Modification to Income Tax Regulations in Qatar

Income Tax Amendment in Qatar

The purpose behind the amendments is to adjust the Income Tax Law with worldwide standards and best practices. It is expected that amendments to the Executive Regulations (ER) will be published soon, which will incorporate further insights about the new amendments to the Income Tax Law.

Change in Scope of Income Tax Law

Traditionally, income derived from Qatari sources was subject to income tax in Qatar. Under the amended Income Tax Law, certain classes of foreign-sourced income have now become taxable in Qatar (e.g., income from land situated beyond Qatar). Moreover, income from services given beyond Qatar will presently likewise be subject to income tax in Qatar.

Foreign income as taxable

This shall include income produced from real estate, immovable property, profits, royalties, interest, and technical service charges provided such classes of income are not owing to a foreign long-lasting foundation of a Qatari Undertaking. Another article of the law determines that dividends paid to a Qatari undertaking for its businesses outside Qatar shall not be subject to tax in Qatar provided the same business were taxed in foreign country.

Tax-exempt status for private charitable organizations, private associations and foundations, and private foundations of public interest. These were excluded from the scope of Income Tax law according to Article (2) of law No. (24) of 2018. However, the new tax law No. (11) of 2022 have brought private associations and foundations, private charitable organizations, and private interests within the extent of the tax law as absolved substances in light of Article no. (4) of the tax law. Appropriately, these entities will presently be considered within the scope of the tax law as tax-exempt entities and comply with tax commitments.

Global Minimum Tax rate to 15%

As a member of the OECD's Inclusive Framework on BEPS, Qatar is focused on carrying out the Global Anti-Base Erosion (GloBe) Rules. To this end, Qatar has implemented provisions in the Income Tax Law introducing a minimum tax of 15% on Qatari substances that are to the extent of the Global Minimum Tax initiative. The expected amendments to the Executive Regulations will incorporate further insights about the relevant systems for demanding this minimum tax on in-scope entities.

Tax Exemptions

The Preamble of Law No. 24 of 2018, certain people were considered out of scope and were not exposed to the provisions of the Income Tax Law withholding tax and contract reporting provisions.  In view of the amendments to the Income Tax Law, such people would now be considered as inside the scope of the Income Tax Law on a tax-exempt basis. Certain entities that were recently viewed as outside the scope of the income tax law are presently viewed as in scope, nonetheless, exempt from income tax. These incorporate, among others, private charitable organizations, private associations as well as foundations, and private foundations of public interest. Proceeding, these entities will be dependent upon compliance requirements under the Income Tax Law.

Foreign Tax Relief

Qatari tax residents can claim relief in regard to foreign taxes paid beyond Qatar.

Economic Substance

'Qualified entities' from an Economic Substance perspective that meet certain criteria will be expected to submit a report to the General Tax Authority (GTA) on the 'minimum indicators' of their core activities in Qatar. It is expected that the Executive Regulations will give more insights about these reporting requirements.

Powers of the GTA

For purposes of tax inspection and exchange of data, the amendments to the income tax law introduced the following as a component of the powers of the GTA in obtaining relevant data for these purposes. The GTA is qualified to obtain data and reports for the purpose of tax investigation and for the goal of exchange of data with the competent foreign tax authority prerequisites. Resident people are expected to give data on their financial assets abroad in line with the GTA

Ultimate Beneficial Ownership (UBO) reporting

The amendments specify that certain entities should furnish the GTA with all important data about their beneficial owners upon request of the GTA.

Penalties

The amendments presented new requirements in accordance with other existing laws in Qatar concerning economic substance regulations, ultimate beneficial ownership, and prerequisites emerging from the digitization of the economy. A flat penalty of an amount equal to 15% of net gain is included in Article 24 of the Tax Law for cases where the economic substance prerequisite is not complied with by the entities responsible.

Conclusively, on 2 February 2023, Qatar published amendments to Law No. 24 of 2018 via Law No.11 of 2022 in the Official Gazette Law No. 11 of 2022 introduces important changes that will affect the taxation and compliance obligations of citizens. The amendments decreed under Law No. 11 of 2022 incorporate the scope of taxable activities, exemptions, non-compliance penalties, and powers of the GTA.