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Qatar introduces 10% flat corporate tax

The present corporate tax structure of 10-35 per cent for foreign-owned companies will
be replaced by a flat rate of 10 per cent from January

• By Habib Toumi, Bureau Chief


• Published: 07:37 November 18, 2009


• Image Credit: Reuters

Doha: Qatar has issued a new tax law on Tuesday that will come to effect on January
2010, Qatar News Agency (QNA) reported.

"Shaikh Tamim Bin Hamad Al Thani, the Amir's deputy and crown prince, issued today
law No. (21) of 2009. The law is to go into force as of January 1, 2010 and is to be
published in the official gazette," QNA said.

Shaikh Tamim is sitting in for his father Amir Shaikh Hamad Bin Khalifa Al Thani who
is attending World Summit on Food Security in Rome.

The official agency did not give details about the law, but it is most likely to bring down
corporate taxes to 10 per cent down.

Earlier this month, Qatar’s Finance Minister Yousuf Kamal said that Qatar planned to
lower the tax rate on foreign companies to a flat 10 per cent starting next year.
“There is a new tax law and once promulgated it will lower the rate to 10 per cent,” the
minister told a press conference in Doha.

Qatar currently imposes corporate tax on foreign-owned companies at a progressive rate


ranging from 10 to 35 per cent.

A Western news agency had reported that Qatar would introduce an individual income
tax. However, a government official later said that the new income tax law would apply
to revenues of corporations and not that of individuals.

"This law will apply to companies ... not people," the official, who declined to be
identified, told the news agency by telephone.

Income Law No. 11/1993 imposes income tax on the taxpayer - natural persons and
corporate bodies- arising from activities in Qatar, including profits from any contract
executed in Qatar, profits realised from the sale of any asset of an establishment, agency
commissions, consultation fees, amounts from the sale, rent or concession of intellectual
property rights, bad debts collected by the taxpayer and net profits upon dissolution of a
company.

Tax liabilities are computed on the basis of profits disclosed by audited financial
statements, adjustments for tax depreciation and any items disallowed by the Income Tax
Department.

However, corporate tax is levied only on foreign-owned business entities in Qatar, and
there is no tax rate for Qatari-owned businesses.

According to Forbes 2009 Tax Misery & Reform Index, which evaluates policies that
attract or repel capital and talent, Qatar has the world’s friendliest tax climate.

Qatar has embarked on a massive plan to curb its heavy reliance on oil and gas income by
spending billions of dollars to develop its non-oil economy.

MP Jassem Husain, a Bahraini economist and business analyst, has repeatedly called for
the imposition of taxes on foreign and local investments as a means to boost the state
budget that will enable the launch of massive projects while reducing reliance on oil
income

Income tax ranges from


moderate to high in Qatar
INDIVIDUAL TAXATION

Non-resident individuals, other than Qatari and GCC nationals, are taxed only on their
business income in Qatar.

INCOME TAX

Income tax is levied on any foreign business entity, whether a legal entity or a natural
person, carrying out a business activity in Qatar. A ‘business activity’ is defined as any
occupation, profession, service, trade or the execution of a contract or any other business
for the purpose of making profit.

Normal business expenses are deductible, and losses may be carried forward for up to
three years. Income tax is levied at progressive rates.

INCOME TAX
TAXABLE INCOME QAR TAX
(US$) RATE
Up to 100,000 (US$26,663) nil
100,001 - 500,000 (US$133,311) 10%
500,001 – 1,000,000
15%
(US$266,623)
1,000,001 - 1,500,000
20%
US$399,134)
1,500,001 - 2,500,000
25%
(US$666,556)
2,500,001 - 5,000,000
30%
(US$1,333,113)
Over 5,000,000 (US$1,333,113) 35%
Source: Global Property Guide
RENTAL INCOME
Leasing property is considered a business activity and rental income is taxed at the
standard income tax rates. Income-generating expenses are deductible when computing
for the taxable income.

CAPITAL GAINS
Capital gains realized by individuals carrying on a business activity are taxed at the
standard income tax rates. Capital gains not related to business activities are not taxable.

Bahrain's income tax, first in Gulf, sparks


opposition (News Feature)
By Mazen Mahdi Jun 26, 2007, 0:43 GMT

Manama, Bahrain - Bahrain has become the first Gulf state to


implement an annual income tax, and has done so over the objections of trade unions,
religious figures and some political groups.

Some 100,000 workers, including more than 65,000 in the private sector and 35,000 in
the public sector, had the 1 per cent tax deducted from their paychecks Monday. Citizens
and non-citizens alike must pay the tax to fund a new unemployment scheme.

The government, which already collects indirect taxes in the form of fees on imports and
for services it provides, says the new scheme will put Bahrain on a par with more
advanced countries in terms of social insurance for its citizens.

Trade unions say the tax is unfair, pointing out it exempts military personnel and local
and national elected officials. Key religious figures labelled the tax as un-Islamic because
it deducts money from workers without their permission.

And the head of parliament's opposition Islamic Shiite Al Wefaq bloc, Sheikh Ali
Salman, met with Prime Minister Sheikh Khalifa bin Salman al-Khalifa on Monday in an
effort to stop its implementation.

Al Wefaq had originally supported the scheme, but withdrew its support under fire from
its supporters and religious leadership. A source close to the group said the meeting failed
to secure a stop to the tax, but agreement was reached to increase public sector salaries up
to 15 per cent.
The six Gulf monarchies have refrained from implementing direct taxes on citizens, using
surplus oil revenues particularly in the 1980s to employ nationals in the public sector and
offer free or subsidized public services.

But Iraq's 1990 invasion of Kuwait and the ensuing 1991 Gulf War strained regional
economies at an estimated cost of 60 billion US dollars, prompting the monarchies to
gradually reduce subsidies and privatize their public sectors.

Rising youth unemployment among Gulf youth in the 1990s, years of mismanagement
and corruption and a sharp rise in the youth population compared to slow private sector
growth have been contentious issues for governments of the region.

Gulf governments have been criticized by the US and West for years for their failure to
introduce political reforms, expand public participation and address the issue of rising
unemployment - issues blamed for helping to give rise to Islamic fundamentalist groups
in the Gulf.

Assistant Undersecretary for Labour Affairs Jamil Humaidan says the tax income will
help pay new job seekers with university degrees a monthly assistance ranging from 120
Bahraini Dinar (320 US dollars) to BD150 (400 dollars) a month.

Beneficiaries would be required to join training programmes under the government's


National Employment Project to help place them in private sector jobs. Bahrainis and
some eligible expatriates who lose their job after paying contributions for at least 12
months could also claim 60 per cent of their salary, up to BD 500 (1,326 dollars).

The activist Committee for the Unemployed and Low-Wage (CULW), which has pushed
the government for job-creating schemes and support for unemployed Bahrainis,
criticized the new programme because of its six- month limit on benefits and its rigid
requirement that after a candidate rejects a third job offer, he or she is cut off from
benefits.

'We do not want money to be deducted from salaries of people who are already
struggling to make ends meet and keep up with rising inflation,' said CULW board and
founding member Hassan Abdulnabi.

The BD30-million (79-million-dollar) NEP project that seeks to find jobs for unemployed
Bahrainis in the private sector - using joint agreements with companies and training - has
come under fire for placing university graduates in mainly low-paid sales jobs.

On June 1, during a picket against increasing poverty in the Gulf island, the president of
the Shiite Islamic Action Society (IAS), Shaikh Muhammad al-Mahfud, criticized the
government for failing to adopt sound economic policies over three decades. He charged
the country had fallen behind on development compared to neighbouring countries.
Al-Mahfud called on the government to raise the minium monthly wage to BD 500
(1,326 dollars) in face of rising inflation, at a time when many Bahrainis make less then
BD 300 (812 dollars).

Taxation in BAHRAIN
Taxation of Companies

The single corporate income tax in Bahrain is levied on oil, gas and petroleum companies
at a rate of 46 percent. This tax is applicable to any oil company conducting business
activity in Bahrain of any kind, including oil exploration, production, or refining,
regardless of the company's place of incorporation.

Deductions are allowed for taxes and customs and duties, which are paid by the taxpayer.
The costs of raw materials, production and management, may also be deducted from
taxable income. Capital assets may be depreciated over the useful life of assets.

Taxation of Individuals

There is no individual income tax in Bahrain.

Municipal Tax

A municipal tax is payable by individuals or companies renting property in Bahrain. The


rate of the tax varies according to the nature of the property, namely: unfurnished
residential property, furnished residential property and commercial property.

Social Security Taxes

Employers who employ more than ten employees, irrespective of their nationality, must
pay 10 percent of the employee's gross income to social welfare taxes. The employer's
contribution is 7 percent of gross wages for insurance against old age, disability and
death (applicable only to Bahraini employees) and 3 percent of gross wages for insurance
against employment injuries (applicable to all employees). The employee's contribution is
five percent of gross wages for insurance against old age, disability and death (applicable
to Bahraini employees only).

Withholding Taxes; Sales Tax

No withholding taxes exist. The only tax on sales or turnover is a tax on gasoline which is
levied at a low rate of 12 percent. Bahrain has no value added tax, property tax or
production tax.

Treaties for Prevention of Double Taxation


While there is no existing provision in the law expressly preventing double taxation, the
foreign tax paid on income subject to a foreign country's tax system will generally be
deductible from the tax imposed on taxable income in Bahrain.