A. At a glance
B. Taxes on corporate income and gains
Corporate income tax. Qatar has two independent taxation frameworks. State-registered entities are subject to the State Income Laws, while entities registered in the QFC are subject to QFC regulations.
The basis of taxation in Qatar is generally territorial with some exceptions. Persons carrying on business activities in Qatar are subject to tax on profits arising from sources in Qatar. Income from outside Qatar is generally not subject to tax except for certain income earned from abroad by Qatar resident persons.
Gross income of companies are exempt from tax to the extent they are owned by Qatari shareholders and to the extent of the profits that are attributable to citizens of the other Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Saudi Arabia and the United Arab Emirates) who are tax resident in Qatar.
Rates of corporate income tax. The standard corporate tax rate is 10%. Measures are expected to be introduced to achieve a minimum tax rate of 15% to align with the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) 2.0 Pillar Two project.
Companies engaged in petrochemical industries and petroleum 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 and petrochemical 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 within the scope of the Qatar Income Tax Law, although they are exempt from income tax. However, they must comply with withholding tax and contract tax retention requirements as well as other requirements of the Income Tax Law, if applicable.
The income of businesses registered and operating in the 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 activities
• Special-purpose company
• Single-family office
• Ship brokering and agency services
• Trust and trust services
Tax incentives. Taxpayers may seek approval for an exemption or preferential tax rate for projects based on criteria related to the nature of a project or its location. The Ministry of Finance may grant exemptions for up to five years. The Council of Ministers may approve exemptions for longer periods or approve a preferential tax rate.
Taxpayers enjoying tax exemptions are required to submit their annual corporate tax return showing the amount of income that would have been taxable without the exemption, and the amount of tax exempted. Failure by a tax-exempt entity to file exemption documents together with the tax return results in a penalty of QAR10,000.
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 GTA. 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, subject to meeting certain conditions:
• 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)
The penalty for a failure to deduct withholding tax equals 100% of the withholding tax amount. Penalties for late remittance to the GTA of the amount withheld are levied at a rate of 2% per month, up to a maximum of 100% of the withholding tax due.
There is currently no withholding tax regime in the QFC. 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, tax resident taxpayers may credit foreign taxes imposed on income that is also taxed in the QFC either through a double tax treaty or unilateral relief, or they may elect to treat such taxes as deductible expenses.
C. Determination of trading income
General. The following are some of the items that are included in taxable income:
• Revenues earned from an activity performed in Qatar, including trading, contracting and the provision of services
• Revenues earned from the partial or total performance of a contract in Qatar
• Service fee income received by head offices, branches or related companies
• Certain dividend income and capital gains on real estate located in Qatar
• Interest on loans obtained in Qatar
• Income derived by a Qatari project (a project managed by a resident in Qatar) that participates directly or indirectly in management or capital of a foreign project or vice versa when the transactions are not at arm’s length
• Income derived by a Qatari project from immovable properties situated outside Qatar, including gain on the sale of such properties
• Share in income of a Qatari project from profits of a company abroad, including interest and royalties earned abroad, subject to certain conditions
• Technical fees arising from abroad and received by a Qatari project, subject to certain conditions
• Income of a Qatari project from real estate abroad, including income arising from direct use or rental of immovable property or the use thereof in any form if not attributable to a foreign PE of the Qatari project
In addition, the following income earned abroad is also subject to tax in Qatar:
• Income from rights to distribute products or services
• Payments for marketing, procurement, financial mediation, agency and other mediation services
• Fees for receiving warranties or similar financial support
• Provision of telecommunication and broadcast services
Normal business expenses are allowable and must be determined under the accrual method of accounting. Branches are limited in the deduction of head office expenses (see Head office overhead). Self-employed individuals engaged in a professional activity may choose to deduct a notional expense equal to 30% of their total income instead of all of the expenses and costs that are allowed to be deducted. Expenses for entertainment, hospitality, meals, holidays, club subscriptions and client gifts are subject to restrictions. Guidance contained in the Executive Regulations specifies that these expenses are subject to an allowable ceiling of 2% of net income, up to a maximum of QAR500,000.
Inventories. Inventories must be valued using international accounting standards.
Provisions. General provisions, such as bad debts and inventory obsolescence, are generally not allowed. Specific bad debts that are written off are deductible to the extent that they satisfy conditions set by the GTA. Deductions by banks for loan-loss provisions are the subject of periodic instructions from the Qatar Central Bank and, in general, provisions are allowable up to a ceiling of 10% of net profits.
Head office overhead. In general, charges of a general or administrative nature imposed by a head office on its Qatar branch are allowed as deductions, provided that they are incurred for the purposes of the business of the Qatar branch. However, no such deduction is allowed with respect to amounts paid by the Qatar branch to the head office or any of its other offices with respect to the following:
• By way of royalties, fees or other similar payments in return for the use of patents or other rights
• By way of commission for specific services performed or for management
• Except in the case of a banking project, by way of interest on money loaned to the Qatar branch
Tax depreciation. Under the Executive Regulations relating to the Qatar Income Tax Law, assets should be depreciated on a straight-line basis using the following annual depreciation rates:
Transfer-pricing documentation prepared in English is currently accepted by the GTA. However, in practice, and in the event of a pre-approval application to use an OECD method other than the CUP method, a summary memorandum should be prepared in Arabic and submitted to the GTA for its approval.
Under the QFC tax regime, transfer pricing may be determined using any of the OECD accepted transfer-pricing methods, and there is no requirement to seek pre-approval to use the OECD recognized method other than the CUP method.
A group Master File and Qatar Local File should be submitted via the GTA’s Dhareeba portal if one of the group’s entities is resident outside Qatar and if the local entity or permanent establishment’s annual revenue or total assets meets or exceeds the statutory threshold of QAR50 million in the reporting year.
In addition to the transfer-pricing documentation, there is an additional transfer-pricing compliance requirement in Qatar. A transfer-pricing statement (together with the annual tax declaration) should be completed and submitted by the Qatar entity via the GTA’s Dhareeba portal if the local entity or permanent establishment’s annual revenue or total assets meets or exceeds the statutory threshold of QAR10 million in the reporting year.
In June 2022, the GTA confirmed that the transfer-pricing documentation filing deadline is 60 days from the tax return filing due date. For taxpayers with a 31 December financial yearend, the Master and Local File transfer-pricing reports should be filed by 30 June of the following year. Late filing penalties apply at a rate of QAR500 per day capped at QAR180,000.
There is currently no formal advance pricing agreement (APA) regime in Qatar. However, APA regulations are expected to be issued by the local tax authority soon.
Under the QFC tax regime, a taxpayer’s presentation to the QFC Tax Department of a Qatar local file or a local transfer-pricing documentation report (including functional analysis and benchmarking study) is generally required in the event of a tax or transfer-pricing inquiry.
Country-by-Country Reporting. On 14 November 2017, Qatar joined the Inclusive Framework (IF) for the global implementation of the Base Erosion and Profit Shifting (BEPS) Project. As a BEPS Associate, Qatar is committed to implementing four minimum standards under the BEPS Project, one of which is Action 13 on transfer-pricing documentation.
On 19 December 2017, Qatar signed the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country (CbC) Reports. The signing of this agreement enables Qatar to efficiently establish a wide network of exchange relationships for the automatic exchange of CbC Reports. As of the end of 2020, Qatar has activated its (non-reciprocal) exchange relationship with approximately 60 countries.
As part of the proposed implementation of Action 13 of the BEPS Project, Qatar published Ministerial Decision No. 16 of 2019, which outlines CbC Reporting requirements in Qatar that are applicable for tax years beginning on or after 1 January 2018.
Qatar signed the CRS Multilateral Competent Authority Agreement (CRS MCAA). The signing of the CRS MCAA enables Qatar to efficiently establish a wide network of exchange relationships for the automatic exchange of information under CRS.
The effective date for the CRS in Qatar was 1 July 2017. Reporting Financial Institutions (such as banks, funds, brokers, custodians and insurance companies offering cash value or annuity products) must have processes and procedures in place to meet their compliance requirements.
Individuals and entities that are not Reporting Financial Institutions should be prepared to provide relevant documentation to Reporting Financial Institutions to support their tax residency status.
The annual reporting deadline is 31 July following the year to which the data relates (subject to change by the GTA).
Economic substance rules. On 17 October 2021, Qatar introduced economic substance rules via the Resolution of the Minister of Finance No. 20 of 2021 for companies that are engaged in relevant activities and intellectual property activities and that benefit from a Preferential Tax System (Qualified Entities). The rules will enter into force on 31 December 2023.
The Preferential Tax System is defined as any system that provides a preferential tax benefit that is not available under the general tax system of the state, regardless of its form, nature of benefit or its amount. Therefore, entities established under the QSTP, the Qatar Free Zone and the QFC (together referred to as Licensed Authorities) that are benefitting from the Preferential Tax System would be covered under these regulations.
The following are the relevant activities under the regulations:
• Head office
• Center for distribution and other services
• Finance acquisition of assets and leasing of assets
• Treasury funds management
• Banking
• Insurance
• Shipping
• Holding companies
• Technical consulting
• Technical training
To continue benefiting from the Preferential Tax System, Qualified Entities should meet certain requirements, such as conducting of a core income-generating activity in Qatar, having adequate number of full-time employees in Qatar, incurring an adequate amount of operational expenses to carry out activities and meeting the other requirements set by the Licensed Authorities.
The Resolution does not provide for reporting compliance requirements but requires Qualified Entities to maintain certain information to be provided to the Licensed Authorities and competent authorities on request.
Law No. 11 of 2022 introduces a penalty of 15% of net income when the “substance” tests are not met.
Ultimate
beneficial ownership. Qatar introduced new requirements to report ultimate beneficial owners in line with other existing laws in Qatar concerning beneficial ownership reporting requirements. Further details of the reporting requirement are expected to be addressed when the amended Executive Regulations are issued.
F. Tax treaty withholding tax rates
The following table shows the withholding tax rates for dividends, interests and royalties provided under Qatar double treaties that are in force and effective as of 1 January 2023.
Dividends
(dd) This rate applies if the beneficial owner of the dividends holds at least 10% of the capital of the company paying the dividends or if the beneficial owner is the state of Portugal, a political or administrative subdivision or a local authority thereof, or the central bank of Portugal.
(ee) The 5% rate applies if the beneficial owner of the interest is a bank. A 10% rate applies in all other cases.
(ff) The 5% rate applies if the beneficial owner is a company (other than a partnership) that holds directly at least 20% of the capital of the company paying the dividends.
(gg) The rate is 0% if the beneficial owner is a company (other than a partnership). The rate is 5% of the gross amount of the dividends or interest in all other cases.
(hh) The 5% rate applies if, for the six-month period ending on the date on which entitlement to the dividends is determined, the beneficial owner of the dividends owned at least 10% of the voting power or the total issued shares of the company paying the dividends, and if the company paying the dividends is not allowed a tax deduction for the dividends.
(ii) The 0% rate applies if the interest is derived from government debt or if the beneficial owner is one of the following:
• A government entity
• A bank
• An insurance company
• A securities dealer
• A pension fund (conditions apply)
• Any other enterprise, provided that in the three tax years preceding the tax year in which the interest is paid, the enterprise derives more than 50% of its liabilities from the issuance of bonds in the financial markets or from taking deposits for interest and more than 50% of the assets of the enterprise consist of debt-claims against persons not associated with the enterprise
(jj) The 5% rate applies if the beneficial owner holds at least 10% of the capital of the company paying the dividends. The 0% rate applies to dividends paid to the other contracting state or a local authority, political subdivision or statutory body thereof.
(kk) The 0% rate applies if the interest arises with respect to a government debt or debt listed on a recognized stock exchange.
(ll) Exemptions apply to certain specified state-owned entities.
(mm) The 0% rate applies to dividends beneficially owned by a contracting state, a political subdivision, a local authority, an investment authority, the central bank or a pension fund thereof or any other entity or institution that is recognized, by mutual agreement, as an integral part of the state and is exempt from tax in the source state.
(nn) The exemption applies if the recipient company holds directly at least the following percentage of the capital of the company paying the dividends:
• 1% if the dividends are paid by a company, the shares of which are substantially and regularly traded on a stock exchange
• 5% if the beneficial owner of the dividends is a public body
• 10% in other cases
(oo) The 0% rate applies to dividends beneficially owned by a contracting state, a political subdivision, a local authority, an investment authority, the central bank or a pension fund thereof or any other institution or fund that is recognized, by mutual agreement, as an integral part of the state, political subdivision or local authority. The 5% rate applies if the beneficial owner is a company (other than a partnership) that holds directly at least 10% of the capital of the company paying the dividends.
(pp) The 5% rate applies to sales on credit of industrial, commercial or scientific equipment, and on loans granted by banks. The 10% rate applies in all other cases.
(qq) The 5% rate applies to payments of royalties regarding copyrights of scientific works, patents, trademarks, secret formulas, processes or information concerning industrial, commercial or scientific experience.
(rr) The 5% rate applies if the beneficial owner is a company that holds directly at least 10% of the capital of the company paying the dividends. The 0% rate applies to dividends beneficially owned by a contracting state, a political subdivision, a local authority, an investment authority, the central bank or a pension fund thereof or any other institution or fund that is recognized as an integral part of that state, political subdivision or local authority, as shall be agreed by mutual agreement of the competent authorities of the contracting states.
(ss) This treaty is effective from 1 January 2022.
(tt) The 5% rate applies if the beneficial owner is the “government,” as defined below, of a contracting state. The 10% rate applies if the beneficial owner is a company that holds at least 25% of the capital of the distributing company. Otherwise, the 15% rate applies.
For the purposes of Article 10 “Dividends”, Article 11 “Interest” and Article 13 “Capital gains” of the double tax treaty, the term “government” means the following:
• Political subdivision
• Local authorities
• Central bank
• Any other institution resident in that contracting state performing financial functions of a governmental nature and the capital of which is wholly owned directly or indirectly by that contracting state
In the case of Qatar, the institutions referred to above are the following:
• Qatar Investment Authority
• Qatar Holding
• Qatar Development Bank
• Qatar Energy (formerly known as Qatar Petroleum)
• Qatar Retirement Funds
(uu) The 0% rate applies if the beneficial owner is the “government” of the other contracting state. The term “government” has the same meaning as defined in footnote (tt) above.
(vv) This treaty is effective from 1 January 2023.
(ww) The 0% rate applies if the beneficial owner is a company that holds at least 20% of the capital of the company paying the dividends or if the beneficial owner is a Qatar national, a pension fund, Qatar or a company held directly or indirectly by Qatar.
(xx) The 5% rate applies if one of the following conditions apply:
• The beneficial owner is a company that holds directly at least 15% of the capital of the company paying the dividends throughout a 365-day period that includes the day of the payment of the dividend.
• The beneficial owner is Qatar or any of its political subdivisions or local authorities, or any of their statutory bodies, agencies or instrumentalities or its central bank.
• The beneficial owner is one of the following entities that is wholly owned, directly or indirectly, by Qatar, its political subdivisions or local authorities: Qatar Investment Authority, Qatar Holding LLC, Qatar civil retirement fund, Qatar military retirement fund, Qatar Development Bank, Qatar Ports Management Company (Mwani Qatar), Qatar Petroleum or Qatar Petroleum International Limited.
(yy) The 0% rate applies if one of the following conditions is met:
• The beneficial owner is Qatar or any of its political subdivisions or local authorities, or any of their statutory bodies, agencies or instrumentalities or its central bank
• The beneficial owners is one of the following entities that is wholly owned, directly or indirectly, by Qatar, its political subdivisions or local authorities: Qatar Investment Authority, Qatar Holding LLC, Qatar civil retirement fund, Qatar military retirement fund, Qatar Development Bank, Qatar Ports Management Company (Mwani Qatar), Qatar Petroleum or Qatar Petroleum International Limited.
Qatar has ratified tax treaties with Belgium, Eritrea, Fiji, Gambia, Mauritania, Nigeria and Paraguay. The entry into force dates of these treaties is unknown at this stage.
Qatar is in the process of negotiating, signing and ratifying tax treaties with Benin, Bangladesh, Congo, Côte d’Ivoire, Egypt, Ethiopia, Estonia, Eswatini, Gabon, Ghana, Germany, Iceland, Libya, Lithuania, Montenegro, Peru, Somalia, Tajikistan, Thailand, Turkmenistan and Uzbekistan.
Qatar is renegotiating its tax treaties with India, Morocco and Pakistan.