Amendments to Qatari Income Tax Law Published

The State of Qatar has recently issued Law No. 11 of 2022 amending Qatar’s existing corporate income tax law (Law No. 24 of 2018) The new amendments aim to align Qatar’s corporate income tax (“CIT”) regime with recent international tax reforms, including the OECD’s BEPS Pillar 2 proposals.

What are the key amendments?

• Global minimum tax: Pursuant to the amended CIT Law, entities residing in Qatar that are within the scope of the Global Minimum Tax rule under the BEPS Pillar 2 proposals will be subject to a minimum effective tax rate of 15%. A future amendment to the Executive Regulations of the Law will cover the mechanism for applying this tax to in-scope entities.
• Additions to taxable income: The scope of taxable income has been widened under the amended CIT Law with certain types of foreign-sourced income now subject to tax in Qatar. Income derived by Qatari projects from real estate and immovable property located outside of Qatar is now subject to tax provided that that such income is not linked to a foreign permanent establishment of the Qatari project.
  Dividends, as well as interests and royalties that arise from foreign sources, that are paid by foreign companies outside of Qatar to Qatari projects are also now subject to tax, if they are not linked to a foreign permanent establishment of the Qatari project.
  In addition, tax will apply to foreign-sourced income arising from the provision of various types of services, subject to certain conditions.
• Amended exemptions: Certain types of entities including non-profit organizations, private associations, and foundations of public interest that were previously out of scope of the income tax law, are now instead exempt from tax. This means that they are subject to compliance requirements such as filing tax returns, preparing audited financial statements. Etc.In addition, the article provides for the applicability of an exemption to capital gains accrued on the disposal of various types of immovable and financial assets held outside of Qatar, in addition to movable assets that form part of a foreign permanent establishment owned by a Qatari project, including capital gains on the disposal of the permanent establishment.An exemption also applies to fees paid to Qatari projects in their capacity as a member of the board of directors in a company residing outside of Qatar.
• New definitions: Certain terms have been newly defined or re-defined including, arm’s length principal, not-for-profit organizations, distributed profits, immovable properties, foreign tax, interests, effective place of management, Qatar project, technical service fees, project, and foreign project. Critically, the definitions of permanent establishment and the criteria for residency have also been amended.

• Foreign tax relief: Subject to certain conditions and controls, tax relief may apply in respect of foreign income tax paid outside of Qatar.
• Economic activity/substance requirement: A requirement has been introduced mandating the submission of a report on core activities performed in Qatar. The Executive Regulations will set out the entities that fall within this reporting requirement. Entities that do not satisfy the core activities/physical presence requirements will be subject to a 15% penalty on their net income, and the General Tax Authority (“GTA”) could also refuse the issuance of a tax residency certificate to such entities.
• Reporting: New requirements have been introduced with respect to mandatory reporting to the GTA, upon its request (during an audit), of detailed statements including all financial assets or rights to assets held outside Qatar.
• Anti-avoidance provisions: Additional anti-avoidance measures have been put in place for joint Qatari-foreign projects to counteract any instances where the relationship between the Qatari party and the foreign party is not at an arms-length basis.
• Ultimate beneficial ownership reporting: Various entities having a head office or effective place management in Qatar are required to make available to the GTA, upon its request, all necessary information about their legal and ultimate beneficial owners.

Amendments to the Executive Regulation of the Income Tax Law are expected to be published soon with further guidance on the above amended provisions.

How can we help?

Our multiple award-winning Tax team is here to help. With their expertise and significant experience of CIT matters across the Middle East and all industry sectors, they are well placed to assess the impact of the updated legislation on your organisation and assist with your CIT requirements in Qatar.