The Tax Legislation of Qatar was prepared to be so plain, clear, and uncomplicated. For the sake of same plainness, I intend to inform you about the taxation principles in effect in the State of Qatar without spoiling the coherence and comprehensibility.
What is the scope of income subject to taxation?
Relevant to the facility or not any income generated in Qatar; every kind of income commissions, etc. collected in or abroad Qatar; service incomes such as consultancy, arbitration, appraisement fees; rental income; moral rights income such as know-how and copyright; debt collections of previous; liquidation decision; profits of interests and banking transactions (including abroad interest, etc. of incomes earned in Qatar) are subject to taxation in Qatar.
Incomes generated abroad does not mean being tax free. In other words, it is compulsory to add the incomes generated abroad by the subsidiaries of Qatar-based companies to gross profit; and rate the tax assessment by this way.
On the other hand, it is crucial to be taken into consideration that taxation is assessed corresponding to our (Turkish) corporate tax. However, it also should not be forgotten that personal incomes’ being tax free is due to trading without establishing a company and generating an income is banned, and personal income is limited.
To whom and what rate is taxation applied?
The State of Qatar and GCC Countries citizens are tax-exempt whereas citizens who are not Qatar and GCC nationals are subject to %10 rate of tax per share of their incomes stated in 1st article. In other saying, %10 tax is applied to gross profit of foreign companies’ per share in Qatar.
However, incomes of oil and natural gas sector, and related facilities are subject to tax at a rate of %35; not %10.
While dividend income is tax-exempt, capital gains are obliged to be added to the tax assessment. Likewise, Qatar-based companies’ incomes of share sales are another must to be added to the gross profit as an income composing the tax assessment.
Besides, expenses reducing the tax assessment must be in compatible with company operations; and the content and qualification of expenses that can be added is stated in the related legislation.
Are there any taxes subject to the profits of company incomes, or another form of tax?
In general VAT, SCT (Special Consumption Tax), Property Tax, Inheritance and Transfer Tax are not currently applied in Qatar excluding some implementations in some exceptional cases and sectorial basis considering the ownership.
Is stoppage (deduction) applied in the State of Qatar?
With the new taxation law, stoppage has started being applied in Qatar. Within this frame, gross royalty and technical support services fees given in Qatar by a company based abroad are subject to %5; commissions interest, brokerage, contribution fees (excluding some exceptions) are subject to %7,5 stoppage.
From the point of stoppage, the taxpayer is the person and/or company making the payment of tax.
What are the prominent issues to be paid attention and known about taxation?
In 4 months after the end of the financial year, it is compulsory to fill out the tax statement and submit it to the Ministry of Finance and Economy tax department. On condition of receiving approval, the deadline of submitting the tax statement may be postponed for extra 8 months.
Companies having more than 100.000 Qatari Riyals profit for a financial year have to submit financial report prepared by an auditor who is authorized by the State of Qatar enclosed with the tax statement.
In the case of statement is not submitted, ministries and public institutions stop payments to taxpayers. Also, the institution my deduct the tax from taxpayer receivables if the tax has not been paid yet; and levy the taxpayers assets.
Subcontractors cannot receive final payments from the prime contractors or institutions unless they bring receipt of discharge from the income tax department. The same condition is valid for the contractors as well. Prime contractor companies have to submit the list of subcontractors, the contracts signed; and price changes of current agreements to the related department.
In addition, prime contractors, in order to make the last payment to the subcontractors, have to submit the receipt of discharge for the sake of getting certificate of release and proving that necessary controls have been done to the tax office.
Companies have to apply and have their companies registered to the Ministry of Finance and get their companies’ tax id number card.
Delay fine is monthly; %2 of the tax or 10.000 Qatari Riyals are to be paid. The mentioned fine is calculated daily; and whichever is more is collected from the taxpayer in practice. However, the fine cannot be more than %24 of the tax. Irregularity fine starts from 5.000 Qatari Riyals.
Accounting records have to be in Qatari Riyals unless getting permission previously, whereas records are not obliged to be written in Arabic. Accounting records, deeds, documents, and tax statements have to be kept for 5 years. The start of this 5 years of period is the date the statements are submitted to the tax office. ITD (Income Tax Department) has the authority of examining the tax statements and deeds, and documents based on the tax statement.
It is obligatory for every company to work with an accounting office accredited by the State.
Incomes and the financial year is calculated based on the Gregorian calendar. However, taxpayers may demand their income to be calculated on a deadline different from December 31st, which means first financial year may be less or more than 12 months, but not less than 6 or more than 18 months.
Related department may demand the explanation of some expense items following the examination. The tax department does not make interpretation; if the tax payer does not submit the statement or accounting documents, the department determines the tax considering an approximate profit; and submits the assessment report to the tax payer. If the taxpayer has a valid reason, the assessment report can be objected in 30 days. The objection is taken into consideration, examined; and given decision is applied in the frame of tax basis. The taxpayer has the right to pass the subject to the Tax Appeals Commission If the taxpayer still objects to the given decision. In addition, both taxpayer and the department can pass the disagreement to the Tax Court.
American and English accounting norms are used in calculating the tax. Within the framework of Financial Statement Report, incomes, expenses, amortization, etc. are taken into consideration.
Profit – income – other operations generating income – also abroad interest income of the profit gained in Qatar are subject to tax in general. From these gains, expenses of good and service abroad Qatar, interest expenses, rents, labor procurement expenses, wages, severance pay, retirement insurance payments, other tax expenses and balance receivables approved by the tax department are deducted.
Personal expenses not related to tax operation, non-tax-deductible expenses, tax fines, other kind of fines, the expenses that can be bared by insurance, amortizations increasing value of land and other expenses, the expenses made for the subsidiaries central office in Qatar are deducted from the incomes. However, the total expense of these items cannot exceed %3,5 of incomes; and exceeding amount is not admitted as expenses. If the taxpayer firm has a branch office/subsidiary in Qatar, the rate is %3 for the expenses made for the central office.
The exemption/exception for the economic activities are determined by a committee. In order to make an exception, the committee takes into consideration the sector of the activity, and whether the activity is in favor of Qatar’s economic and social progress, is compatible with development plan of the State of Qatar, and is having positive effect on national interest and balance of payment, legal permission is gotten, formal procedures are fulfilled what rate country sources are used, etc. or not.
Moreover, a contractor undertaking a project which is tax-exempt can also apply to benefit from tax-exemption. But, every taxpayer to whom tax-exemption is implemented has to keep records and submit the statements on time.
The last but not least, it is so crucial for Turkish citizens to take into consideration of the provisions of “The Agreement between Qatar and Turkey for the Avoidance of Double Taxation with Respect to Taxes on Income” signed on 10.05.2008 published in 26872 Official Gazette with 2008/13518 decree and entered into force on 11.02.2008. Every natural person with the identification number ,subject to the audit of the finance, may most probably be exposed to some surprising sanctions in a short and medium period whether they are corporate body; taxpayer apart from the companies or not.