Income Tax in Qatar

Personal Income Tax:

Qatar operates a territorial taxation system, which means an individual should be taxable in Qatar if they have generated qualifying Qatar-source income, regardless of their tax residence.

Income tax is not imposed on employed individuals' salaries, wages, and allowances.

A self-employed individual may be subject to income tax if one derives income from sources in Qatar.

Residency Rule:

In the Qatar tax law, a natural person is defined as resident if one meets any of the following conditions:

·   has a permanent home in the State of Qatar

·  has been in the State of Qatar for more than 183 consecutive or separate days during any 12-month period, or

· has one's centre of vital interests in the State of Qatar.

However, please note that Qatar operates a territorial taxation system, which means a person should be taxable in Qatar if they have generated qualifying Qatar-source income, regardless of their tax residence (employment income is non-taxable in Qatar).

Taxable Income:

Employment income:

Income tax is not imposed on employed individuals' salaries, wages, and allowances.

Business income:

A self-employed individual may be subject to income tax if one derives income from sources in Qatar.

Capital gains:

Capital gains on the disposal of real estate and securities derived by the individual are exempt from taxation provided such real estate and securities are not part of the assets of a taxable activity.

Capital gains derived by non-residents, to the extent such gains are 'Qatar-sourced', are subject to 10% income tax.

Dividend income:

There is no withholding tax (WHT) on dividends.

Interest income:

Bank interest and returns due to individuals other than those carrying on a taxable activity in the State of Qatar are exempt from income tax.

Interest payments to a non-resident individual will be subject to WHT of 7% of gross payments.

Rental income:

Rental payments to a non-resident individual may be subject to WHT of 7% of gross payments.

Deductions from Income:

Income tax is not imposed on employed individuals' salaries, wages, and allowances.

A self-employed individual may be subject to income tax if one derives income from sources in Qatar.

Corporate Income Tax:

Corporate income tax:

Foreign companies, including partnerships and joint ventures, carrying on business activities in Qatar are subject to tax. Tax is imposed on a foreign entity operating in Qatar, regardless of whether it operates through a branch, a joint venture with a locally registered company or through a wholly owned subsidiary. However, Qatar tax resident companies wholly owned by Qataris and citizens of the other Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Saudi Arabia and United Arab Emirates) are exempt from tax. Qatar tax resident companies that are not wholly owned by Qataris and other GCC citizens are taxable up to the level of profits ultimately attributable to the non-GCC national shareholders and to GCC national shareholders who are not tax residents in Qatar. Other GCC nationals are treated in the same manner as Qatari citizens for Qatar tax purposes.

Tax resident companies and permanent establishments (PEs) that are wholly owned by Qatari and other GCC nationals and that are exempt from corporate income tax must submit tax returns and audited financial statements to the Qatar Tax Department (QTD) if their capital is QAR2 million or more or if their annual revenue is QAR10 million or more.

A company is considered to be a Qatar tax resident if it meets any of the following conditions:

· It is incorporated under the laws of Qatar.

· Its head office is located in Qatar.

· Its place of effective management is located in Qatar.

A PE is a fixed place of business through which the business of a taxpayer is wholly or partly carried on, including, among others, a branch, office, factory, workshop, mine, oil or gas well, quarry, building site, assembly project, or place of exploration, extraction or exploitation of natural resources. A PE also includes an activity carried on by the taxpayer through a person acting on behalf of the taxpayer or in its interest, other than an independent agent.

Rates of corporate income tax:

 Income is subject to tax at a standard rate of 10% of profits, as adjusted for tax purposes.

Petroleum companies engaged in oil operations are taxed at the rates specified in their agreements, provided that the tax rate is not less than 35% on their taxable income. Taxable income is determined in accordance with the provisions of the underlying production-sharing contract or development and fiscal agreement. Petroleum operations are defined by law as the exploration for petroleum, improving oil fields, drilling, well repair and completion, the production, processing and refining of petroleum, and the storage, transport loading and shipping of crude oil and natural gas. Oilfield service companies contracting with petroleum companies are subject to the standard 10% tax rate.

Foreign international shipping and aviation companies are exempt from tax in Qatar if Qatari shipping and aviation companies enjoy similar reciprocal treatment in the respective foreign countries.

Not-for-profit entities that are registered in Qatar or in another country are not covered by the provisions of the Qatar Income Tax Law and are accordingly exempt from tax. However, they must withhold tax if applicable.

The income of businesses registered and operating in the Qatar Financial Centre (QFC) is subject to a standard rate of tax of 10%. Regulated and non-regulated activities may be carried on from the QFC. Regulated activities include the following:

·  International banking

·  Insurance and reinsurance

·  Fund management

· Brokerage and dealer operations

· Treasury management

· Funds administration and pension funds

· Financial advice and back-office operations

Non-regulated activities include the following:

·  Professional and business services (including, but not limited to audit, legal, consultancy, tax advisory, media and public relations, project management, architecture and engineering)

· Holding company and headquarter hosting

· Special-purpose company

· Single-family office

· Ship brokering and agency services

· Trust and trust services

Tax incentives:

 Tax exemptions may be granted for periods of three to six years for certain companies, regardless of the nationality of the owners. A committee evaluates applications for tax exemptions. It considers factors such as the following in reviewing the applications:

·  Whether the company provides social or economic benefits to Qatar

·  Whether the company falls within the planned development and economic objectives of the government and has the approval of the appropriate government department

·   The extent to which the company contributes to the national economy

·  Whether the company uses modern technology

·  Whether the company creates employment opportunities for citizens

The income of businesses operating at the Qatar Science and Technology Park (QSTP) is exempt from tax. However, such businesses must file annual tax returns, together with audited financial statements, with the QTD. QSTP-registered entities must also withhold tax if applicable.

Activities that may be carried out at the QSTP include the following:

· Research and development of new products

· Technology development and development of new processes

· Low-volume, high-value-added specialist manufacturing

·Technology-related consulting services, technology training and promotion of academic developments in the technology fields

· Incubating new businesses with advanced learning

To support financing and investment activities carried on by QFC entities, the QFC tax regulations provide for the establishment of tax-exempt vehicles. A QFC entity that is one of the following exempt vehicles may elect for special tax-exempt status:

·  Registered Fund (QFC Scheme or a Private Placement Scheme)

· Special Investment Fund (permitted activities are private equity investments, venture capital investments, investments in property and investments on behalf of a single family)

· Special Funding Company (includes holding company and special-purpose company)

·  Alternative Risk Vehicle

· Charity

QFC companies engaged in captive insurance or reinsurance business and companies of which at least 90% of the ordinary capital, profit and asset entitlement are beneficially, directly or indirectly owned by Qatari nationals and are licensed to engage in non-regulated activities may elect a 0% concessionary tax rate to apply to their chargeable profits.

In addition, a newly registered and incorporated QFC company may be able to claim reimbursement in the form of a tax credit with respect to tax losses incurred in the first two accounting periods, subject to meeting all criteria. If a QFC company receives a reimbursement of tax losses, it is automatically precluded for the following three accounting periods from electing special exemption status or the concessionary 0% tax rate.

Law No. 17 of 2014 provides a tax exemption for non-Qatari investors holding shares of companies or units in investment funds listed on the Qatar Stock Exchange (non-QFC entities). This exemption also extends to profits realized on the sale, transfer or exchange of listed shares or investment fund units.

Capital gains:

 Capital gains are aggregated with other income and are subject to tax at the regular corporate income tax rate. The sale by nonresidents of shares in Qatar tax resident companies is taxable at a rate of 10%. However, the sale of shares in listed companies is exempt from tax.

Capital gains derived by a QFC taxpayer may be exempt from tax in the QFC if they are considered a non-local source or meet the conditions of the QFC participation exemption.

Administration:

Within 30 days after beginning a taxable activity in Qatar or registering with the Ministry of Economy and Commerce, a taxpayer must register with the QTD and obtain a tax card.

The tax year runs from 1 January to 31 December, and a taxpayer must use this accounting period unless approval is obtained for a different year-end. Approval to use an alternative accounting period is granted in exceptional cases only.

In general, all companies, including tax-exempt companies (see Tax incentives), must file tax declarations within four months after the end of the accounting period. The due date may be extended at the discretion of the QTD, but the length of the extension may not exceed four months.

Audited financial statements must be submitted together with the tax declaration if any of the following circumstances exist:

· The capital of the taxpayer exceeds QAR100,000.

· The taxpayer’s total taxable income exceeds QAR100,000.

· The head office of the taxpayer is located outside Qatar.

The tax declaration must be certified by an accountant in practice in Qatar who is registered with the Ministry of Finance. If this requirement is not satisfied, the QTD rejects the tax declaration. The tax declaration and supporting audited financial statements must be denominated in Qatari rials.

Tax is payable on the due date for filing the tax declaration. The due date for payment of taxes may be extended if the filing date is extended and if the taxpayer provides reasons acceptable to the QTD. Alternatively, the QTD may allow taxes to be paid in installments during the extension period. Tax is payable in Qatari rials.

Penalties for late filing are levied at a rate of QAR100 per day, subject to a maximum of QAR36,000. The penalty for late payment equals 1.5% of the tax due for each month or part of a month for which the payment is late, up to the amount of the tax due.

The QTD may issue tax assessments based on a presumptive basis or reassess by applying market prices to certain related-party transactions in certain circumstances. The tax law provides for a structured appeals process with respect to such tax assessments. Correspondence for all appeals must be in Arabic. The appeals procedure consists of the following three stages:

· Correspondence and negotiations with the QTD

· Formal appeal to an Appeal Committee

· The commencement of a case in the judicial courts

The QTD may inspect a taxpayer’s books and records, which should be maintained in Qatar. The books and records are not required to be maintained in Arabic. The accounting books and records must be maintained for 10 years following the year to which the books, registers and documents are related.

The QTD has introduced a new tax administration system through which correspondence with the tax authority primarily flows. This includes the filing of tax registration forms, tax return submissions and communications from the QTD to the taxpayer with respect to inquiries, assessments and appeals.

For QFC entities, including tax-exempt entities, the annual income tax declaration must be submitted and the corresponding tax due must be paid within six months after the end of the accounting period.

Financial sanctions for the late submission of the annual tax declaration are levied based on when the delayed filing is submitted. In addition, the delay payment charge on unpaid tax, which is currently 5% per year, is imposed.

Withholding taxes:

Qatar Tax Law No. 21 of 2009, which is effective from 1 January 2010, introduced withholding taxes on payments to nonresident entities for activities not connected with a PE (essentially, those without a Commercial Registration and Tax Card issued by the QTD), and to entities registered in the Commercial Register with the registration linked to a specific project for a period of less than one year. The following are the payments subject to withholding tax and the applicable rates:

·  Royalties and technical fees: 5%

·Interest payments (subject to specified exceptions), directors’ fees, attendance fees, brokerage, commissions and other payments with respect to contracts for services conducted wholly or partially in Qatar: 7%

Companies or PEs in Qatar that make the above payments must deduct tax at source and remit it to the QTD by the 15th day of the month following the month in which the payment is made.

QFC taxpayers are not required to withhold tax.

Dividends:

Dividends paid by a Qatar tax resident company are not subject to withholding tax. Income distributed from profits that have already been subject to Qatar taxation are not subject to further taxation in the hands of the recipient. Dividends paid by an entity that has a tax exemption are exempt from tax.

Dividends paid to a QFC taxpayer are not subject to tax in the QFC.

Foreign tax relief:

 A deduction is allowed for income taxes incurred by the taxpayer abroad if the revenues related to the foreign taxes are taxable in Qatar, subject to other deductibility requirements. In addition, foreign tax relief is available under the tax treaties with the countries listed in Section E.

In the QFC, taxpayers may credit foreign taxes paid on income that is also taxed in the QFC, or they may elect to treat such taxes as deductible expenses. Foreign tax relief is also available under tax treaties entered into by Qatar.

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Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.