Qatar amends Income Tax Law

On 2 February 2023, Qatar published Law No. (11) of 2022 which includes several important amendments to the Income Tax Law No. (24) of 2018 (ITL). The amendments are effective from 2 February 2023.

The purpose of the amendments is aligning the Income Tax Law with international standards and best practices. It is expected that amendments to the Executive Regulations (ER) will be published soon, which will include further details regarding the recent amendments to the Income Tax Law.

15% Global Minimum Tax

As a member of the OECD’s Inclusive Framework on BEPS, Qatar is committed to implementing 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 entities that are in scope of the Global Minimum Tax initiative. The anticipated amendments to the Executive Regulations will include further details regarding the applicable mechanisms for levying this minimum tax on in-scope entities.

Scope of Income Tax Law

Traditionally, only income derived from local (i.e., Qatari) sources was subject to income tax in Qatar. Under the amended Income Tax Law, certain categories of foreign-sourced income have now become taxable in Qatar (e.g., income from real estate located outside of Qatar, dividends, interest and royalties). In addition, income from services provided outside of Qatar will now also be subject to income tax in Qatar.

Definitions

The amendments introduce various new terms (e.g., project, Qatari Project) and include changes to existing definitions (e.g., on the definition of ‘Permanent Establishment’, and on the definition of resident).

Exemptions

Certain entities that were previously considered outside the scope of the Income Tax Law are now considered in scope, however, exempt from Income Tax. These include, amongst others, private charitable organizations, private associations as well as foundations and private foundations of public interest. Going forward, these entities will be subject to compliance requirements under the Income Tax Law (e.g., filing tax returns, preparing audited financial statements, etc.).

Foreign Tax Relief

Subject to meeting certain conditions, Qatari tax residents can claim relief in respect of foreign taxes paid outside of Qatar.

Economic Substance

‘Qualified entities’ from an Economic Substance Perspective that meet certain criteria will be required 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 provide more details regarding these reporting requirements.

Entities that fail to comply with the core activities/physical presence test will be subject to a 15% penalty on their net income.

UBO reporting

The amendments stipulate that certain entities must provide the GTA with all necessary information about their ultimate beneficial owners upon request of the GTA.

Key takeaway

The recent amendments have implemented significant changes to the scope of the Income Tax Law and reporting obligations in the state of Qatar. Businesses operating in the state of Qatar should therefore assess the impact of these amendments to ascertain their tax position.