26 March 2026 Qatar ratifies double tax treaty with Kuwait
On 15 March 2026, Qatar's Official Gazette published Amiri Decree No. (1) of 2026 on the ratification of the Agreement between the Government of the State of Qatar and the Government of the State of Kuwait for the Avoidance of Double Taxation with respect to Taxes on Income and for the Prevention of Tax Evasion and Avoidance (Double Tax Treaty or DTT). The DTT is aimed at enhancing economic cooperation between the two countries, reducing double taxation and fostering a transparent and predictable tax environment for bilateral investment by businesses and individuals in both countries. The DTT partners shall inform the other state in writing, through diplomatic channels, of the completion of the ratification procedures in their respective state. The DTT shall enter into force on the date of receipt of the latter of these notifications. Once the DTT enters into force, its provisions on withholding tax (WHT) will apply to amounts paid or credited on or after 1 January of the year following the entry-into-force date. The DTT will apply to other taxes on income and capital for tax years beginning on or after 1 January of the year following entry into force. Once effective, the DTT will become the third DTT that Qatar has concluded with other Gulf Cooperation Council states, after its DTT with Oman and with Saudi Arabia. The DTT applies to income taxes imposed by a contracting state and levied on gross income or on elements of income, including taxes on gains resulting from the alienation of ownership of movable or immovable property.
A person may apply the DTT provisions if considered a resident in one of the DTT partner jurisdictions. For Qatar, a resident is someone liable to tax based on domicile, residence, management, incorporation or similar criteria, excluding those taxed only on Qatar-source income. For Kuwait, a resident is a Kuwaiti national or any entity established in Kuwait. The DTT provides for a tiebreaker rule for dual residence of individuals, considering: (1) permanent home, (2) center of "vital" interests, (3) habitual abode, (4) nationality and (5) mutual agreement by competent authorities. For legal entities with dual residence, no specific tiebreaker exists and the authorities must mutually agree on residency. The permanent establishment (PE) definition mostly aligns with the standards of the Organisation for Economic Co-operation and Development (OECD). It includes detailed descriptions for a fixed-place PE, natural-resources PE, construction-site PE, service PE, substantial-equipment PE and dependent-agent PE. The DTT also lists the preparatory and auxiliary activities excluded from creating a PE. Business profits shall be taxable only in the state where an enterprise is located, unless the income is attributable to a PE in the other jurisdiction. The profits of the PE should be determined on the basis that it is a separate and independent business from its head office. Income derived from immovable property may be taxable in the contracting state where the property is located. International transportation income is taxable only in the contracting state where the enterprise's place of effective management is located. Such income includes rental/lease income and charter income from the international operation of ships and aircraft. Dividends and interest are taxed in the residence state, while royalties and technical service payments may be taxed in the source state at a rate not exceeding 8%. DTT WHT rates apply only if the recipient is the beneficial owner and the payment is at arm's length. Any excess payment due to special relationships is taxed under domestic WHT provisions. Gains from the alienation of immovable property in the other contracting state may be taxed in that state. Gains from the alienation of movable property forming part of a PE situated in the other contracting state may be taxed in that state. This includes gains from the disposal of the PE itself (separately or together with the entire enterprise). Gains from the sale of ships or aircraft operated in international traffic, or movable property related to such operation, are taxable only in the contracting state where the enterprise's place of effective management is located. The taxing rights with respect to assets other than those outlined above are allocated to the jurisdiction where the alienator is a resident. Income not covered in other parts of the DTT should be taxable only in the jurisdiction where the recipient is a resident. The DTT has clear provisions for both Qatar and Kuwait with respect to government investments. Investments of a contracting state in the other contracting state and the respective income or gains derived shall be taxable only in the first-mentioned state. This provision does not apply to income from immovable property or gains arising from the disposal of immovable property. If a resident of one contracting state is taxed on income or capital in the other state, the residence state allows a credit for foreign tax paid, up to its own tax on that income or capital. This credit may include foreign tax that is reduced or exempted under the residence state's domestic incentives or investment promotion laws. Taxpayers may present cases of double taxation to the competent authorities of either state, which must seek to resolve the issue through mutual agreement. Taxpayers should present the case within three years of the first notice of the action that led to the imposition of tax contrary to the provisions of the DTT. Benefits under the agreement may be denied if obtaining those benefits was one of the principal purposes of an arrangement or transaction. Businesses in Qatar and Kuwait should review their operating models in light of the new DTT to determine its impact on their operations and investments.
Document ID: 2026-0730 | ||||||
