Tax in Qatar
When starting a business in a new country, one of the most important factors to consider is that country’s tax laws. In fact, for some businesses, tax laws may play a significant role in choosing where to establish their operations.
Similarly, some individuals choose to live and work in certain countries because they have favourable tax regulations, allowing them to earn more as they pay less in tax.
So, what about Qatar? What do you need to know about tax in Qatar if you are a business or an individual?
Before we get into the various aspects of tax in Qatar, we should first point out that Fusion Middle East is not a qualified tax advisor. We would always advise companies and individuals to seek the advice of a qualified tax professional regarding all tax matters in Qatar.
But, with that in mind, we can provide some broad information regarding tax in Qatar, so that businesses and individuals have a rough idea of what to expect.
Tax in Qatar
Qatar has the third largest natural gas reserves in the world, with oil and gas reserves expected to last for many years to come. What does that mean for business in Qatar?
For many companies, it means money. Oil and natural gas revenues have placed Qatar as one of the highest per-capita income countries, with one of the fastest growing economies.
Add to that the fact that Qatar has been rated as having the least demanding tax framework in the world, alongside the UAE, and this becomes an incredible incentive for businesses looking to establish themselves in Qatar.
Qatar operates a territorial taxation system. That means, unless specifically exempt from tax, a business entity is taxable in Qatar if it has generated Qatar-sourced income, irrespective of the place of its incorporation.
For foreign companies looking to set up in Qatar, there tax regimes in which foreign investors can potentially operate. These include the State of Qatar, the Qatar Financial Centre (QFC) and the Qatar Science and Technology Park (QSTP).
These tax regimes differ greatly, so it’s important to understand all three before deciding where to establish a business. For the purposes of this blog post however, we will be giving a general overview for companies setting up within the State of Qatar tax regime.
Corporate Income Tax
Governed by Law No. 21 of 2009, current tax rules in the State of Qatar state that an entity that is wholly or partially foreign owned, and that derives income from sources in Qatar is taxable in Qatar.
It’s worth noting that there is no corporate income tax levied on entities wholly owned by Qatari and Gulf Cooperation Council (GCC) nationals.
Profits attributable to non-Qatari nationals are generally subject to income tax at a flat rate of 10%. However, a different tax rate may apply to entities with oil and gas operations, or where activities are carried out under a government agreement.
For foreign owned companies operating in Qatar, there are a number of deductions that can be applied. These generally relate to generating Qatar sourced revenue, such as employee salaries and benefits.
Therefore, that 10% corporate income tax could be considered a tax on net income rather than the gross amount.
Customs duties are applied to goods with an origin outside the GCC countries, normally at a rate of 5%. However, certain goods, such as tobacco goods, may be liable to pay a higher duty. Businesses should bear in mind that temporary import exemptions are sometimes available.
Personal Income Tax
One of the most significant factors attracting employees to Qatar is that there are no taxes imposed on expat salaries or wages.
However, Qatar has introduced a new Wage Protection System, which obligates all companies based in Qatar to pay employee salaries in Qatari Riyals, into a local Qatari bank account. Salaries can no longer be paid into overseas bank accounts.
To find out more about the Wage Protection System, read our blog post here.
VAT and Sales Tax
There is currently no sales tax or VAT imposed on operations in Qatar, or within other GCC countries. However, the GCC plans to introduce a VAT framework to be introduced within each of the GCC member states within the next few years.
Some GCC member states, including Kuwait, Oman and the UAE have announced that VAT will be implemented by 1 January 2018. Qatar is expected to make an announcement on its introduction of VAT shortly. We will keep you updated when we know more.
The anticipated VAT rate across the GCC is expected to range between 3% and 5%.
For companies that choose not to establish a company locally, there are tax regulations that may apply. For example, these companies may be subject to withholding tax.
Withholding tax requires locally established companies to withhold or retain between 5-7% of the gross invoice amount to any foreign supplier, and remit these withheld funds to the tax department by the 16th day of the following month. A withholding tax statement must also be filed to the tax department within the same deadline.
Withholding tax is typically a critical consideration for companies wanting to supply their goods and services in Qatar, and is often a deciding factor into whether they choose to open a local permanent establishment.
To stay informed on all important changes in the tax law that may affect your business, be sure to subscribe to the Fusion Middle East YouTube Channel, or check back for more blog posts, right here.