The Government of Qatar has ownership interests in several economic sectors, including oil and gases production, petrochemicals, and the steel and fertilizer industries. Government policy in recent years has recognized the need to promote greater private investment in core industrial projects.

Foreign ownership of business and incentives
Generally, a non-Qatari national, whether natural or juristic, may engage in commercial activities provided the foreign participation in the entity does not exceed 49%.

In October 2000, the Government enacted a new Foreign Investment Law aimed at promoting foreign investment in specific business sectors including agriculture, manufacturing, health, education, tourism power and projects which develop and utilize the State's natural resources.

The new law permits up to 100% foreign ownership in these business sectors. The law does not allow a non-Qatari to participate in banking, insurance, commercial agency or real estate trading activities.

The Government welcomes foreign investors and is keen to promote projects involving the transfer of foreign expertise and technology to the Qatari economy. The enactment of the new Foreign Investment Law confirms the Government's commitment to attracting new investors to participate in the future development of business in the State.

In addition to expanding the zone within which foreign investors can participate in the national economy and avail of 100% ownership in certain fields of the economy, the new Foreign Investment Law confers upon foreign investors privileges, which were not available to them previously, including:

• The right to lease land for the project for up to 10 years.
• The right to import the machinery, equipment and some of the primary materials required for the project.
• The exemption of the capital to be invested in the project from income tax for a period not exceeding 10 years.
• Exemption from import customs duties on the equipment and machinery to be imported for the project.
• Exemption from import customs duties on the primary raw materials and half-manufactured materials, which are not available in Qatar.
• Protection from confiscation by the state otherwise than for the public welfare, without discrimination and subject to fare and adequate compensation.
• The freedom to repatriate the profits of the project and its capital on liquidation, and the freedom to transfer the ownership in the project.
  

Tax structure
Law No. 11 of 1993 was issued on 14 July 1993 to cover the income tax system and filing procedure in Qatar. In general, the Law provides that any business activity carried out in Qatar will be subject to tax. An "activity" has been defined as any occupation, profession, service, trade or the execution of a contract or any other business for the purpose of making profit. Income tax is levied on partnerships and companies operating in Qatar whether they operate through branches or in partnership with foreign companies.

There are no personal taxes, social insurance or other statutory deductions from salaries and wages paid in Qatar.

Direct Taxes
Taxes are levied on a taxpayer's income arising from activities in the State of Qatar. The term activities include:

• Profits realised on any project executed in Qatar.
• Profits realised from the sale of any of the company's assets.
• Commission due to agencies or arising from representation agreements or commercial agency whether such commission is realised in or outside the State of Qatar.
• Fees paid for consultancy, arbitration or expertise and other related services.
• Rent from property.
• Amounts received from the sale, rent or the assignment of a concession and the use of a trade mark, design, know how or copyright.
• Amounts received from debts previously written-off.
• Profits realised on liquidation.
• In addition, interest and other bank income received outside the State of Qatar will be subject to tax in Qatar if this income relates to amounts arising from the taxpayer's activities in Qatar.
  

Tax Administration
The Gregorian calendar is used for Qatar income tax purposes, but a taxpayer may apply to prepare his financial statements for a twelve-month period ending on a day other than 31 December. The first accounting period may be more or less than twelve months, but it should not be less than six months or more than 18 months. A taxpayer should keep his accounting records in Qatari Riyals unless permission is obtained from the tax administration for them to be kept in a foreign currency.

Filing Requirements
Tax declarations should be filed with the Income Tax Department (ITD) at the Ministry of Finance within 4 months of the end of the financial period. Failure to submit a filing can result in the temporary withholding of payments due under contracts. The Tax Law also empowers the ITD to collect unpaid taxes from third parties, such as a Taxpayer's debtors, where the taxpayer fails to settle taxation liabilities. Penalties for late filing or late payment of taxes may be levied at the rate of QR 10,000 per month or 2% of tax due whichever is greater.

All entities with a capital or annual profit exceeding QR 100,000 should submit audited financial statements to support the tax declaration. An accountant in practice in Qatar who is registered with the Ministry of Finance, Economy and Commerce must certify the financial statements.

Accounting Records and Inspection
On submission of the final tax return and audited financial statements the filings of the taxpayer will be reviewed by the ITD. Generally accepted methods of commercial accounting must be applied and the accruals method must be followed. The ITD has the right to inspect a taxpayer's books and records which should be kept in Qatar. The accounting books and records must be maintained for at least 5 years from the date the annual tax declaration is registered with the ITD.

Tax Determination
Tax liabilities are computed in a manner similar to general international practices on the basis of profits disclosed by audited financial statements, adjusted for tax depreciation and any items disallowed by the ITD. If the ITD concludes that the filing is not correct, the ITD can issue an assessment of the payable taxes on a deemed profits basis. Such assessments by the ITD may be appealed.

This option may be exercised by the ITD in the following instances:

• If there are reasons to believe that the declaration submitted by the taxpayer is not correct.
• If the taxpayer fails to submit a declaration.
• If the taxpayer does not maintain proper books and records.
• If the taxpayer does not provide the information requested by the ITD.
  

Deductions
Expenses incurred to earn the taxable income are deductible. These include:

• Interest expenses.
• Rent paid.
• Salaries and labour cost, end of service benefits and all related contents including charges allocated to end of service benefits.
• Pension funds and other similar charges.
• Fees and taxes other than income tax.
• Debts written off that are approved by the ITD and which are in accordance with standards established for this purpose.
  

The following cost and expenses are not considered deductible items:

• Personal and other expenses not related to taxable activities.
• Criminal and tax penalties paid in accordance with this law.
• Expenses or losses that may be recovered under an insurance policy, or a contract, or a compensation claim.
• Depreciation that exceeds cost.
• The branch share of Head Office expenses that exceed the rate determined by the ITD as a proportion of the total branch income.
  

The Law contains provisions, which allow trading losses to be carried forward and set-off against future profits. However, losses cannot be carried forward for a period exceeding 3 years from the end of the tax year in which the losses were incurred. Losses cannot be set off against prior year income.

Withholding Requirements
A directive issued by the Director of Income Tax in January 1993 requires all ministries, Government departments, public and semi-public establishments and other taxpayers to withhold final payments to subcontractors until such entities present a tax clearance certificate issued by the ITD. This directive also imposed annual disclosure and compliance requirements on the principal contractor.

Tax Rates
The following are the income tax rates:

Qatari Riyals               Tax Rate %
0 - 100,000                          0
100,001 - 500,000             10
500,001 - 1,000,000          15
1,000,001 - 1,500,000       20
1,500,001 - 2,500,000       25
2,500,001 - 5,000,000       30
5,000,001 and above         35

Tax Exemptions
The new Tax Law provides for a Committee to be formed to evaluate applications for tax exemption regarding projects executed by foreign companies. Any contractor who is involved in the execution of an exempt project can apply for exemption from income tax. However, taxpayers who obtain exemption from taxes are required to maintain proper accounting records and should submit financial statements to the tax authorities within 4 months from the end of the tax year.


                                                                                         Tony Harkén