The Qatar Financial Centre (QFC) was established in 2005 with the ambitious aim to attract financial institutions and multinationals to establish businesses in international banking, financial services, insurance, corporate head office functions and related services. Consistent with Qatar’s drive to diversify its economy, the QFC has now opened its doors to include a range of professional business-to-business services. The QFC Authority is the commercial and strategic arm of the QFC that processes licence applications for entities seeking to carry out permitted non-regulated activities in and from the QFC. Its counterpart, the QFC Regulatory Authority is the independent regulator responsible for authorising businesses that are interested in carrying out insurance and financial services from the QFC.
The QFC is an onshore regime that operates within its own legal, tax and regulatory framework, which is independent of but runs parallel to the existing framework in the state of Qatar. The QFC has its own civil and commercial courts, as well as an independent regulatory tribunal. The legal framework is modelled closely after English common law and existing major financial centres. QFC-established entities can access the local market, be 100% foreign owned, are not subject to currency restrictions and can repatriate 100% of profits.
TAXATION IN THE QFC: QFC entities are subject to corporation tax at the rate of 10% on local source profits and can access Qatar’s tax treaty network, which is among the most extensive in the GCC. QFC tax authorities have issued a tax manual and occasionally publish guidelines to assist with clarity on the tax treatment in the QFC in areas like interest on loans and intangible assets not registered in Qatar. QFC entities must self-assess their tax liability and file a tax return in six months from the end of the accounting period.
Favourable tax provisions exist for QFC entities providing Islamic financial services or entering into Islamic finance transactions. The Qatari government, local authorities, statutory bodies and any QFC entity that is owned by them are exempt from taxation in the QFC. The QFC additionally maintains its own transfer pricing regulations, which specify that transactions between associated persons must be conducted on an arm’s length basis. There are provisions for advance rulings relating to advance pricing agreements, brokerage and fund management services. KEY RECENT DEVELOPMENTS IN THE QFC FRAMEWORK FOR NON-REGULATED ENTITIES: As Qatar gears up to deliver the 2022 FIFA World Cup, the QFC Authority has recently introduced a number of changes to expand and strengthen its existing regulatory and tax framework. These recent developments have increased flexibility, transparency and clarity in the existing framework, making the QFC an increasingly viable alternative for both domestic and foreign investors looking to set up non-regulated entities to operate in and from Qatar. Expanded opportunities and benefits for non-regulated entities include the following:
• Business-to-business services: the QFC Authority has expanded the scope of permitted activities to include IT support and a range of consultancy services in real estate, recruitment, sports and events management, the environment, etc. Applications from new categories are considered on a case-by-case basis;
• 0% concessionary tax rate: the QFC Authority has introduced a 0% concessionary tax rate for captive insurance and reinsurance firms, and QFC entities that are 90% Qatari-owned. The rate has also been extended to QFC-based Qatari single family offices (SFOs), with corresponding tax exemptions available for investment companies managed by these SFOs; and
• Special purpose companies (SPCs): The SPC framework allows firms to create holding, treasury, and/or intellectual property vehicles for special tax-exempt status. These SPCs could be incorporated for a single or a series of transactions, via a simplified application process, with less stringent requirements.