Laws And Regulations
Tax Regime
Qatar’s corporate tax framework is designed to support businesses with a streamlined system that includes clear regulations, potential exemptions, and straightforward compliance procedures. This approach not only simplifies tax obligations but also reinforces Qatar’s reputation as a competitive and business-friendly destination for local and international enterprises.
Regimes and Authorities
The tax regime in Qatar, rated as the world’s third least demanding, implements international best practices through two main taxation entities, the General Tax Authority (GTA) and the Qatar Financial Centre (QFC) Tax Authority. The QFC tax regime applies to all QFC-licensed firms, while the rest of businesses operating in Qatar are subject to the State of Qatar's tax regime administered by GTA.
Legislation and Treaties
The state’s tax legislations are derived by three main laws the Income Tax Law (Law No. 24 of 2018), the Excise Tax Law (Law No. 25 of 2018), and the QFC Tax Law and Regulations. Qatar has 84 tax treaties in force and is also a signatory of the Organisation for Economic Co-operation and Development Multilateral Instrument (OECD MLI).
Financial and Accounting Principles
Firms under the umbrella of the State of Qatar's tax regime must adhere to the International Financial Reporting Standards (IFRS). On the other hand, the QFC tax regime uses multiple frameworks including IFRS, US Generally Accepted Accounting Practice (GAAP), UK GAAP and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards. Financial statements under both regimes must be submitted in the Arabic language, starting 1 January 2020.
Company Structures
Different forms of companies are allowed to operate in Qatar under the Ministry of Commerce and Industry (MOCI) including limited liability company, limited partnership, limited share partnership, joint liability company, joint venture company, shareholding company (public or private), branch of a foreign company, and holding company. Additionally, the QFC allows for a variety of business set-ups including limited liability company, limited partnership, limited liability partnership, general partnership, branch, holding company, special purpose company, single family office, and trust.
Tax Cards and Residences
All taxpayers operating businesses in Qatar must obtain tax cards from the GTA. Applications should be submitted within 30 days from commencing activities or registering with the Ministry of Commerce and Industry Commercial Register. Failing to register with the GTA or to maintain a tax card validity may result in a QAR20,000 penalty. A body corporate is considered resident, if it is formed and registered under Qatari law or if it conducts business through a head office or place of effective management in Qatar.
Permanent Establishment
Qatar’s tax law defines a Permanent Establishment (PE) as a fixed place of business through which a taxpayer, fully or partially, carries on their business. It also allows for the creation of a PE by a dependent agent, a person acting on behalf of or in the interest of the taxpayer other than an independent agent. As stipulated by law, a PE would exist for projects or services carried on for more than 6 months (183 days) in a 12-months period. A company having a PE in the country is subject to corporate income tax. Filing an online tax return requires a PE to be commercially registered.
Taxable income: Regardless of the place of incorporation, a wholly or partially foreign-owned company that derives income from Qatari sources is taxable in Qatar. Taxed income includes the gross income obtained through:
• Activities performed in Qatar
• Contracts wholly or partly carried out in Qatar
• Consideration for services paid to a head office, branch or related company
• Real estate located in Qatar
• Exploring, extracting or exploiting natural resources in Qatar
• Interest on loans obtained in Qatar
The amount of net taxed income is determined after the deduction of expenditures incurred to earn the gross income, including the following:
• Employee costs; salaries, wages, end of services benefits and other similar payments
• Raw materials, consumables and services necessary to perform an activity
• Rental fees
• Insurance premiums
• Interest on loans attributable to the activity
• Assets depreciation at specified rates
• Uncollectible accounts expenses in accordance with law-set criteria
• Aids, donations, and subscriptions to charitable, humanitarian, scientific, cultural or sporting activities paid to governmental authorities, public institutions, or other licensed bodies in Qatar up to 5% of the net taxed income prior to making deductions for the same taxable year
• Entertainment and recreational expenses, up to 2% of the net taxed income prior to making deductions for the same taxable year
The QFC tax regime classifies taxable profits as local source if they arise in or derive from Qatar. Profits generated by QFC's unregulated firms from local services intended for use outside the country are considered non-taxable.
Taxation Rates
Taxable income is subject to a Corporate Income Tax rate of 10% under the State of Qatar's tax regime. However, a different rate may apply to taxpayers carrying out activities under agreements with the government or engaged in the oil and gas sector.
As defined under law No. 3 of 2007, a 35% tax rate applies to income derived from petroleum or petrochemicals operations including:
• Exploration
• Field development
• Well completion and repair
• Drilling
• Petroleum processing and production
• Impurifies filtration
• Transporting, storing, loading and shipping
• Equipment and establishments necessary for industrial operations
• Construction and operation of related energy and water or other facilities
• Complementary and administrative services required to achieve the above operations
Where a special agreement was signed with the Qatari government prior to Law No. 3 effective date, the rate specified in the government will apply. A tax rate of 35% will be used if the agreements does not specify a rate.
A QFC-Entity is taxed a 10 % flat rate of its taxable profit according to the QFC tax regime.
Capital Gains
Taxed as ordinary income at 10% under both tax regimes. Non-taxable income: Both, the State of Qatar's and the QFC tax regimes, do not levy corporate income tax on entities wholly owned by Qatari and GCC nationals. However, such entities may be required to file tax returns (see under 4.1.6 Compliance for corporations). Dividends of taxable companies, wholly or partially foreign-owned, are also not subject to tax under both tax regimes.
Inapplicable Taxes
Surtax and alternative minimum tax are not applicable in Qatar under both tax regimes. the State of Qatar's tax regime does not allow for foreign tax credit. QFC firms can benefit from double taxation and unilateral credit relief.
Losses
Losses can be carried forward, deducted from the net income of subsequent years, under both tax regimes. This excludes losses resulting from an exempt or non-taxable source of income. the State of Qatar's tax regime allows for a forward period of 5 years, while the QFC tax regime allows a forward with no limit of time as long as the QFC entity continues to generate income. Both regimes do not allow losses to be carried back.
Tax and Participation Exemption
The State of Qatar's tax regime allows for the tax exemption of qualifying for up to five years, subject to approval by the Minister of Finance. Companies seeking longer periods of exemptions shall obtain the approval of the Council of Ministers. However, the regime does not provide participation exemption and foreign companies selling shares in Qatar-based companies are taxed. On the other hand, the QFC tax regime provides exemption on capital gains earned by qualifying shareholdings.