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February 14, 2023
2023-0278

Qatar enacts amendments to Income Tax Law

  • Qatar has amended certain provisions of the Income Tax Law by way of Law No. 11 of 2022 published in the Official Gazette on 2 February 2023.
  • The amendments relate to the scope of taxable activities, exemptions, noncompliance penalties, and powers of the General Tax Authority (GTA).
  • Taxpayers should assess how these amendments will impact their tax compliance obligations and potential tax liabilities in Qatar.

Executive summary

On 2 February 2023, Qatar published amendments to Law No. 24 of 2018 (the Income Tax Law) by way of Law No. 11 of 2022 in the Official Gazette. Law No. 11 of 2022 introduces important changes that will impact the taxation and compliance obligations of taxpayers. The amendments decreed under Law No. 11 of 2022 encompass the scope of taxable activities, exemptions, noncompliance penalties, and powers of the GTA.

Detailed discussion

Background

On 13 December 2018, His Highness Tamim Bin Hamad Al Thani, the Emir of Qatar, issued Income Tax Law (Law No. 24 of 2018) replacing Law No. (21) of 2009 which was made effective on the same date. The Executive Regulations to the Law No. 24 of 2018 was issued on 12 December 2019.

The Income Tax Law is now amended by Law No. 11 of 2022 and the Executive Regulations regarding these changes are expected to be issued in the near future.

Key amendments to the Income Tax Law

Imposition of tax

Based on the amendments to the Income Tax Law, the following income earned abroad will now be taxed in Qatar.

  • Income derived by a Qatari project (a project managed by a resident in the State of Qatar) that participates directly or indirectly in the 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 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 permanent establishment (PE) of the Qatari project
  • In addition, the following income earned abroad shall also be 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

Tax exemption

Under the Preamble of Law No. 24 of 2018, certain persons (e.g., individuals, companies and any other body of persons) were considered out of scope and were not subject to the provisions of the Income Tax Law except for withholding tax and contract reporting provisions. Based on the amendments to the Income Tax Law, such persons would now be considered as within the scope of the Income Tax Law on a tax-exempt basis. Accordingly, the following persons and income earned abroad will be exempt from income tax in Qatar:

  • Income of private organizations and institutions, charitable private organizations and associations, as well as privately owned public interest institutions established under the provisions of the regulating law thereto
  • Capital gain of a Qatari project derived from the sale of shares, interests and other foreign rights, immovable and movable properties of a PE abroad
  • Board of directors' fees and similar payments earned by a Qatari project from a company residing abroad
  • Income of a Qatari project earned through the activities of the foreign PE, provided that such income is subject to tax abroad

Reporting requirements and penalties

The amendments introduced new requirements in line with other existing laws in Qatar concerning economic substance regulations, ultimate beneficial ownership, and requirements arising from the digitization of the economy.

The amendments introduce a penalty of 15% of net income in instances where the "substance" tests are not met.

Minimum tax rate in compliance with BEPS 2.0

Qatar is a member of the Inclusive Framework on Base Erosion and Profit Shifting (BEPS). The amendments to the Income Tax Law includes provisions reinforcing Qatar's commitment to the BEPS project, before the more detailed introduction of the Global Anti-Base Erosion Rules and/or a Qualifying Domestic Minimum Top-up Tax in the future. Measures are expected to be introduced to achieve a minimum tax rate of 15% on certain entities, which will be further clarified in the changes to the Executive Regulations.

Powers of the GTA

For purposes of tax inspection and exchange of information, the amendments to the Income Tax Law introduced the following as part of the powers of the GTA in obtaining relevant information for these purposes.

  • The GTA is entitled to obtain information and documents for the purpose of tax inspection and for the purpose of exchange of information with the competent foreign tax authority requirements
  • Resident persons are required to provide information on their (or their rights to) financial assets abroad at the request of the GTA

Other changes

The amendments to the Income Tax Law also introduced other changes including:

  • Inclusion/amendment of certain definitions, including but not limited to a PE, a person, an entity, a nonprofit organization, a project, a Qatari project, immovable property, distributed profits, interest, technical service fees, complete competition, foreign tax, place of actual management and resident (Qatar nationals are now included in the definition of resident)
  • Deductibility of taxes paid abroad, subject to certain conditions
  • Anti-avoidance rules now exclude the method by which the GTA applies market value based on arm's-length principles to a deed or an economic event subjected to a different value by the taxpayer

Implications

Businesses should be mindful of these changes and consider how the regulations may impact their tax compliance obligations and potential tax liabilities in Qatar. The Executive Regulations with respect to these changes are expected to be issued at a later date.

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For additional information with respect to this Alert, please contact:

EY Consulting LLC, Doha

Ernst & Young LLP (United States), Middle East Tax Desk, New York

 

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