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The State of Qatar is a sovereign and independent state in the Middle East, occupying a peninsula that juts into the Arabian Gulf. Since its complete independence from Britain in 1971, Qatar has emerged as one of the world’s most important producers of oil and gas. It is an Islamic state whose laws and customs follow the Islamic tradition. Since 2013, the country has been governed by HH Sheikh Tamim bin Hamad bin Khalifa Al-Thani.
Qatar has signed Agreements for the Avoidance of Double Taxation (“DTAs”) with more than seventy countries across the globe, which include countries like India, France, Georgia, Greece, Hong Kong, Hungary, the Seychelles, Singapore, and many more. The country offers a number of special advantages to foreign investors, as follows:
Qatar maintains an exceptional business environment for both local and foreign investors that is cultivated by friendly external and internal factors. The political system of Qatar is an absolute monarchy, with the Emir of Qatar as Head of State and Head of Government. As published in the Index of Economic Freedom, Qatar ranked 28 out of 186 countries with a score of 72.6.
Free zones are special economic or trade areas with a separate regime for incorporating companies in which a foreign investor can have 100% ownership without the requirement of a local sponsor. Companies in free zones can benefit from the freedom to trade in foreign currencies, subsidised rates on leasing property, and tax exemptions.
The QFC has one of the most competitive tax environments in the world, with a flat tax rate of just 10% on profits. QFC companies may be fully owned by non-Qatari natural or legal persons, which is not the case for companies established under the Companies Law, as the ownership of Qataris in a company must not be less than 51% of its capital (a few exceptions apply).
The QSTP has special free zone status and is a centre of research and commercial excellence for scientific development and regionally produced intellectual property for both Qatari and international partners. The QSTP promotes the research and commercialization of technology projects and training.
In Qatar, the general rule is that Qatari citizens or entities fully owned by Qatari citizens must own at least 51% of the capital of a business venture. However, the Minister of Commerce and Industry can decide to increase foreign ownership from 49% to 100% in certain sectors referred to as ‘Priority Sectors’.
In support of economic development, Qatar is seeing an average annual growth of 10 percent since 2009. With that growth, the need for infrastructure becomes greater. In fact, by 2030, Qatar will grant $200 billion in construction projects, with $19 billion heading to infrastructure projects and $40 billion going to road closures, airports, and rail initiatives.
Qatar levies the following taxes:
1. Personal Tax
There is no tax on personal income. This means that employees take home their wages and salaries without any tax deduction. The total income of Qatari and GCC nationals resident in Qatar is exempt from paying tax.
2. Company Taxation
The rate of tax is 10% of a company’s total state income, paid annually. This fixed rate is only applicable to businesses and not to individuals’ incomes. Typical business costs are deductible, and losses can be rolled over for a period no longer than 3 years from the original accounting declaration.
3. Social Security Rate for Companies
As of January 3, 2023, monthly contribution rates to such funds will increase from 15% to 21% of an employee’s basic salary or wage, with a maximum cap of QAR 100,000; employers will need to contribute 14%, while employees will need to contribute 7%, with some exceptions. Employers who fail to comply with the new rules could face imprisonment up to six months and fines up to QR 30,000.
4. Value-added tax (“VAT”)
Qatar does not charge VAT or its analogues on the supply of goods or the supply of digital services. However, VAT is expected to be introduced soon. Since in most countries that have signed an agreement with the GCC Single Commission, the tax rate is 5%, it is likely that the same rate will apply in Qatar.
5. Property tax
There are no property taxes in Qatar. However, fees may be payable to the government by the owner on the registration of property and by the landlord on the registration of leases.
In Qatar, companies are governed by the Commercial Agency Law (Law No. 8 of 2002). The business entities that can be established in Qatar are:
The company must have a memorandum and articles of association signed by all partners outlining the distribution of shares, which are not freely transferable. If shares are transferred, the majority shareholder must remain Qatari. All shareholders must agree to the transfer of shares, and other shareholders are given the first option to purchase shares before they can be offered to an approved nominee. Minimum capital requirement No less than QAR200,000 ($54,950), divided into equal shares of not less than QAR10.
This type of company comprises joint partners who are empowered to administer the affairs of the company and are responsible for the company’s liabilities, and trustee partners who only contribute to the company’s capital without being responsible for its liabilities, except for the value of their shares in the capital. Trusted partners must not interfere with the management of the firm. There is no minimum capital requirement.
The company name is formed by reference to the names of all the partners, or the name of one partner followed by the words ‘and partners’. All the partners must be Qatari nationals. There is no minimum capital requirement.
This is another type of local entity formed by two groups: joint partners, comprising one or more partners, who are personally liable for debts; and trustee partners, comprising at least four shareholding partners, whose liability is limited to the value of shares held in the capital. In the case of joint partners, all partners must be Qatari nationals. For trustee partners, Qatari nationals must hold 51 percent of the total shareholding. The company must also have a general assembly made up of all joint and trustee shareholding partners. The minimum capital requirement is QAR1M.
Two or more people can form an unincorporated joint venture. The allocation of liability between joint-venture parties is set forth in the company memorandum. No Minimum requirement of Capital.
Foreign investors are restricted to owning between them a maximum of 25 percent of the company. The minimum capital requirement of the company is QAR 10 million for public joint-stock companies and QAR 2 million for private joint-stock companies.
While the holder of the share capital manages the company, he or she is able to appoint one or more managers to represent the company in its transactions. A one-person company is dissolved upon the death of the holder of its share capital, unless the shares of the heirs are held by one person or the heirs decide to continue the company by restructuring it into another entity. The minimum capital requirement is QR200,000.
A holding company can be incorporated as a joint stock, limited liability, or one-person company. It controls financially and administratively one or more companies. The holding company must hold at least 51% of the shares in each of the companies it controls. These entities can also be structured as joint-stock, limited-liability, or one-person companies. Minimum capital requirement is No less than QAR10m.
The State of Qatar is a sovereign and independent state in the Middle East, occupying a peninsula that juts into the Arabian Gulf. Since its complete independence from Britain in 1971, Qatar has emerged as one of the world’s most important producers of oil and gas. It is an Islamic State whose laws and customs follow the Islamic tradition. Since 2013, the country has been governed by HH Sheikh Tamim bin Hamad bin Khalifa Al-Thani.
Author: Chandrawat & Partners
Topic: Doing Business in India
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