Taxation in Qatar (expats and residents) – that will be the topic of today’s article.
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Introduction
Many important financial aspects need to be taken care of by the individuals who move to other countries. However, among these aspects, taxes happen to be the most crucial, and every individual should be familiar with the tax system in the country they reside in.
Therefore, in today’s article, we will cover the important aspects related to taxes in Qatar, which would mostly concentrate on the information essential for expats living in Qatar.
We often include tax information related to the residents as well in most of the articles related to expat taxes.
Why? Because in certain situations some individuals might be subject to tax rates as applicable to the residents because of qualifying for the criteria related to tax residence (either accidentally or intentionally).
Or else, some people might have decided to stay there permanently and might not be familiar with all the aspects related to taxes.
General Information:
Qatar is a country located in the eastern coastal region of the Arabian Peninsula while being bordered by Saudi Arabia on the south and the Persian Gulf on the remaining three sides.
With the city of Doha as its capital, Qatar is divided into seven municipalities, and the official, as well as the most commonly spoken language of Qatar, is Arabic.
The currency of Qatar is Riyal, which is denoted as “QAR”, and by the time of writing this article 1 Qatari Riyal is equivalent to 0.27 USD.
Qatar is known to have the world’s third-largest natural gas reserve, and it is common knowledge that oil and natural gas made Qatar be one of the highest per capita income countries in the world.
Moreover, the natural gas reserves of Qatar are estimated to last for the 22nd century as well.
Even though the economic policy of Qatar is concentrated on developing natural gas reserves and foreign investments in non-energy sectors, it has been estimated that around 50% of the GDP of the country is because of oil and gas industries.
As of the stats related to taxes obtained from the tax summaries website, there are 4 tax regimes in Qatar related to foreign investors, which are as follows.
- The State regime takes care of most businesses existing within the country.
- The Qatar Financial Centre (QFC) regime, which is loosely based on the English common law and most of the major financial centres that exist already.
In Qatar, financial institutions and professional service providers (companies) operate according to this regime.
- The Qatar Science and Technology Park (QTSP) is responsible for the tax exemptions offered to the activities related to research and development (R&D).
- Finally, there is the Qatar Free Zones Authority (QFZA), which was established in the year 2018. This currently supervises the two free zones in Qatar, which are Ras Bufontas and Umm Al Houl.
The advantages of setting up a company in the zone are 100% ownership of the business, flexibility for the laws related to the foreign workforce, and the likeliness of having a tax holiday for 20 years.
This means there won’t be a corporate tax, custom duties, as well as personal income tax.
The “Ministry of Finance” and the “Qatar Financial Centre” happen to be the tax authorities in Qatar.
As part of this article, we will cover the details regarding corporate taxes in Qatar as well. Why? Well, some expats living in Qatar tend to have a business in Qatar while being an expat, and they might have some trouble getting familiar with the corporate taxes.
However, we will mostly talk about the taxes applicable to the companies that operate as per the state regime in a detailed manner. We will just have a brief insight on QFC, yet the regimes of QSTP and QFZ are not mentioned in this article.
Nevertheless, every detail related to individual taxes has been covered, which are imposed on both residents and expats.
If you are only interested in knowing about the individual taxation details in Qatar and want to skip the information related to corporate taxation, then click here.
Corporate Taxation:
Corporate Income Tax (CIT):
A corporate entity, which may be entirely owned by a foreign individual or partially owned by them, is subject to taxation on the income obtained from Qatar.
If the entity is a joint venture, then the tax imposed on the entity is dependent on the foreign individual’s share of the profit.
It should be duly noted that there is no corporate tax applicable to the entities that are entirely owned by people of Qatar and GCC (Gulf Cooperation Council) nationals who are residing in Qatar.
If the taxes are not specifically excluded for an entity, then the entity would be subject to taxes. This would be the scenario when the income derived by the entity is from Qatar, regardless of the location of the entity.
In such cases, the taxable income is imposed with a corporate income tax rate of 10%, which is a flat rate. However, there are some exceptions.
Given below are the tax rates that are applicable in some particular scenarios:
- The same rate would apply if there was any special agreement made before 1st January 2020.
If there is no specified rate mentioned in the agreement, then income would be taxed at a rate of 35%.
- According to Law No. 3 of 2007, the tax rate applicable to oil operations is usually around 35%.
- The payments provided to non-residents as per certain services activities that are not connected with a permanent establishment in Qatar is imposed with a withholding tax (WHT).
- There have been some new provisions made by the new Tax Law and its regulations, which come with a possibility of impacting a Qatar-based entity’s tax situation.
This is concerning the profits that are attributable to the Qatari shareholders because the recent requirements were introduced, which narrow down the possibility of such exemptions.
Hence, it is suggested to all the Qatari entities that they review their tax situations properly.
- Additionally, the subsidiaries of non-exempt ownership that are entirely owned by listed entities are taxed to the full extent. This non-exempt ownership includes foreign as well as non-exempt Qatari or GCC ownership companies.
Before this, there was a general idea among corporate entities that such subsidiaries are exempt from taxes.
To make it a bit better for the entities in Qatar, there are no taxes applicable at the local level, state level, or provincial level.
The branches of companies belonging to other nations are imposed with taxes that are the same as the taxes applicable to the taxable entities in Qatar.
When it comes to expenditures of companies other than taxes, there are employee costs, losses, rents, insurance premiums, etc., which also need to be taken into careful consideration.
The operating losses of a company can be deducted from the overall income during a year and can be carried forward for another five years according to the New Tax Law.
The taxes paid outside of Qatar as income taxes can be deducted as an expense for determining taxable income when such income is being taxed in Qatar.
Another major aspect related to the corporate income tax in Qatar is that the taxes can be excluded when the business of a company is determined to be important for the wellbeing of Qatar’s economy.
In such cases, the tax exemptions can be made for a period of 5 or 10 years, and the criteria for such businesses is set by the Qatari tax law.
Tax Residence for Corporate entities:
It should be taken into consideration that the residence is not the basis on which taxes are determined for an entity, regarding corporate income tax purposes.
People should also notice that the companies that are resident outside of Qatar may also be subject to corporate income tax.
Anyhow, the residence status of a corporate entity helps determine whether there would be a withholding tax applicable on the payments.
Any corporate entity would be considered as a resident in Qatar when it is incorporated as per the Qatari laws, has its headquarters located in Qatar, and the company’s management activities are done in Qatar.
Income determination for corporate entities:
The corporate income tax is imposed on the income that has been derived from the sources in Qatar. Some examples are:
- Income obtained from activities that are carried out in Qatar.
- Income obtained from contact work that has been carried out entirely or partially in Qatar.
- Income obtained from real estate located within Qatar, which comprises the sale of sales of shares belonging to the companies where the assets mainly consist of real estate located in Qatar.
- Income obtained from the shares in companies, which have been located in Qatar.
Value Added Tax:
At present, there is no value-added tax in Qatar, yet it is anticipated that VAT might be introduced in the nearby future as per a common GCC framework with an estimated tax rate of 5%.
Custom Duties:
The general rate for custom duties in Qatar is around 5%, which applies to countries other than the GCC countries. There may be a possibility for higher rates depending on the type of goods (tobacco products have higher rates).
Excise Taxes:
The rates are as follows:
- Tobacco Products: 100%
- Carbonated drinks: 50%
- Energy drinks: 100%
- Special purpose goods (including alcohol and pork foods): 100%
Qatari Science and Technology Park (QTSP):
The entities involved with activities related to research and development (R&D) are exempt from the Qatar tax, yet they have to file tax returns and are imposed with WHT on payments made to non-residents.
Qatar Free Zones:
The main objective of the Qatar Free Zone Authority was set up in the year 2018 to develop the Free Zones in Qatar. At present, this oversees two free zones, which are an Airport Free Zone (Ras Bufontas) and a Port Free Zone (Um Al Houl).
The advantages of setting up a business in any of the Free Zones are a 100%ownership and a 20-year tax holiday.
Audit Requirements:
A company needs to audit its financial statements while filing a corporate income tax return when any of the given situations happen.
- The capital is more than 200,000 Riyals
- The total income is more than 500,000 Riyals
- The head office is located outside of Qatar
In Qatar, the tax law necessitates accounts to be prepared while abiding by the IFRS. Starting from 1st January 2020, all the financial statements in Qatar are to be made in the Arabic language.
Individual Taxation:
The government of Qatar came up with a system called as Wage Protection System (WPS).
According to this system, all the salaries of individuals (including expats) who are working in a company of Qatar or a branch of an international company located in Qatar are paid over to their bank accounts.
This data can be used by the Qatar government to cross-reference the Labour records of the registered employees or the wages/salaries of the employees in financial statements.
As for the taxes, Qatar implements a territorial taxation system. Based on this, the individual is taxed in Qatar on the income derived from sources in Qatar, which is regardless of the person’s tax residence.
This means, even expat individuals are taxed on the income as per the Qatar tax laws if the income has been derived from sources in Qatar.
Note – However, income tax isn’t levied on wages, salaries, and allowances of the individuals who are employees.
On the other hand, self-employed individuals are subject to taxes on the income obtained from the sources in Qatar.
As per the tax law in Qatar, a person would be considered as a resident for tax purposes when they qualify for any of the following conditions given below.
- The person should have a house located in Qatar.
- The person must be living in Qatar for more than 183 days in a one-year timeframe, which can either be consecutive or separately.
- The individual’s center of vital interests should be in Qatar, which means their personal interests/business interests or anything important to them.
Therefore, even as an expat, if you own a house or live in Qatar for 183 days, or have vital interests over there, you would be considered as a tax resident.
It is easy to avoid buying a house or having vital interests over there, yet you may find it hard to overcome the tax residence criteria of 183 days by staying for a period less than that, especially while living as an expat over there.
Social Security Contributions:
The employers in Qatar are mandated to make social security contributions for their employees, who are Qatari nationals. However, there is no obligation for the employers to do this for employees belonging to other countries (expat employees).
Net Worth Tax: No
Inheritance Tax: No
Estate Tax: No
Gift Tax: No
Property Tax: No
Transfer Tax: No
Stamp Duty: No
Capital Duty: No
Payroll Tax: No
Business Income:
Individuals are taxed on the income derived from Qatar-based business that has its operational activities in Qatar.
Such activities include any professional services provided, services provided, trades executed, speculations made, contracts took, or any business that obtains profit while utilizing movable or immovable properties in Qatar.
Income tax applies to the self-employed individuals who obtain income from the sources in Qatar or are involved with activities in the country.
Capital Gains Tax (CGT):
Capital Gains Tax is not levied on the sale of real estate and securities if the assets sold are not a part of the taxable activity in Qatar.
Expats are subject to capital gains tax on the sale of Qatar-sourced assets while being taxed at a rate of 10%.
The CGT returns must be submitted within 10 days of the completion of the sale or the conclusion of the contract, whichever happens first.
Dividend Income:
Dividends won’t be taxed if the profits have already been taxed or if the profits are derived from the companies that are exempt from taxes in Qatar.
Rental Income:
There are no taxes on rental payments for the people who are not involved in a taxable activity in Qatar.
Interest Income:
Bank interest or any other interest that is not involved with a taxable activity in the state of Qatar is not subject to taxes.
Foreign Tax Relief:
According to the tax laws of Qatar, the income tax paid outside of Qatar is deductible as an expense for determining taxable income purposes, while the income should be taxed in Qatar.
Tax Treaties:
Qatar has a double tax treaty (DTT) network, which is considered to be growing. At present, 60 countries have a Double Tax Treaty.
Tax incentives:
The gross income of the people who are residing in Qatar is exempt from taxes, which includes their shares in profits derived from legal entities.
Deductions:
- The taxes and duties, except for the income tax in the case of corporate entities, are deductible.
- Donations, gifts, and Subscriptions made to charitable trusts, humanitarian organizations, scientific organizations, cultural organizations, sports activities, etc., which are made to the government organizations or public entities are deductible.
However, the value should not be more than 3% of the overall profits earned in that particular year when the deductions are claimed by the individual.
- Bad debts approved by the GTA based on certain criteria set by the tax law in Qatar are deducible by corporate entities or business owners.
- The interest paid on the loans secured to take care of taxable activities can be deductible.
However, the deduction won’t be possible when the loan is between the head office and its branches, or some other entities related to the head office.
Withholding Tax:
The withholding tax in Qatar does not apply for dividends, anyhow, it applies to interest, royalties, and fees, and services-related payments.
- The WHT for interest payments is 5% for resident companies, resident individuals, non-resident companies, and expat/non-resident individuals.
- The WHT for royalty payments is 5% for resident companies, resident individuals, non-resident companies, and expat/non-resident individuals.
- The WHT for fees and other services-related payments is 5% for resident companies, resident individuals, non-resident companies, and expat/non-resident individuals.
Frequently asked questions:
- Do I need to file taxes in my country of origin while I am being taxed in Qatar?
“You will have to file taxes in your country of origin, and if you are subject to taxes over there, which can be deducted in Qatar.”
- Who is considered a resident in Qatar for tax purposes?
“Click here.”
- Is foreign income taxed in Qatar?
“No.”
- What is the personal income tax rate in Qatar?
“There is no specific personal income tax in Qatar, yet people obtaining income from businesses involved with taxable activities are taxed at CIT rate of 10% (flat-rate).”
- When are the tax returns due?
“Employed expats are not required to file their tax returns, yet expats who are involved in a business are required to file tax returns before 4 months after the end of a tax year, and the tax year in Qatar begins on January 1st and ends on December 31st.”
Bottom Line:
Taking care of the financial aspects while living as an expat in some other country might be hard, yet with the help from a professional, the process can be made easy.
If you need professional advice regarding your expat investments needs, you can avail yourself of the top-notch services offered by us.
That being said, we hope that you were able to find all the information provided in this article useful.
It should be duly noted all the information regarding the taxes in Qatar is up to date while writing this article. The data might change by the time you read this article, and we highly suggest you take advice from an expert in this particular field.
