A Guide to Understanding Individual and Corporate Taxes in Qatar
Moving your family or business to another country can be overwhelming, especially when it comes to understanding different cultural norms, laws, and government restrictions. No matter where you move, understanding a new tax code can become quite difficult. Fortunately, the Middle Eastern nation of Qatar has one of the simplest tax schemes in the world. Here is an overview of the most common types of taxes you might encounter.
Personal Income Tax
Most countries around the world generate revenue through taxes on their citizens in the form of individual income taxes. In Qatar, a majority of the nation’s tax revenue comes from the oil and gas industry. For this reason, residents in Qatar are not required to pay taxes on income that comes from wages from an employer. To qualify as a resident, you must live in the country for more than 183 consecutive days or 183 days intermittently during a 12-month period.
While individuals don’t have to pay any income taxes, corporations are required to pay for social insurance for any Qatari-national employees (equal to 10% of their salary).
Exemptions: Foreign nationals who do not qualify as residents will be taxed through withholding taxes at a rate of 5% (see below for more on withholding taxes). Income earned by freelancers and sole proprietors is usually considered business income and subject to corporate taxes since the income is generated directly for the business.
Qatar has a straightforward tax scheme for business income through corporate taxes. All businesses that are wholly or partially owned by foreign nationals are required to pay a flat 10% corporate tax (CIT) on net income. Businesses can deduct their costs and losses from their gross revenue to reduce the amount of taxable income. These losses and expenses can be rolled over for up to three years.
Exemptions: Some companies that are incorporated in free zones may be exempt from corporate taxes depending on the free zone’s rules. Companies owned by Qatari or GCC nationals are also exempt from the corporate tax scheme. In addition, companies that work in oil and gas operations are required to pay a 35% tax rate as defined by Law No. 3 of 2007.
Capital Gains Tax
Capital gains taxes are the earnings generated from the sale of an asset. For example, if you purchase a home in Qatar for QAR1,000,000 and sell it a few years later for QAR1,500,000, you’ve earned QAR500,000 of capital gains. For Qatari nationals and foreign residents, Qatar doesn’t levy taxes on the capital gains generated from the sale of assets such as real estate and stocks.
Exemptions: Capital gains earned by businesses are not tax-exempt. Instead, they are added to the company’s income and taxed at the regular corporate tax rate. Also, foreigners who don’t qualify as residents are required to pay a 10% capital gain tax on any gains generated in Qatar.
Withholding Taxes (WHT) are taxes levied against earnings by individuals and companies that do not reside in Qatar. This includes individuals who live outside the country but have earnings that were realised from a Qatari source. The withholding tax rate is a flat 5% and must be captured at the source of the income. For example, the employer must subtract the withholding tax before distributing the earnings to the individual.
Withholding tax also applies to sources of income such as interest, royalties, technical fees, commissions, and brokerage fees.
Exemptions: Income earned from company dividends is exempt from withholding taxes.
Value-Added Tax (VAT)
A value-added tax (or VAT) is a consumption tax on goods and services charged at various stages of the manufacturing or supply chain process. For example, if a textile manufacturer produces clothing, they are taxed only on the value that they add to the product. In this example, the manufacturer would be taxed on the total cost of production minus the cost of any raw materials they received from another source.
While Qatar is required to introduce a VAT under the GCC framework, the tax hasn’t been officially announced. Experts anticipate that VAT will be a 5% tax and will likely take effect in early 2023.
To encourage more foreign investment, the Qatari government has agreements with more than 80 countries to help expats avoid double taxation. In some cases, double taxation is limited up to a certain amount. Each agreement is different so foreign nationals need to understand the specific rules that apply to them. For a full list of the double taxation agreements, click here.
There are no property taxes in Qatar. However, there may be relatively small government fees that are due at the time a property is bought and sold. This usually comes in the form of a transfer fee of 0.25% that is paid by the buyer. People who rent a property in Qatar might see a similar fee (around 0.5%) that is charged when the property is leased (for rentals, this amount is typically capped at QAR2,500).
Get Expert Help to Simplify Your Qatar Taxes
While understanding how much taxes you will need to pay in Qatar may seem simple, mistakes can result in steep penalties or other consequences. It’s always wise to have an expert tax advisor or accountant to help you through the process and ensure you are paying the right amount of taxes to the Qatari government. Not only will this save you time and money, but it also gives you the peace of mind that you meet all of the necessary tax requirements that could lead to trouble.
How Can PRO Partner Group Help?
PRO Partner Group/Venture Partner Qatar and their locally based tax and audit specialists can advise you on the implications of the various tax regimes on your business and how you can best plan to ensure that your company has the right structure and systems in place to manage your tax obligations going forward.
If you need assistance with any issues pertaining to taxes in Qatar, or for any other related company setup, restructuring, local partner or PRO support matter in Qatar, Abu Dhabi, Dubai, the wider UAE, Oman or KSA, then please do get in touch with us on +971 (0)4 456 1761 for Dubai or +971 (0)2 448 5120 for Abu Dhabi, email us at email@example.com or complete the contact form below and we will be delighted to assist you.