Questions for tariffs bulletin: Qatar

Overview of the tax regime in Qatar

Qatar’s tax system, recognised as one of the least burdensome globally, follows international standards and is overseen by two main authorities: The General Tax Authority (GTA) and the Qatar Financial Centre (QFC). The QFC tax framework applies specifically to companies licensed under the QFC, while all other businesses in Qatar fall under the jurisdiction of the GTA and are subject to the State’s general tax laws.¹

Companies that are not 100% Qatari-owned are subject to a flat 10% corporate income tax on their net taxable profits sourced in Qatar, as per Article 9 of the Income Tax Law.² Fully Qatari-owned entities are generally exempt.³

QFC-registered companies are subject to a 10% corporation tax on locally sourced profits, as per Article 9 of the QFC Tax Regulations.⁴ Profits from foreign sources are generally not taxed, depending on the source rules.

In both regimes, capital gains are taxed as ordinary business income at the standard 10% rate, if they arise from Qatari sources.⁵ Gains from foreign sources may be exempt, particularly under the QFC regime.

On the other hand, Qatar has not yet implemented VAT, though it is a signatory to the GCC Unified VAT Agreement and is expected to introduce a 5% VAT rate in line with other GCC countries. No official implementation date has been announced.⁶

In addition, Qatar imposes no personal income tax on salaries, wages, or allowances, regardless of residency status.⁷

 

Describe the taxes and duties regimes in your location's standard form contracts

What are your standard form contracts?

In Qatar, many state-owned or state-affiliated entities have developed their own standard form contracts, which they typically mandate for use in their construction and development projects. These include organisations such as Qatar Petroleum, Qatargas, Ashghal (the Public Works Authority), and Kahramaa (the public utilities company).⁸

Due to their widespread use and familiarity, these contracts are often adapted for private sector projects as well. In cases where these standard forms are not applied, the most commonly used alternatives are the FIDIC 1999 suite of contracts – particularly the Red Book, used for employer-designed works, and the Yellow Book, used for design and build projects. The FIDIC 2017 suite has not yet seen widespread adoption in Qatar. In some instances, entirely bespoke contracts are also used.⁹

Which party bears the risk of taxes and duties?

• Before the contract is entered into:

In Qatar, the general principle is that the contractor bears the risk associated with taxes and related costs, though this of course may vary depending on the specific terms agreed in the contract. Contractors are expected to factor in all applicable taxes – such as corporate income tax – within their bid price.

This position is explicitly reflected in Qatar’s major public sector contract templates. For instance, under the Ashghal PSA2010 Specimen Agreement Document, Article 4(b) stipulates that “the Agreement Price shall be a firm lump sum not subject to any alteration except in the event of a Change or as otherwise expressly provided in or referred to in the Agreement.” It goes onto state that the Authority is not liable for any increases in the consultant’s costs, whether caused by taxation, currency fluctuations, or inflation. Furthermore, Article 15.4 confirms that the consultant is solely responsible for all taxes, levies, and fines related to the performance of services, and must indemnify the Authority against related claims.

A similar risk allocation is found in Kahramaa’s General Contract Conditions for EPC-PC Projects, where Clause 11.3 provides that “the Contract Price… shall include all costs, charges, taxes, duties, and all other expenses for performing the Works.” This mirrors Ashghal’s clause 4(b) and reinforces the standard approach that tax-related risks fall on the contractor unless explicitly stated otherwise.

This approach is also upheld in QatarEnergy’s procurement templates, where Clause 3.3 [Prices] in its General Terms and Conditions specifies that “the Price is inclusive of all charges, taxes, duties, and all other expenses for supplying the Goods and performing the Services.” Only where an obligation is expressly stated to be carried out at the Purchaser’s expense will the contractor be relieved of such risk.

• After the contract is entered into:

Clause 11.4 of Kahramaa’s General Conditions stipulates that the Contract Price and the rates and/or lump sums it includes shall not be subject to escalation or adjustment, unless otherwise stated in the contract. This includes any increase in the cost of labour, materials, or newly imposed or amended taxes, duties, or similar imposts. This approach mirrors Clause 4(b) of Ashghal’s PSA2010 Specimen Agreement, which similarly allocates tax risk to the consultant and precludes adjustments for cost increases arising from taxation or other financial variables.

This risk allocation aligns with the general principle found in the FIDIC 1999 suite, where Sub-Clause 14.1 [The Contract Price] confirms that the contract price is inclusive of all taxes, duties, and fees, unless otherwise provided in the Particular Conditions. However, FIDIC diverges from Ashghal and Kahramaa’s strict non-adjustment approach by offering a more flexible mechanism under Sub-Clause 13.7 [Adjustments for Changes in Laws]. This provision allows the contractor to seek adjustments to the Contract Price and/or Time for Completion if changes in applicable laws – including tax legislation – after the Base Date materially impact the performance of the contract.

 

If taxes and duties change after the contract is entered into, what relief, if any, is available under your location's?

Standard form contracts? eg change in law provisions, force majeure

As previously noted, bespoke contracts offer parties the flexibility to define how taxes and duties are treated, including how the risk is allocated if tax laws change during the life of the contract. By contrast, in governmental contracts in Qatar, such as those issued by Ashghal and Kahramaa, the prevailing approach is that the contractor bears the risk for any fluctuations in the cost of labour or materials, as well as for any new, amended, or increased taxes, duties, or similar imposts.

In contrast to a fixed-risk approach, the FIDIC suite of contracts – including the 1999 Edition and following versions – incorporates a contractual mechanism under Sub-Clause 13.7 [Adjustments for Changes in Laws], which permits adjustments to the Contract Price and/or Time for Completion when changes in laws or regulations, including tax legislation, occur after the Base Date and affect the contractor’s performance.

Laws – statutes, case law

In the absence of agreed-upon provisions for inflation or risk mitigation due to unforeseeable events, courts in Qatar may adopt a specific approach under Qatar Civil Code.¹⁰ While contracts are binding and hold the force of law between parties, unforeseen changes in circumstances can render obligations excessively burdensome or financially untenable. The Civil Code provides mechanisms to address such situations, in attempt to ensure fairness and to balance the interests of the parties involved.

As a basic principle of local law, contracts have the force of law subject to a limited number of caveats. Article 171(1) of the Civil Code states: "A contract is the law of the contracting parties and so cannot be revoked or modified except with the agreement of the parties or for such reasons as prescribed by law." 

However, under Qatari Civil Code Article 172(2), if exceptional and unforeseeable events occur that make contract performance extremely burdensome – though not impossible – the court may reasonably reduce the affected party’s obligations to prevent disproportionate loss, provided that a balance of interests between both parties is considered. Any agreement excluding this right is void.

Article 171(2) reinforces this principle by allowing judicial intervention when such unforeseen events threaten to impose enormous loss on one party, thus ensuring fairness. The party seeking relief must prove both the existence of such events and their burdensome impact.

Although Qatari law does not define “exceptional circumstance” precisely, a LexisNexis commentary by Zeina Tebacharani¹¹ suggests it includes:

• events beyond a party’s control;
• not attributable to the other party;
• unforeseeable at the time of contract;
• unavoidable once they occur; and
• so onerous that they threaten exorbitant loss.

While Article 171(2) of the Civil Code could be used as a back-up argument if the contract is silent or unclear on tax changes, it’s important to note that Article 700¹² clarifies that increases in costs – like rising labour or material prices – do not justify modifying obligations unless the contract explicitly allows it.

 

For particular market segments in your location, what changes, if any, have employers or contractors made recently to the usual risk allocation?

It remains uncertain what specific adjustments employers or contractual arrangements have recently made regarding risk allocation. Nonetheless, businesses should begin evaluating the potential effects of VAT on critical functions such as procurement, pricing, contract terms, and cash flow. VAT implementation may necessitate revising pricing models and incorporating VAT-specific provisions into contracts to manage tax obligations effectively. Enhancing IT infrastructure is also important for accurate tracking of input and output VAT and for meeting reporting obligations. Additionally, equipping employees with training on VAT rules and compliance processes will be crucial for a smooth transition.¹³

Experiences from other GCC countries, such as the UAE and Saudi Arabia, underscore the value of early planning. Companies in those jurisdictions initially faced challenges related to cash flow management, invoice accuracy, and regulatory compliance. Qatari businesses can use these lessons to proactively prepare for VAT adoption, allowing them to overcome potential difficulties and ensure compliance. Strategic planning will be essential to preserving operational effectiveness and reducing the financial burden of VAT.¹⁴