A company must have a legal presence in Qatar to conduct business in the country. This may be by virtue of a company, branch office, trade representative office or agency relationship. Incorporating a company is usually the most suitable approach if the foreign investor intends to have a long-term presence in Qatar. The type of company to be incorporated depends on several factors, particularly the commercial activities of the company.
INCORPORATING A COMPANY: With a few exceptions, companies in Qatar must have at least 51% Qatari ownership. Where permitted by the Ministry of Economy and Commerce (MEC), non-Qatari investors may own up to 100% of companies operating in the following priority sectors: health, education, tourism, natural resource development, energy and mining, consultancy services, technical work services, information technology, cultural services, sport and entertainment services. The MEC has discretion whether or not to allow greater than 49% ownership in these sectors. However, businesses established in the Qatar Financial Centre (QFC) or in a “free zone” may be wholly owned by foreign investors. The QFC operates as a unique on-shore system that allows for 100% foreign ownership and caters to professional and financial services companies and firms. The scope of companies that can be incorporated in the QFC is currently being revised. The only free zone currently in operation is the Qatar Science and Technology Park (QSTP) which is reserved for technology companies or start-ups that contribute to technology development and training. Three new special economic zones (SEZs) are planned. The first phase of SEZ Ras Bufontas, based near Hamad International Airport, is due to be completed in 2017. Alternatively, if a foreign company has a contract with the government, or a quasi-government entity, it is permitted to register a branch to perform that contract (which would be 100% foreign owned). The contract must be in respect of “a government-qualified project” that would facilitate the performance of a public service or benefit. This is often the preferred choice for a foreign company looking to undertake a government contract. However, it should be noted that the branch will only be permitted to carry out that specific contract. The branch cannot generally operate and do business in Qatar.
Law No. 20 of 2014 introduced a more efficient system for accepting or rejecting applications, and for appealing any decisions. The recently promulgated law stipulates that a branch of a company cannot undertake commercial activities different to the objects of the company stated in its founding documents. Further to this, the branch cannot have a separate legal personality from that of its parent company. It also provides for higher penalties for noncompliance with the law. Certain consultancy activities and security services may only be carried out by an entity that is 100% Qatari owned.
COMMERCIAL COMPANIES LAW: Unless its commercial activities fall within one of the priority sectors mentioned above, and an exemption has been granted, a company incorporated under the Commercial Companies Law (Law No. 5 of 2002) must have at least 51% Qatari ownership. The company structures available under the Commercial Companies Law are a limited liability company (LLC), single person company, joint stock company, holding company and “Article 68” company.
Foreign investors most commonly choose an LLC. An LLC can have between two and 50 shareholders and can partake in most commercial activities. The minimum share capital of an LLC is QR200,000 ($54,820) divided into shares of equal value, although the MEC may require a higher amount for certain activities. The liability of the shareholders of an LLC is limited to the value of their shares in the company. Profit can be allocated in different proportions to the shareholdings.
The process for incorporating an LLC under the Commercial Companies Law can take up to six weeks and involves the following:
• Submitting the memorandum or articles of association of the Qatar company for approval to the MEC, as well as notarised, authenticated and consularised copies of the original and Arabic transations of:
• the constitutional documents of the foreign shareholder entity; and
• a board resolution and power of attorney (in English and Arabic) authorising someone to act on behalf of the foreign shareholder to establish and manage the Qatar company.
• Depositing the requisite share capital in a Qatar bank;
• Registering with the Qatar Chamber of Commerce;
• Entering into a lease contract for an office space which meets the minimum requirements; and
• Obtaining a municipal license, signage license and immigration card. Additional licences and approvals may be required, depending on the commercial activities of the company. Most notably, a company that is performing engineering works must obtain a licence from the Committee for Accreditation of Engineers and Engineering Consultancy Offices (the Engineering Committee) by virtue of the Engineering Law (Law No. 19 of 2005) and its regulations.
LICENCES: The activities that require a license include: the preparation of architectural and constructional drawings, diagrams, designs, surveying, diagramming and project supervisory activities; providing consultancy, advice and feasibility studies; cost estimating, quantity surveying and managing projects in various engineering professions (the Engineering Activities). A foreign company looking to undertake any engineering activities in Qatar must provide proof of certification to undertake such activities in its country of incorporation.
Alternatively, a foreign investor may enter into a commercial agency agreement with a Qatari agent to sell its goods or services in Qatar. This is the only means of trading goods in Qatar without incorporating some form of commercial entity in the jurisdiction. Under the Commercial Agency Law (Law No. 8 of 2002) the commercial agent is provided protections such as exclusivity, commission on all sales concluded in Qatar and compensation for any termination or non-renewal of the agency agreement.
A company only looking to promote its goods in Qatar may incorporate a trade representative office (TRO) provided that the goods it promotes are registered in the country where it is incorporated. A TRO is allowed to promote, but not carry out or execute, any commercial activity.
TAX : The tax rules for businesses operating in Qatar are governed by Law No. 21 of 2009. The detailed rules relating to the administration of the tax regime are contained in the executive regulations. The Public Revenue and Taxes Department (PRTD) also issue circulars to explain their interpretation of the tax law and its practical application.
Tax is imposed on local source income generated by residents and non-resident businesses that have a permanent establishment in Qatar. Local source income will include gross income from activities carried on in Qatar and from contracts wholly or partly performed in Qatar.
There are a number of exemptions including income on public treasury bonds, gross income from agriculture and fishing, and an exemption for income and capital gains from companies and investment funds listed on the Qatar stock exchange.
Expenses will only be deductible if they are necessary to generate gross income, are actually incurred and are supported by documentary evidence. Expenses specifically disallowed include expenses incurred in generating exempt income, expenses in breach of the law, expenses on entertainment and similar items in excess of the limits provided for in the executive regulations, salaries paid to various family members, and head office expenses in excess of the limits set by the executive regulations. Depreciation will be allowable on fixed assets based on the rates set out in the Income Tax Law.
The net profit will be subject to tax at a rate of 10%. Any losses generated may be carried forward for a period of up to three years.
All taxpayers should register with the Public Revenue and Taxes Department (PRTD) and apply for a tax card within 30 days of obtaining a commercial registration or the first day of realising income from their activity. The income tax return should be submitted to the PRTD and any tax paid within four months of the end of the accounting period, although a taxpayer may request an extension of the filing date by up to four months. As of October 1, 2014 the PRTD has introduced a requirement for the online filing of tax returns. However, as an interim measure, hard copies of documents will also be required to be filed. Withholding taxes apply to certain payments made to non-residents with respect to activities not connected with a permanent establishment in Qatar at the following rates:
• 5% of the gross amount of royalties and technical fees; and
• 7% of the gross amount of interest (with exceptions), brokerage fees, directors’ fees, attendance fees and any other payments for services carried out wholly or partly in Qatar. The rate of tax for petroleum operations in the 2009 law is not less than 35% although earlier agreements will continue to apply.
QFC: The QFC applies tax to locally sourced profits at a standard rate of 10%, although there are differences in some of the more detailed computational provisions. A tax rate of zero applies to reinsurance activities, captive insurers and non-regulated entities owned by Qatari nationals. There are no withholding taxes within the QFC.
The interaction between the tax regulations and the special company regulations allows for a number of tax-efficient investment structures to be developed involving the use of holding companies and special purpose companies.
For instance, a scheme for new entities in the QFC enables them to obtain a cash rebate for early period tax losses instead of carrying them forward for future use. Therefore, the tax regime will also provide a tax ruling facility to help firms obtain clarity. The internal tax manual is published online and provides details of how the QFC Tax Department interprets the relevant tax regulations.
TECHNOLOGY: The QSTP is a special zone for technology-based companies. QSTP entities located in the park can avail themselves of a full exemption from corporate income taxes and are allowed to import goods and services free of Customs duties.
LABOUR LAW: Employment and immigration law in Qatar are primarily governed by the Labour Law (Law No. 14 of 2004) and a series of related ministerial resolutions, but must be read in conjunction with the sponsorship and immigration laws, which are largely set out in Law No. 4 of 2009 (Regulating the Entry, Exit, Residence and Sponsorship of Foreigners, the Sponsorship Law).
The Labour Law applies to everyone other than the employees of companies registered in the QFC, who are subject to the QFC Employment Regulations (QFC Regulation No. 10), rather than the Labour Law. Moreover, government and public employees, in addition to employees of Qatar Petroleum (and its related companies), security guards, housemaids and agricultural workers are not subject to the provisions of the Labour Law.
All contracts of employment must be in Arabic, and approved and registered with the Ministry of Labour and Social Affairs, unless the employee in question is not subject to the Labour Law.
The Labour Law imposes certain mandatory minimum standards, including a minimum notice period of one month for indefinite duration contracts, at least three weeks of annual leave (or four weeks if the employee has been in continuous employment for five years or longer) and end-of-service gratuity equal to at least three weeks’ salary for each year of employment.
The Labour Law stipulates that the maximum number of working hours per week is 48 hours (reduced to 36 hours during the month of Ramadan). It also makes provision for overtime payment, although by virtue of a subsequent ministerial resolution, the overtime provisions do not apply to certain senior staff. Public holidays are granted on Eid Al Fitr (three working days), Eid Al Adha (three working days), Independence Day and Sports Day.
Additionally, the Labour Law restricts the employment of non-Qatari nationals, when a suitable Qatari national candidate is available for the role. This is part of the Qatarisation strategy which aims to increase the number of Qatari employees in the workforce.
The Sponsorship Law provides that each non-GCC national who wishes to reside and work in Qatar must have a residency permit and work permit. These are provided under a kafala (sponsorship) system.
If an employee wishes to transfer his employment to another company, he must also transfer his sponsorship and obtain a certificate of no objection to do so from his sponsor. An employer also controls approval visas to exit the country.
At present, labour disputes are handled by the Labour Department in the Ministry of Labour and Social Affairs in the first instance. If a dispute cannot be resolved by the Labour Department, it is then transferred to the Qatari courts.
RECENT CHANGES: An amendment to the Labour Law was announced in February 2015, requiring salaries to be paid to employees through direct bank transfers. This will make it easier for the government to scrutinise and document late payments or non-payment to employees. Where necessary, existing employment contracts will need to be updated in order to reflect this change.
While this represents a step in the right direction on an important issue, there is an expectation that the government will implement greater reform to the Labour Law and the Sponsorship Law. In order to move jobs under the current system, an employee must obtain a no objection certificate from their employer, which the latter is not obliged to provide. Moreover, employers can decide whether to grant an employee’s visa to exit the country. Both aspects of the system have been criticised. The Sponsorship Law is closely linked to the Labour Law, and the recent changes made to the Labour Law have therefore paved the way for subsequent amendments to the Sponsorship Law.
Amendments are set to be announced soon and are expected to include a new format for the employment contract, for example including guidelines for incorporating clauses with regards to such issues.
DISPUTE RESOLUTION: Parties may choose whether to resolve disputes through litigation in Qatari courts or arbitration, or by any other means of alternative dispute resolution, such as mediation or expert determination. Contracts typically provide for litigation or arbitration as the method of dispute resolution.
Parties are entitled to choose the law which will govern their contract, provided the chosen law does not contravene public policy and morals in Qatar. Pursuant to Article 25 of the Civil Law, for example, real property is governed by the law of the state where the property is located.
LITIGATION: The right of litigation is inviolable and has been guaranteed to everyone in Qatar. The law specifies the procedures and manners of exercising the right to recourse to litigation. Civil law cases will first be heard by the Court of First Instance and upon appeal, the Court of Appeal and then the Court of Cassation. A separate court resolves the enforcement of judgments, orders and arbitral awards and an urgent court hears applications for interim relief, e.g., an application for an injunction to resist an on-demand bond.
The court investigates facts by appointing an expert who is asked to produce a report opining on the relevant facts of the dispute. The process is governed by Chapter Eight (Articles 333-361) of the Qatari Procedural Law for Civil and Commercial Matters (Law No. 13 of 1990). Experts meet each of the parties and possibly attend a site visit following which they will produce a report which is submitted to the court and all relevant parties. The parties may subsequently comment on the report, following which the court will issue a decision, either dismissing the claim or awarding a remedy.
Not all decisions of the Qatari courts are published and those that are, are in Arabic.
ARBITRATION: Arbitration is codified in Qatar’s legislation within the Civil and Commercial Code of Procedure (Law No. 13 of 1990) under Articles 190-210. This legislation, in parallel with the chosen arbitral rules (if any), governs the procedural aspects of arbitration in Qatar.
The Qatar International Centre for Conciliation and Arbitration (QICCA) was established in 2009. The court has mandatory power of jurisdiction over disputes relating to firms registered with the QFC and opt-in global jurisdiction. It also offers arbitration and mediation services and published the QICCA Rules of Conciliation and Arbitration in 2012, based on the model laid down by the UN Commission on International Trade Law. QICCA was introduced with a view to providing a private, fast and economical forum for the resolution of disputes.
ENFORCEMENT: Qatar is a member of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NY Convention). On March 25, 2014 Qatar’s Court of Cassation overturned a judgment of the Court of First Instance and Court of Appeal, in which the judge refused to enforce an arbitration award that was rendered in proceedings at the International Chamber of Commerce seated in Paris, as the award was not issued in the name of Sheikh Tamim bin Hamad Al Thani, the emir of Qatar.
The March 2014 decision of the Court of Cassation changed this approach and applied the NY Convention to reinstate the award. The subcontractor successfully argued their case that the ICC award was a foreign award to which the NY Convention applied. However, the court’s reasoning was that the award was foreign because it was in English, and ( confusing the governing law of the contract with the applicable law) the applicable law was “the rules of the Paris commercial chamber”.
CRIME PREVENTION: Qatar’s ambition is to diversify its economy through investment in human capital, manufacturing, and most notably through ICT. The rapid development of Qatar’s ICT industry has prompted laws, policies and committees to be established which protect Qatar from cybercrime.
Qatar National Vision 2030 involves ICT at almost every level through a combination of public and private sector schemes that seek to advance the standard of living of Qatar’s growing population. Major infrastructure projects, most notably the development of two “smart cities” – Lusail and Msheireb – have ICT at their core and are central to Qatar’s strategic diversification strategy. Connectivity between elements of physical infrastructure such as power grids, traffic lights, weather stations and CCTV will make these new developments “smart”.
Incorporating state-of-the-art technology into Qatar’s infrastructure enables the country to set a high standard of smart living. Indeed, it can be regarded as one of the distinguishing features of Qatar’s vision of its future physical and social landscape. With such a high degree of significance placed on ICT, Qatar has adapted existing laws and established new ones to reflect changes.
As a result, Qatar can be described as both a “greenfield” and to some extent a “brownfield” market since the technology it is developing is totally new to the country, or is otherwise a development of its existing infrastructure. From a regulatory and legal perspective, Qatar has been developing new policies and implementing policy reforms in relation to cyber security and data protection legislation.
The Ministry of Interior is the officially recognised agency responsible for enforcing Qatar’s cyber security legislation, and the ministry is proactively developing solutions to the risks that can be created through increased connectivity, including the significant and growing vulnerabilities of ICT infrastructure and systems, sensitive data and key industry sectors being on-line.
Qatar has an officially recognised national and sector-specific cyber security framework for implementing internationally recognised cyber security standards called the National Information Assurance Framework. This includes a set of cyber security laws, standards and guidelines to ensure that information assets remain secure. The recently enacted Cybercrime Prevention Law (Law No. 14 of 2014) imposes severe sanctions (including jail time and financial penalties) for offences committed through the internet and across ICT networks. The offences that are listed across the law’s 54 articles include hacking into government networks and online fraud. The law is enforced and promoted by the Cybercrime Combating Unit at the Ministry of Interior. Moreover, the Public Prosecution have the authority to investigate cases of cybercrime, and the police must provide the Public Prosecution with any equipment seized in a cybercrime case.
As well as the Cybercrime Prevention Law, the Personal Information and Privacy Protection Law, which which will set privacy standards for all sectors in the country, has been approved by Qatar’s cabinet and is under review by the Legislative Committee. The Critical Information Infrastructure Protection Law was approved in February 2014 and will include mandatory obligations for certain “critical” companies to which they must conform. The Qatar Computer Emergency Response Team (Q-CERT) is another national, government-sponsored organisation set up by the Ministry of Information & Communications Technology (ictQATAR) in 2005 to address Qatar’s cyber security requirements in Qatar. Q-CERT seeks to identify major threats to the digital space and resolve them before they cause harm. Q-CERT is a member of FIRST, the global forum for incident response and security teams.
PROPERTY: The two types of ownership status are: • Absolute ownership: the ownership of property and all rights in the property, whatever purpose the property is for without restriction. Absolute ownership is an entitlement afforded to Qatari nationals and wholly owned Qatari entities only, except in certain areas.
• Leasehold rights: this is a long-term right to property owned by another. Leasehold rights grant the beneficiary the right to utilise, occupy or let the property for a period of 99 years. The right is transferable and is able to be sold, sub-leased, mortgaged or passed to heirs. Leasehold rights are available to non-Qatari nationals.
FOREIGN OWNERSHIP: Historically, ownership of property in Qatar was largely restricted to Qatari nationals and wholly owned corporate entities (Law No. 5 of 1963). In 2002 GCC nationals and foreigners were granted restricted ownership rights in relation to residential units in certain areas of Qatar (Law No. 2 of 2002 and Law No. 17 of 2004).
In 2006 this entitlement was extended by the Council of Ministers’ Resolution Nos. 6 to 18 in certain geographical areas within Qatar. In these designated areas, non-Qatari nationals could hold leasehold rights to residential property.
Law No. 6 regulating real estate development was introduced in 2014. The law has further defined the right that non-Qataris and corporate entities have to land ownership.
While GCC nationals can generally purchase property in Qatar, certain limitations are imposed. For example, only three properties may be owned on an area not exceeding 3000 sq metres and the properties may only be used for residential purposes. A property may not be purchased for commercial or investment purposes such as leasing.
Non-Qataris (including companies not wholly owned by a Qatari) may only take absolute ownership of properties in certain designated areas including The Pearl and West Bay Lagoon.
REAL ESTATE DEVELOPMENT: As part of the government’s initiative to attract investment into the real estate sector, Law No. 6 of 2014 (the Real Estate Development Law, RED Law) was enacted to regulate real estate developers.
A key element of the RED Law is that it seeks to protect purchasers of off-plan units by ensuring the proceeds of such sales are used towards the construction of the development. As a result of the new law, off-plan purchasers have rights in rem in the land rather than purely contractual rights pursuant to the sale and purchase agreement. Developers may only sell off-plan with the consent of the Ministry of Economy and Commerce.
The consent process includes creating the strata title for each off-plan unit (in collaboration with the Ministry of Municipality and Urban Planning), opening an escrow account and submitting the cash flow forecasts for completion of the project along with construction milestones and promotional material relating to the sale.
The RED Law grants permission to non-Qatari companies of good standing and with 10 years of experience to carry out real estate development activities within designated areas.
Underpinning this is the requirement for real estate developers to obtain a developer’s licence from the MEC, which keep a register of licence holders. Both Qatari nationals and companies incorporated in Qatar can hold such licences.
The MEC may revoke licences on certain grounds, including failure to commence construction of units sold off-plan within six months of being granted permission to do so. Carrying out real estate development without a licence is punishable by up to one year imprisonment and/or a fine of up to QR50,000 ($13,705).
PROJECT FINANCING: Article 25 of the RED Law requires developers to get consent from the MEC prior to structuring the finance for a real estate project. Consent is given where there are unreserved off-plan units, the value of the financing does not exceed the value of the unreserved off-plan units and the aggregate amount deposited in the escrow account exceeds the value of the construction works completed (as independently certified).
Banks who provide real estate financing take a mortgage over the land and are afforded the rights subject to the rights of the customers that have purchased off-plan units.
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