt filing of taxdeclarations and payment of a taxpayer’s liability,as well as general co-operation with the taxadministration, are of great importance..

Accounting Records and InspectionThe tax administration has the right to inspect ataxpayer’s books and records which should bekept in Qatar. There is no legal requirement forbooks and records to be kept in Arabic. Theaccounting books and records must bemaintained for at least 5 years from the date theannual tax declaration is 34 registered with thetax administration. All entities with a capital orannual profit exceeding QR 100,000 shouldsubmit audited financial statements to supportthe tax declaration. The financial statements mustbe certified by an accountant in practice in Qatarwho is registered with the Ministry of Economyand Commerce. On submission of the final taxreturn and audited financial statements the filingsof the taxpayer will be reviewed by theDepartment of Taxation. It is normal for theDepartment of Taxation to raise query letters onspecific cost categories and reconciliation ofrevenues reported with the contract value in thecase of principal contractor and subcontractorfilings. Provided sufficient reasons exist for the taxadministration to conclude that the filing is notcorrect, they can issue an assessment on adeemed profits basis. If the taxpayer does notagree with the deemed assessment he shouldlodge an objection letter within 30 days from thedate of assessment stating reasons to support hiscontentions. If the period expires without anobjection, the assessment becomes final andcannot subsequently be appealed. However, if thetaxpayer is still not satisfied with theadministration’s decision after the objection letteris lodged, he can appeal to a Tax AppealCommittee within 30 days of the date he isnotified of the administration’s final decision.Additionally, an appeal may also be presented tothe Court by either the taxpayer or the taxadministration.


26

Taxation

Tax DeterminationTax liabilities are computed in a manner similar togeneral British and American practice, on thebasis of profits disclosed by audited financialstatements, adjustments for tax depreciation andany items disallowed by the Income TaxDepartment. In general, capital gains arising fromthe sale of business assets and business interestsare included as an ordinary income. Incomeincludes the aggregate of all gains and profitswhich are realised or have arisen from thecarrying on of an activity in Qatar. The tax payer isrequired to declare the full value of a supply andinstallation contract. The value of supply andother engineering services performed outsideQatar is normally allowed as a cost in the incomestatement provided it is supported with validdocumentary evidence.

DeductionsExpenses incurred to earn the taxable income aredeductible. These include:• Interest expenses;• Rent paid;• Salaries and labour cost,• end of service benefits and all related

contents including charges allocated to endof service benefits, pension funds and othersimilar charges;

• 35 Fees and taxes other than Income tax;• Debts written off that are approved by the

tax administration and which are inaccordance with standards established forthis purpose.

..

The following cost and expenses are notconsidered tax-allowable items:• Personal and other expenses not related to

taxable activities; Criminal and tax penaltiespaid in accordance with this law;

• Expenses or losses that may be recoveredunder an insurance policy, or a contract, or acompensation claim;

• Depreciation on land;• Depreciation that exceeds cost;• Branch share of Head Office expenses that

exceed the rate determined by the taxadministration as a proportion of the totalbranch income. However, the followingmatters should be considered.


27

Taxation

OthersThe allowable ceiling for head office charges on a project which has income streams

arising in Qatar and overseas is set at 3.5% of total income after deducting subcontractcosts, the supply value of imported machinery and equipment, revenues arising fromwork performed overseas, and other income which does not relate to activities inQatar. General provisions such as bad debts and stock obsolescence are disallowed.Specific bad debts written off will be deductible to the extent that they are inaccordance with the conditions set by the tax administration. Charges of a general oradministrative nature raised by a head office on its Qatar branch are allowed as adeduction subject to a ceiling of 3% of turnover less sub-contract costs. In the case ofbanks, the limit is 1%. The Law contains provisions, which allow trading losses to becarried forward and set-off against future profits. However, losses cannot be carriedforward for a period exceeding 3 years from the end of the tax year in which the losseswere incurred. Losses cannot be set off against prior year income. A directive issued bythe Director of Income Tax in January 1993 requires all ministries, Governmentdepartments, public and semi public establishments and other taxpayers to withholdfinal payments to subcontractors until such entities present a tax clearance certificateissued by the Income Tax Department. This directive also imposed annual disclosureand compliance requirements on the principal contractor. The principal contractormust submit a listing of subcontractors giving names, addresses and the value of eachsub contract to the Income Tax department. Variations in contract value are also to beadvised to the Income Tax Department. The tax clearance certificates furnished bysubcontractors are to be submitted as a support for the final tax declaration of theprincipal contractor. The directive is silent on the ramifications for the taxpayer inrespect of sub contractor costs, which are unsupported by a tax clearance certificate. Itis however likely from the overall intent of recent directives from the Income TaxDepartment that any subcontractor costs which are unsupported by appropriatecertificates may be disallowed in the determination of taxable profits.


28

Taxation


Tax RatesCurrent tax rates range from nil on profits up to QR 100,000 to 35% on profitsexceeding QR 5,000,000. Tax is charged progressively on bands of income.

Income (In QAR) Tax Rate0 - 100,000 NIL

100,001 - 500,000 10%

500,001 - 1,000,000 15%

1,000,001 - 1,500,000 20%

1,500,001 - 2,500,000 25%

2,500,001 - 5,000,000 30%

5,000,000 & above 35%

Accounting PrinciplesGenerally accepted methods of commercial accounting must be applied and theaccruals method must be followed. If a taxpayer wishes to use a differentaccounting method, prior approval of the tax administration must be obtained.Compliance with International Accounting Standards is recommended

Withholding TaxThere is no withholding of taxes on the repatriation of profits or dividends, royalties,license fees or group charges. However, if the investor operates in other countries inthe region, the withholding tax rules in those countries will need to be taken intoaccount in the regional business structure.

29

Taxation

Deemed Profit TaxesThe Law allows the tax administration to issue anassessment for tax on a deemed profits basis. Thisoption may be exercised by the administration inthe following instances:• If they have reasons to believe that the

declaration submitted by the taxpayer is notcorrect;

• If the taxpayer fails to submit a declaration;• If the taxpayer does not maintain proper books

and records;• If the taxpayer does not provide the

information requested by the tax authority.

Tax ExemptionsThe new Tax Law provides for a Committee to beformed to evaluate applications for tax exemptionregarding projects executed by foreign or Qataricompanies or individuals.

The main attributes considered by the Committeewhen assessing projects for tax exemption are:• That the projects contribute to the support of

Industry, Agriculture, Trade, Oil, Mineral,Tourism, Communications, or land reform, orany other activities or contracts that thecountry needs and which are of benefit botheconomically and socially;

• That the project falls within the planneddevelopment and economic objectives of theState and has the approval of the concernedGovernment department;

• That the project contributes towards thenational economy. The following points areconsidered:

✓ The commercial profitability of the project;✓ The extent to which the project complements

other projects;✓ The extent to which the project utilises

material produced locally;✓ The effect of the project on the balance of

payments;✓ The extent to which the project uses modern

technology;✓ That the project creates employment

opportunities for citizens.Any contractor who is involved in the execution ofan exempt project can apply for exemption fromincome tax. However, taxpayers who obtainexemption from taxes are required to maintainproper accounting records and should submitfinancial statements to the tax authorities within4 months from the end of the tax year.

Tax TreatiesQatar has signed double tax treaties with Algeria,Bangladesh, France, India, Morocco, Romania,Russia, Senegal and Tunisia. Several countries,including Japan, the United States and the UnitedKingdom, allow some unilateral relief against theirown taxes for Qatar income tax paid.


Disclaimer: Whilst every effort has been made to ensure that the details contained herein are correct andup -to-date, it does not constitute legal or other professional advice IMC does not accept anyresponsibility, legal or otherwise, for any errors or omission.

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Doing Business in Qatar IMC

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Doing Business in Qatar - IMC · Qatar officially the State of Qatar is a sovereign country located in Southwest Asia, ... up to 12 new stadiums as well as new roads and transportation