Taxes are the least interesting thing about setting up businesses. However, that doesn't make them any less of a critical ingredient. Governments levy taxes upon businesses to boost the country's economy, improve quality of life, and Qatar's tax regime is no different.
A sparsely populated country with enormous infrastructure projects, Qatar is on its way to becoming a global business hub. A person overseeing any form of business in the middle-eastern country will have to pay 10% flat tax on any revenue from capital profits or undertakings.
A brand-new Income Tax Law came into being on January 17th, 2019, in Qatar. The changes introduced by the Qatar Tax Department can have a crucial effect on companies operating in the country.
Did you know that no corporate income tax is imposed on corporate establishments in Qatar that are wholly owned by Qatari nationals and GCC nationals? As a result, the business opportunities in Qatar are endless. This article explores all the Qatar Tax details that business owners must familiarize themselves with.
Corporate Taxation in Qatar
As per Qatar Income Tax law, a corporate entity that has been incorporated under Qatari law or functions out of an office in Qatar is believed to be resident in Qatar. Taxpayers must file an application with the General Tax Authority (GTA) for a tax card within 60 days from:
- Commencement of business activities or
- The registration with Qatar's Commercial Register of the Ministry of Commerce and Industry.
After its expiry, tax card renewal in Qatar is mandatory. Failure to apply to the GTA for a tax card will result in a penalty of QAR 20,000 ($5493).
2.Basis of Taxation
The Qatar Tax System imposes a tax upon the income resulting from business activities performed wholly or partly in the state.
Here is how the Qatar tax law defines Permanent Establishment or PE. It is a fixed place employed by a taxpayer to carry out business activities wholly or partially. For example, a PE can include office branches, mines, oil or gas wells, etc.
A non-resident is believed to create a PE if he has provided services via direct employees for 183 days or more during any 12 months in Qatar. He or she also creates a PE if the person has been overseeing any construction, assembly, installation, etc., over six months or more in the country.
3.Qatar Income Tax Rates
As mentioned earlier, the standard rate for corporate taxation on any locally-sourced income is 10%. However, certain exceptions exist.
The tax rate applied to petroleum-based operations or petrochemical industries shouldn't be less than 35%.
- Value Added Tax or VAT
At the moment, Qatar imposes no VAT on business operations. However, people are anticipating the introduction of VAT in the future. The expected rate is 5%.
You can learn more about taxation services in Qatar to promote your business in the country.
- Custom Duties
Generally, custom duties are imposed at 5% on goods coming from outside of the GCC countries. Please note that customs duties taxation in Qatar can be higher for certain types of goods.
- Taxable Period
Generally, the calendar year is accepted as the tax year. However, taxpayers can apply to the GTA for the use of an accounting year-end.
- Consolidated Returns
Qatar only allows companies to file separate tax returns.
- Filing of Taxes and Payment
The Qatar Tax Department requires taxpayers to file the annual income tax return and reimburse the due tax amount by the fourth month after completing the company's financial year.
Qatari nationals and GCC nationals will have to submit tax returns and audited financial statements to the appropriate tax authorities if their annual income is at least QAR 10 million. Their minimum capital is QAR 2 million.
Dhareeba, the brainchild of GTA, is an online tax management system for the streamlined automation of tax payment and management processes.
Failure to file tax returns within the due date will result in the taxpayer incurring a QAR 500/day penalty up to a maximum amount of QAR 180,000.
Meanwhile, failure to pay the due tax will lead to a fine of 2% of the tax/month of delay or part thereof, up to the due tax amount.
Besides late filing penalties, taxpayers will also incur penalties on failure to apply for a GTA card.
We recommend hiring the services of a tax advisor Qatar for an improved understanding of corporate taxation. Check out our article about starting a business in Qatar to know more.
Contact us today to get valuable insight into business operations!