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New Qatar Tax Law no. 21 of 2009effective 01/01/2010Law no. 21 of 2009 issued in November 2009, effective from January 2010. This law suspended the law no, 11 of1993 (old tax law)Executive regulations effective 01/06/2011Circular 2/2011 clarification on contract retention and withholding tax effective 01/01/2010Circular 3/2011 clarification in providing contract information to PRTD effective 01/01/2010Circular 4/2011 clarification on tax return filing requirements by wholly owned Qatari/GCC Companies and those who are exempted from taxes effective 01/01/2010

Development in the lawAll contracts executed after 01/01/2010 will be subject to tax retentionCompany incorporated in Qatar will not subject to any retention- must have tax cardPermanent branch is not subject to retention must have tax cardBranch registered for a particular project (temporary project) is subject to tax retention which is 3% of contract value or the final payment, whichever is higherRecent DevelopmentsWithholding of tax to be applied on payments made to suppliers who do not hold a tax cardReport all service providers engaged by the tax payer who has non-Qatari share holding. (The threshold is QR. 200,000 for services and QR. 500,000 for contracts including services and supply of goodsTax filing is mandatory on companies resident in Qatar and wholly owned by Qatari/GCC nationalsRecent DevelopmentsRESIDENTA Natural Person who meets any of the following conditions:Permanent home in QatarMore than 183 days stay during any 12 month period in QatarCenter of vital interests in Qatar

A Body Corporate that meets any of the following conditions:Incorporated under Qatari laws such as WLLs, QSCs, SPCs, Establishments etc.Headquarters in QatarPlace of effective management in Qatar

RESIDENT AND PERMANENT ESTABLISHMENTPERMANENT ESTABLISHMENTA fixed place of business through which the business of a taxpayer is wholly or partly carried on.Examples:Mine, Workshop, Building Site or Assembly Project, Factory, Office, Branch, Quarry, Oil and Gas Well, Place of exploration extraction or exploitation of natural resourcesPE also includes the activity carried on by the taxpayer through a person acting on behalf of the taxpayer or in his interest, other than an agent of independent status

RESIDENT AND PERMANENT ESTABLISHMENTPERMANENT ESTABLISHMENTPermanent Establishment should not be confused with the term Permanent Branch.Permanent Branch is referred to foreign branches established in the country to execute licensed activity permanently.A temporary branch is a foreign branch which is established to carry out an exclusive project with the government or a quasi government entity.

RESIDENT AND PERMANENT ESTABLISHMENTAny entity executing taxable activity in Qatar and does not qualify for the criteria mentioned for resident and a permanent establishment is referred to as non-resident or non-permanent establishment.

Resident and Permanent Establishments are subject to corporate income taxNon-resident and non-PE are subject to withholding tax

NON-RESIDENT AND NON-PEComparisonResident and Permanent EstablishmentNon-resident and non-Permanent EstablishmentGeneral IndicatorsA Qatari tax CardA Commercial registrationA fixed place of business in QatarNo Tax CardNo Commercial registrationNo fixed place of business in QatarTax RateCorporate tax rate @10% on next taxable incomePetroleum activities and certain exceptional arrangements are taxed at different rate with maximum 35%.5% - 7% Withholding of taxTax retention Rules3% of contract value or the final payment whatever is higher.Applicable on temporary branches onlyLLC and Permanent branches need to provide a copy of tax cardNo retention rulesAccounting and book keeping requirements Financial statement and accounting in accordance with IFRS and IAS.Audit is mandatoryMaintaining books and records for 10 years in QatarNo book keeping requirement Applies to payments made to non-residents with respect to activities not connected to a permanent establishment in QatarApplicable on all services rendered on or after 1/1/2010 5% on gross amount of royalties and technical fees7% on gross amount of interest, commissions, brokerage fees, directors fees, attendance fees and any other payments for services carried out wholly or partly in QatarWithholding taxesWithheld tax amount must be paid to the Tax Department before the 16th day of the month following the calendar month of paymentPenalty of not deducting the withholding tax is equal to the amount of withholding tax not deductedWithholding taxesSupplier/ContractorQatari Tax CardPermanent EstablishmentNO Qatari Tax CardNo Permanent EstablishmentTemporary Branches/ non registered PEsA company incorporated in Qatar; permanent branchService wholly provided outside QatarRoyalties or management feesService partially or wholly provided in inside Qatar5% on royalties and management feesDouble taxation agreement availableNo double taxation agreementService wholly provided outside QatarService partially or wholly provided in inside QatarNo withholding tax or retention3% retention on services Retention paid after obtaining tax clearance7% on commission, brokerage, directors, fees and any other services5% technical and consulting servicesCheck AgreementApply withholding taxNet taxable income = revenue - deductible expensesNon-deductible expenses will require adjustments in tax return

Taxable IncomeSalaries and wages, any other benefits are deductible only if they are paid pursuant to an employment contractProvision for airline tickets is not a deductible expense. Expense is deductible when actually paid if provided for in the employment contractRent Expense for employees/managers housing is deductible only if stipulated on the employment contractDonations capped to 5% of the net taxable incomeEntertainment/Hotel/Meals/Club/Client Gifts expenses should be capped at 2% of the net income

Deductible expensesCosts incurred in realizing income exempt from taxAmounts paid in violation of lawPenalties and finesSalaries and benefits paid to owners (major shareholder) and owners first family

Non-deductible expensesAssets are divided into two groupsOne asset group is depreciated on a straight line methodSecond group is depreciated on a reducing balance method

Changes in tax depreciation rulesAll companies registered in Qatar need to apply for a tax cardApplication must be submitted within one month of date of commencement.It has to be renewed as soon as it is expiredAn entity filing income tax returns will need a tax cardAn entity filing and remitting withholding taxes on supplier payments will require a tax cardWithholding taxes will be deducted from the payments to any entity not holding a tax cardWLL and permanent branches would need tax card in order to clam retention money from the clients

Administrative issuesComparison between new and the old tax lawNew Tax lawOld Tax lawResident and Permanent establishmentIntroduction of concept of resident and permanent establishmentNo concept of resident and permanent establishmentCorporate tax law% except for certain activities0% to 35%GCC NationalsResidency is the deciding factorNon-resident GCC nationals are subject to tax with certain exceptionExempted from taxes regardless where they resideWithholding tax Withholding tax rate is5% to 7% No withholding tax Tax depreciation rlesFirst group depreciated on straight line methodSecond group depreciated on reducing balance methodStraight line method for all the assetsContract retentionRetention rules apply for temporary branches onlyNo retention for permanent branches and companies having a valid tax cardAll entities having foreign shareholders were subject to a retentionContract reporting rulesService contracts above QR.200,000 and Mix contracts above QR.500,000 to be reported to PRTD in 30 daysNo such requirementsAnti avoidance rulesAnti avoidance rules introducedNoneQatari/GCC companies filing requirement Tax returns filing in accordance with the lawNone