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Doing Business In

Qatar

A worldwide association of independent

auditing, accounting and consulting firms

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PREFACE

THE BOOKwas prepared by MGI INTERNATIONAL - Qatar. The content ofTHE BOOKisdirected towards entities interested in knowing more about investing in Qatar. THE BOOKcan

serve only to draw attention to what are considered to be important matters.

Whilst every care has been taken in the preparation ofTHE BOOK, no responsibility can beaccepted for inaccuracies. The reader has to appreciate that information supplied is subject to change

from time to time, especially in Qatar, which is undergoing a continuous upgrade for rules and

regulations.

It is important that the businessman or potential investorobtains professional guidance before undertaking any business in Qatar.

THE BOOKwill be updated each 6 months from the date of issuance.

Issued in 3/1/2006

DISCLAIMER

MGI is a worldwide association of independent auditing, accounting and consulting firms. Each

member firm undertakes no responsibility for the activities, work, opinions or service of the other

member firms.

MGI International - Qatar

Rabih N. KerbajSenior Partner

Doha, QatarP.O.Box 24836 Tel: +974-4874760 Fax: +974-4874059 Email: mgiqatar@qatar.net.qa

mailto:mgiqatar@qatar.net.qa

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THE BOOK

By MGI International Qatar

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What is the first thing you want to know about Qatar? 5

Snap Shots 6

1. Overview of The State of Qatar 71.1.History1.2.Government Constitution1.3.Government Foreign Policy1.4.Tax System

2. Overview of the Economy 82.1.Gross Domestic Product (GDP)2.2.Natural Resources

2.2.1.Crude Oil2.2.2.Natural Gas

2.3.Economic Structure2.4.Essential Industries

2.4.1.Oil Based Industries2.4.2.Gas Based Industries2.4.3.Future Industrial Projects

3. Banking and Financial System 103.1. Banking System

3.1.1.Qatar Central Bank3.1.2.Commercial Banks3.1.3.Doha Securities Market3.1.4.Islamic Banking

3.2. Financial System3.2.1.Sources of Finance for Foreign Investors3.2.2.Investment Incentives

3.2.2.1.General Privileges for Foreign Investors

3.2.2.2.Some of the Proposed Incentives

3.2.2.3.Other Privileges

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3.2.3.Restrictions on Foreign Investment3.2.3.1-Land

3.2.3.2-Contracting

4. Forms of Business Enterprise 134.1.Partnerships

4.1.1.Simple Partnership4.1.2.Joint Partnership

4.2.Limited Partnership

4.3.Limited Companies

4.3.1.Private Limited Company4.3.2.Public Limited Company

4.4.Branches of Foreign Companies

4.5.Joint Ventures

5. Labor Relations and Social Security 145.1.Labor Market

5.1.1.Labor Supply5.1.2.Labor Relations

5.2.The Right to Work Non Nationals

5.3.Labor Regulations

6. Government/Politics 166.1.Government Attitudes and Incentives

6.2.Relationship of Government and Business

6.2.1.General6.2.2.Regulatory Environment6.2.3.Privatization

6.3.Legal System

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7. Taxation 177.1. Income Tax7.2. Direct Tax7.3. Indirect Tax7.4. Determination of Tax Payable7.5. Tax Rates7.6. Accounting Principles7.7. Withholding Tax7.8. Tax Exemptions7.9. Deemed Profit Taxes

7.10. Tax Treaties7.11. Other Taxes

8. What are the rules and regulation regarding foreign trade in Qatar? 208.1.Ways to do Business8.2.Documentations8.3.Customs Duties8.4.Valuation8.5.Special Import Requirements8.6.Duty Exemptions8.7.Taxes8.8.Restrictions8.9.Exports

Questions asked 23

What do you have to do if you intend on doing business in Qatar? 24

MGI INTERNATIONAL World Wide 25

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What is the first thing you want to know about Qatar?

Qatar has the highest GDP per capita income in the world__The per capita income inQatar stood around USD 44,000 in 2005.

Qatar has the third largest reserves of natural gas in the world. Qatar plans 27mega industrial projects by 2010 at USD 60 billion Qatar introduces USD 2.5 billion project "Pearl of the Gulf" man-made Island Lusail City USD 5billion project will be built north of Doha__will accommodate for up to

200,000 people completion by 2010.

Qatar builds a USD 5billion new airport, the biggest in the region

Real estate boom in Qatar up by25to 30per cent Qatar builds a 32-square kilometer North Beach Developmentof10 resort hotels, two golf

courses, 3000 lifestyle villas, 12,000 apartments, as well as huge commercial and retail

shopping areas.

Qatari officials unveiled a USD 15billion infrastructure plan__ in a bid to put the ambitiousGulf state on the world tourist map over the next 10 years.

A 110million USD investment in West Bay in Doha

Hotel industry in Qatar growing__8 new hotels with 2,550 rooms will be added in the nexttwo years. Occupancy rates in star hotels in the country had currently peaked at between 80

and 90 per cent. The rate averaged 70 per cent in 2003.

Over USD 300million to be invested in district cooling schemes. Qatari officials expect at least USD 45billion to be invested in expansion projects by the

coming few years

The government have taking many issues regarding that by offering many incentives forQatari and foreign investors.

Investments in Oil and Gas Petrochemicals are expected to reach 70billion USD in thecoming7years.

Revenues of GDP and its subsidiaries are expected to reach 122Billion QR in the year2010at an assumption of fairly moderate price.

Qatar GDP is expectedto reach 223 billion QR by2010and a per capita income of65000USD

http://en.wikipedia.org/wiki/Doha

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Snap Shots

Market Exchange Rate US$1 = 3.64 Qatari riyals

Natural resources: petroleum, natural gas, fish Population865,000 Population growth rate: 2.7% Net migration rate:17migrant(s)/1,000 population Ethnic groups: Arab 40%, Pakistani 15%, Indian 20%, Iranian 10%, other15% Government type: traditional monarchy National holiday: Independence Day, 3 September(1971)

Political parties and leaders: none Political pressure groups and leaders: none Flag description: maroon with a broad white serrated band (nine white points) on the hoist side Labor force:460,000 Nominal Gross Domestic Product: $23.2 billion (2005): $25.0 billion Real GDP Growth Rate: 7.0% (2005) Major Import Products: Machinery and transport equipment, manufactured goods, food and live

animals Inflation Rate (consumer prices): 4.7% (2005) Industries: crude oil production and refining, ammonia, fertilizers, petrochemicals, steel

reinforcing bars, cement, commercial ship repair

Oil - proved reserves:14.5 billion bbl Natural gas - production: 900 trillion cubic feet Natural gas - proved reserves:14.41 trillion cu m Exports - partners: Japan 41.9%, South Korea 15.8%, Singapore 9.1%, India 5.4% Imports - partners: France 30%, US 10%, Saudi Arabia 10%, UAE 6.0%, Germany 5%, Japan

5%, UK 5%, Other29%

Oil and Gas contribution to GDP in 2005 is 65% Oil and Gas exports represents 87% of total exports

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1. Overview of The State OfQatarQatar is located in the southernArabian Gulf covering an area of11,437 km2. Doha is its capitalcity, in which most of the business and social life are located. It is now witnessing swiftdevelopment in its infrastructure and construction.

Qatars natural resources are its major Economic strength. Proved reserves of Natural gas areestimated to be 7000 kmand that is the third largest reserve in the world. Moreover the oilreserves are estimated to be 14.5 billion barrels.The increase in the market price of these natural resources have pushed the GDP of Qatar intohigh records making Qatar the world wealthiest in terms of per capital incomes

1.1.HistoryQatar has entered in the realm of Islamic civilization in the 7th century, and played a role in thespread of Islam across the sea.In order to drive the Portuguese out, Qatar aligned with the Turks in the mid of the 16th century.But like any other Gulf nation, Qatar stayed under the role of the Ottoman Empire for400 yearsDuring the First World War, Qatar signed a protection treaty with Britain in 1916. It stayed underthe Britain supervision till 1971 when Britain decided to give Qatar complete independence.

1.2.Government ConstitutionSince the issuance of the law No.13 in 2000, foreign investments have increased significantly.This law allows foreign investors to have full ownership of their investment in certain areas.Regulatory laws still govern these foreign investments such as the equity of the local partnershould be 51% and that of the foreign investor49%.

1.3.Government Foreign Policy

Starting from the eighteenth century, Qatar was rule by the Al Thani family who came from theGebrin oasis in the south of Nejd. As a result, Qatar became an emirate ruled by the Emir who isthe head of the state. The council of ministers is the supreme executive authority that directs,supervises, and coordinates the works of ministries and state agencies. The advisory council

supports the Emir and it is constituted of35 very well chosen to be of support in advising theEmir of the welfare of the country. It was first formed in 1972.

1.4.Tax SystemIt is important to make notice that employee earnings are not taxed. Self employed foreign

professionals are subject to income tax according to there income that ranges from 100,000 QRto 5,000,000 QR. No social security insurance deduction from the salaries of employees. All

limited companies and all public share holding companies should have auditors. Accounting andauditing principles are subject to the international accounting and auditing standards in thepreparation of financial statements.

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2. Overview of the Economy2.1.Gross Domestic Product (GDP)

The majority of Qatar GDP comes from Oil and Gas industries. The government is taking someserious action to minimize its dependence on its natural resources. Its hydrocarbon resources remain

the cornerstone of Qatars economy. The increase in the production and prices of Oil and Gas duringthe last five years has doubled the GDP of Qatar. Its nominal growth levels averaged 15.6% over thepast 10 years between1995 and 2005.

2.2.Natural Resources

2.2.1.Crude OilIn addition to Qatars abundance of natural gas, Qatars crude oil reserves are estimated to be

14.5 billion barrels. Its daily production capacity is expected to increase from 800,000 to 875,000barrels per day till the year of2006. The onshore Dukhan field is the largest reserve of crude oil.It consumes about 2 billion barrels of crude oil. 30% of the productions of oil some from theonshore fields while about 70% are produced from the offshore fields

The main fields are: Maydan Mazham Bul Hanine Idd Al Sharqi Al-Shaheen Al-Rayyan

2.2.2.NaturalGasQatar has the third largest reserves of natural gas in the world. Its north gas field is its main fieldwith proven reserves of about 164 billion barrels of oil. Its the largest proven reserve in the worldcovering an area of6,000 square kilometers. These reserves would last for over200 years.Two main projects have initiated in Qatar which are QatarGas and RasGas. Qatar Petroleum

manages and develops these two major LNG projects with foreign shareholders.

2.3.Economic StructureThe studies that were prepared on Qatar GDP by QNB shows that 62% of the GDP is from theoil sector, and 38% is contributed by the non oil sectors . That shows how much Qatar economyis dependent on its oil revenue.

Non oil sectors include: Finance Insurance and Real Estate Manufacturing Industry Building and Construction OtherServices: Government Services Social Services

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2.4.Essential IndustriesQatar aims at diversifying its income sources by enhancing its industrial sector through

development of the north gas field, iron and steel, petrochemical and refining industries. Qatarhas achieved through these developments high standards in quality management and costefficiency. With these outstanding performances, Qatar became one of the best industrially

developed countries in the region.

2.4.1.OilBased Industries

Oil Refining IndustryQatar oil reserves as of December2004 have been identified to be 14.5 billion barrels. Qatardaily production capacity is 700,000 barrels per day.As a result the expected time forreplenishing of the oil reserves is 56 years.

2.4.2.Gas Based Industries

Iron and SteelQatar Steel Company (QASCO)Initially was set up as a joint venture in 1974 between the government of Qatar70% and twoJapanese companies Cobi Steel Ltd 20% and Tokyo Boeki Ltd 10%. Its production capacity is1.2 million tons of molten steel and a rolling mill capacity of740,000 tons per year.

FertilizersChemical Fertilizers Industry (QAFCO)QAFCO is a joint venture established in 1969 with Yara international Norway and IndustriesQatar. QP owns 75% and the Qatari shareholders 25% of the 75% Industries Qatar share. Theproduction capacity of QAFCO is over6000 tons per day of ammonia, 8,000 tpd of urea.

PetrochemicalsPetrochemical Industry (QAPCO)

Qatar Petrochemical Company is a joint venture between QP of80% and the French companyElf Atochem of10% and the Italian company Enichem of10%. This joint venture was establishedin 1974. In 1994 an expansion process started raising the production capacity of ethylene to 525thousand metric tons, polyethylene to 380.5 thousand, and sulfur to 45.5 thousand metric tons.

CementCement Industry

Qatar National Cement Company (QNCC) was established in1965

with a production capacity of1340 thousand tons of both cement varieties and 28.3 thousand tons.

2.4.3.Future Industrial ProjectsQatar Chemical Company Ltd. (Q-Chem)Qatar Chemical Company Ltd. (Q-Chem) is a joint venture formed in 1998 between Qatarpe troleum with a share of51% and Chevron Philips Chemical Company with a 49% share. Itsproduction capacity is 500,000 tpa of Ethylene 453,000 tpa of High-Density Polyethylene, 47000tpa of Hexane-1, and 36000 tpa of Sulfur

Qatar Vinyl Company (QVC)QatarVinyl Company (QVC) is a joint venture inaugurated in 2001 between QP 25.5% QAPCO

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31.9%, Norsk Hydro of Norway 29.7%, and Atofina of France 12.9%. In 2004 the productioncapacity was 346,000 tons of Caustic Soda, 200 thousand tons of EDU and 291 thousand tons ofVCM.

Qatar Fuel Additives Company (QAFAC) was operational at 1999 in Mesaieed. Industries Qatar

owns 50%, OPIC Netherlands Antilles N.V. owns 20%, LCY Investments Corporation 15% andInternational Octane Ltd. of Canada 15%. Its production capacity of600,000 tpa of MethylTertiary Butyl Ether, 830,000 tpa of methanol

Manufacturing Industries

Established in 1990 with a capital of200 million QR, Qatar Industrial Manufacturing Company(QIMCO) aims to set up ventures in various fields of industrial production at home and in theGCC countries, develop its marketing and commercial capabilities and help subsidiary

companies to secure reasonable share of the market. In 1999, the company's direct investmentreached QR320 million in more than 16 industrial projects. QR143 million of this capital is paid bythe company while the balance is covered by financial facilities from commercial banks.

3. Banking and financial system3.1.Banking System

Investments in banks and insurance companies have still some restrictions which are mentionedin the Laws governing these sectors. Foreign investors need permission to invest in this sector.

3.1.1.QatarCentral BankQatar Central Bank was established in 1993 with a mandate to work in the field of issuing

currency and act as the bank of the government and the bank of banks in addition to its maintask of managing the monetary policy of the State. The bank's capital has been raised to QR500million.

The Major Roles of QCB:

Like any other central bank, QCQ monitor and supervises the local commercial banks andexchange businesses. It also plays a role in managing the monitory policy of the country and inthe payment system were it plays a vital link between all banks through the electronic fund

transfer infrastructure.

3.1.2.CommercialBanksThe currently operating banks in Qatar are 15 banks Seven of which are National banks, sevenforeign banks and a government owned institution Qatar industrial development bank which wasestablished in 1997.

3.1.3.Doha Securities MarketIn the year1997, Doha Security Market was initiated. The value of traded shares by then was320 million Qatari Riyal, while in 2005 it reached high records were it became 46.5 billion QR.This remarkable advancement shows how the country economy is booming. In 29 May 2002 nonQatari investors were allowed to invest in Doha Security Market by the Law of Investment Funds.

Never the less the GCC nationals have been allowed to invest in not more than 25% in industryand service sectors.

http://www.qcb.gov.qa/

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3.1.4.Islamic BankingIslamic banking in Qatar has witnessed tremendous changes in 2005 in its growth and popularity.

3.2.Financial System

3.2.1.Sources of Finance for Foreign InvestorsThere are no detailed statistics published by the government concerning foreign directinvestment in Qatar. Foreign investors may take loan for financing a project from GCC or any

other financial institute.

3.2.2.Investment IncentivesQatar political and social stability have encouraged foreign investors to invest in different economicsectors. These encouragements come from the governments actions towards supporting foreigninvestments.

3.2.2.1. General Privileges forForeign Investors: Freedom to import and repatriate funds. Freedom to transfer profits and assets. Freedom to exchange money at stable rates. The benefits of a free market economy.

Some of the General Incentives for Investments: Investors have the right to import materials and equipment required for the

establishment, operation or expansion of projects.

Investors are exempted from income tax effective from the date of commercialcommissioning of projects for ten years

Duty-free imports of equipment and machinery required for projects. Duty-free imports of raw and half manufactured materials needed for industrial projects

and not available locally.

No exchange control regulations No export duties

3.2.2.2. Some of the Proposed Incentives: Preparing investment opportunities and initial studies for industrial projects. Preparing feasibility studies on the technical and economic aspects for projects and

providing technical advice for the prospective private investor.

Providing suitable land sites in industrial estates for industrial projects at reasonablelease rates and long lease terms.

Assisting the licensed industrial projects to get loans from Qatar Industrial developmentBank and other finance establishments.

Providing advice and assistance for investors regarding the available information, dataand studies on their chosen investment projects.

Providing the project with power, fuel, water and natural gas at competitive prices.

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3.2.2.3. Other Privileges Fully equipped industrial estate. Long term loans with competitive interest rates for small and medium scale industrial

projects from Qatar Industrial Development Bank. Flexible regulations and procedures to import workforce for industrial and other

investments. Flexible and sound labor laws that safeguard the rights of all investment parties and

workforce. Suitably priced health care. Flexible legislation and procedures for registering commercial and industrial

establishments Easy access to government officials to resolve investment difficulties. Independent judicial system. No income taxes on corporate profits Industrial land at a nominal rent of five Qatari Riyal per square meter per year Low electricity and water costs

3.2.3.Restrictions on Foreign Investment

3.2.3.1. LandOwnership of land by foreigners is not allowed by the Qatar government. Foreign investors caninvest in some sectors such as the commercial, industrial and agricultural but with theparticipation of a Qatari partner who should own at least 51% of the entitys capital. This isregulated by the Law No.25 of1990.

3.2.3.2. ContractingForeigners are allowed to participate up to 49% in projects if they have the expertise and know-how.

4. Forms of Business Enterprise4.1.Partnerships

4.1.1. Simple PartnershipA simple partnership is formed by two or more persons who are jointly and severally liable for the

partnerships debts. The contract of incorporation of a simple partnership must be in writing andshould be signed by every partner; otherwise it is null orvoid.

4.1.2.Joint PartnershipA joint partnership consists of two categories of partners:Simple partners, who are responsible for the running of the business and who are jointly and

severally liable for the partnerships debtsSleeping Partners, who are liable for the partnership's debts only to the extent of money theyinvested or are committed to invest in the partnership.

4.2.Limited Partnership

A limited share partnership is similar to a joint partnership but it has at least 10 sleeping partners

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4.3.Limited Companies 4.3.1.Private Limited Company

This company is the form most commonly used by foreign investors because it is simple toincorporate, has favorable tax regime, and the liability of each member for its debt is limited to his

capital share. The capital of a private limited company must not be less than QR 200,000 dividedinto equal shares of at least QR 1,000 each. The company's capital must be paid up in full onincorporation. The company must keep a register showing the names, address, nationalities andoccupation of its members and the number of shares owned by each.

A private limited company cannot conduct insurance, banking or investment broking activities.

The articles of association, which should be signed by all shareholders, must include thefollowing statements:

Name and address of the company Names of the shareholders, their titles, their nationalities and their place of residence. The address of the companys head office. The objective for which the company is incorporated. The amount of capital, whether it will be cash or otherwise, which each partner

subscribes. Conditions of assignments of shares. The duration of the company. The names of the persons entrusted with the management. The method of distribution of profits and losses.

4.3.2.PublicLimited CompanyThe procedures to incorporate a public limited company are lengthy and governed by theprovisions of the commercial companies law.

4.4.Branches of Foreign CompaniesThe Law No.25 of1990 regulates foreign participations in business.A foreign company, may, byan Emiri Decree, establish a branch in Qatar to invest money for economic developmentpurposes, or to facilitate the performance of public service, or to achieve a public service in theindustrial, agricultural, mining, tourism or contacting sectors. A foreign company is also allowed

to import materials required for such projects provided there are no similar products in the localmarket. A Qatari service agent must be appointed whose duties are confined to assisting in

securing visas and permits and the provision of labor and accommodation. The agent bears noresponsibility for the business of his principal. In general, a branch of a foreign company isestablished only for the duration of the projects it has been awarded to carry out.

The Minister of Finance, Economy and Commerce is the place to apply for in order to establishan Emiri Decree

A copy of the foreign company's Memorandum and Articles of association dulyauthenticated. An Arabic translation of the objects clause is required.

An Arabic agreement with the Qatari partner showing the type and duration of thebusiness

A certificate that the foreign company is not black listed by the Israeli Boycott Office

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The name of the foreign company representative in Qatar who is authorized to sign onbehalf of the company (Power of Attorney)

4.5.Joint Ventures

Joint ventures are formed through two or more natural or legal persons working together to carryout a commercial enterprise.

5. Labor Relations and Social Security5.1.Labor Market

5.1.1. Labor SupplyQatar has a labor force consisting primarily of expatriate workers. The largest groups of foreign

workers come from India, Pakistan, the Philippines and South Asia. The Government hasrecently begun diversifying the workforce by increasing the percentage of workers from outsidethis region. There is also a significant number of Arab, European and American experts and

professionals working in the country.Even though the dependence of Qatar on foreign workforce is high given the severe shortage of

Qatari labor, the policy of the government is to ensure the employment of the Qatari nationals tothe biggest extent.The government gives facilities in labor supply such as facilitating recruiting foreign labor for a

low cost, liberal immigration and employment rules for foreign skilled and unskilled, and flexiblesound labor laws that safeguard the rights of all investment parties and workforce

5.1.2. Labor RelationsTrade unions are not permitted in Qatar. However, Qatar passed a new labor law in May 2004which allows Qatari workers the right to strike, to form workers committees and to join

international labor organizations with ministerial approval. Strikes are forbidden in vital industriesincluding oil and gas, water and power, transport, communications and hospitals. All workershave the right to form joint committees with employers to conduct joint negotiations over all work-related issues. Where workers committees exist, they will represent the interest of allemployees. Furthermore, if the number of employees exceeds 30, they may directly electrepresentatives.If the joint committees fail to settle the disagreements, they must be submitted to the Labor

Department in the Ministry of Civil Service Affairs and Housing for mediation. If unsettled, theygo to a Committee of Settlement composed of representatives of the Ministry, employer andemployees. If still unsettled, disagreements will then be referred to an Arbitration Committeeheaded by a judge. The Arbitration Committee will be composed of representatives of the

Minister, the Qatar Chamber of Commerce and Industry, and the Qatar General Union ofWorkers.

5.2.The Right to Work Non NationalsTo reside or work in Qatar, nationals of countries other than GCC citizens must obtain specialpermits before entry to Qatar, except in the case of transit and visit visas. Applications for permits

must be based on a formal offer and are normally made through the Qatari embassy. In other

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cases, visas are sent to applicants from Qatar if their expertise is required from the Qatariemployer.

5.3.Labor Regulations

Qatar is taking a more active role in the International Labor Organization and is in the process ofdrafting a new labor law. Until then, employment related matters are regulated by the labor lawNo.3 of1962 and later amendments.By law, a Qatari sponsor is required for any expatriate labor. Thus it is recommended thatinvestors settle all related visa labor issues in early stages of negotiation with their Qatari

counterpart who shall handle securing visas, permits, providing labor and accommodation.In the case of sponsorship transfer of the expatriate from one sponsor to another, it must beapproved by the current sponsor and the Ministry of Interior. However, employees who filed valid

and approved complaints of abuse by employers to the Ministry of Interior can be transferredwithout the current employers agreement.

An expatriate hired locally is only entitled to two sponsorship transfers during residence in Qatar,

provided that age is below 60 years. Expatriates hired abroad are not allowed to changesponsorship. If for any reason a residence permit is canceled, the expatriate is not allowed toreturn to Qatar on a work visa for a period of two years.

Wages and salaries are normally agreed between the employer and employee. There is norequirement to pay employees either an annual bonus or a share of profit.

A normal working week consists of eight hours per day, six days per week. This is reduced to sixhours per day during the month of Ramadan. Overtime should be paid at a minimum rate of timeand a quarter (time and half being more usual) except on Fridays and public holidays when the

minimum is time and a half.A legal minimum of two weeks annual leave is due to employees with less than five yearscontinuous service. After this period the minimum is four weeks per annum. However, in practice,

the amount of yearly leave depends considerably on the employer. The employer is liable to payall the employees air fares to home on the beginning and the end of contract

6. Government/Politics6.1.Government Attitudes and Incentives

Qatar political and social stability have encouraged foreign investors to invest in differenteconomic sectors. These encouragements come from the governments actions towards

supporting foreign investments.

6.2.Relationship of Government and Business

6.2.1. GeneralThe government has adopted a number of strategies to enhance the economys status.

6.2.2. Regulatory EnvironmentForeign investments in Qatar are regulated by a number of strict regulations which controls these

investments. The prices for some commodities are regulated by the ministry of Finance. Whilethe environmental regulations for development projects are operated by the Ministry of Municipal

Affairs.

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6.2.3. PrivatizationThere are some significant actions concerning privatization of some economic sectors. However,

the government is still fully involved in many economic sectors such as oil and gas production,the transportation, telecommunication and the petrochemical industry.

6.3.Legal SystemThe judiciary is independent, in both its religious and civil branches, exercising the authority

vested in it by the countrys constitution. The civil courts are required to apply Qatari Laws(established by AmirDecrees; see Appendix 3 for a listing of the principal laws relating to doingbusiness) in enforcing agreements between parties. The Muslim religious laws (the Shariah) are

used mainly to regulate family matters.

7. Taxation

Introduction

In Qatar there are no personal taxes, social insurance or other statuary deductions fromsalaries and wages paid in the country.

According to law No.9 of1989, GCC nationals are to be treated as Qatari citizens for income taxpurposes. Qatari and GCC nationals and their corresponding wholly owned companies are notsubject to income tax in Qatar.

Foreign individuals, partnerships and companies operating in Qatar should pay income taxes,whether they operate through branches or as partners with foreign companies. By law, a

business activity is any occupation, profession, service trade, contract execution or any otherbusiness that is intended to make profit.The income tax system and filling procedure in Qataris covered by law No.11 of1993 which wasissued on 14 July 1993. This law is supported by a tax practice directives law No.2 of1995issued on 1 April 1995.

7.1.Income TaxIncome includes the aggregate of all gains and profits which are realized or have arisen from thecarrying of an activity in Qatar.

In general capital gains arising from the sate of business assets and business interests areincluded as ordinary income.

Income reported for tax purposes on a contract executed in Qatar must include income fromwork completed abroad, income from the supply of equipment and materials, and all income fromactivities within Qatar.

7.2.Direct TaxesThe income arising from different activities in Qatar is subject to direct tax. These activities

include rent, sale rent, liquidation profits, consultancy fees, written off debts, commissions fromagencies or from representation agreements, and profits received from any project in Qatar or by

the sale of its assets.

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7.3.Indirect TaxesCustoms duties are levied on imported goods.

7.4.Determination ofTax Payable

Tax liabilities are computed in a manner similar to general British and American practice on thebasis of profits disclosed by audited financial statements, adjusted for tax depreciation and any

items disallowed by the Income Tax Department.

Annual Depreciation RatesAssets Rates

Buildings such as offices, dwellings, stores, hospitals and clubs 5%

Roads and bridges inside the establishment 5%

Storage tanks, and pipelines 5%

Maritime craft 7.5%

Service Station buildings and driveway 20%

Plants, machinery, and mechanical devices other than indicated in this schedule 15% Office furniture and equipment 15%

Service replacement plant (including construction and road making equipment andworkshops and their equipment

15%

Trailers and Carts 15%

Automobiles and motorcycles 20%

Aero planes 25%

Drilling and clean-out tools 15%

Trucks (of any size) 20%

Machinery for servicing and lubrication of service machinery 15%

Refinery machines and pipelines and small tanks 10%

Computer equipment 33.3%

ProvisionsGeneral provisions such as bad debts and stock obsolescence are disallowed. Specific baddebts written off will be deductible to the extent that they are in accordance with the conditions

set by the tax administration.

Head Office ChargesCharges of a general or administrative nature raised by a head office on its Qatar branch areallowed as a deductible to the extent that they are in accordance with the conditions set by the

tax administration.Charges of a general or administrative nature raised by a head office on its Qatar branch areallowed as a deduction subject to a ceiling of3% turnover less sub-contract costs. In the case ofbanks the limit is 1% of gross banking income. The allowable ceiling for insurance companies isset at1% of gross premiums after deducting reinsurance premiums.

The allowable ceiling for head office charges on a project which has income streams arising inQatar and overseas is set at 3% of total income after deducting subcontract costs, the supplyvalue of imported machinery and equipment, revenues arising from work performed overseas,and other income which does not relate to activities in Qatar.

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LossesThe law contains provisions which allow for the carry forward of trading losses for set off againstfuture profits. However, losses cannot be carried forward for a period exceeding 3 years from theend of the tax year in which the losses were incurred. Losses cannot be set off against prior yearincome. Loss carry forward relief is not available to a contractor who winds up an activity in Qatar

and subsequently resumes that activity.

Withholding of Final Contract PaymentsAccording to income tax practice directives issued on January 1993 and May 1995, payments forcontractors are withheld until a receipt of a tax clearance certificate is obtained from the income

tax department.

7.5.Tax RatesIncome Tax Rates:

Qatari Riyals Tax Rates0 - 100,000 Nil

100,001 500,000 10%

500,001 - 1,000,000 15%

1,000,001 1,500,000 20%

1,500,001 2,500,000 25%

2,500,001 5,000,000 30%

5,000,001 and above 35%

7.6.Accounting Principles

International Accounting Standards and generally accepted methods of commercial accountingare recommended. Prior approval from the tax administration is required if a different accounting

method is to be applied.

7.7.Withholding TaxThere is no withholding tax.

7.8.Tax ExemptionsCompanies or individuals can apply for tax exemption on projects to a special committee. Thecommittee evaluates applications by the projects contribution to the support of Industry,

Agriculture, Trade, Oil, Mineral, Tourism, Communications, land reform, or any other activities

that are of social and economic benefit to the country.Other projects that may be exempted are projects that fall into the States planned developmentand economic objectives and that has the Governments approval.

Exempted projects from taxation are required to keep proper accounting records and tax

authorities require submitting financial statements within 4 months from the end of the tax year.

7.9.Deemed Profit TaxesBy law, the tax administration will issue an assessment for tax on deemed profits basis if the taxpayer fails or delays in submitting a tax declaration, does not maintain proper books and records,does not provide information requested by the tax authority or the declaration submitted is

deemed not correct

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7.10.Tax TreatiesQatar has signed double tax treaties with Algeria, Bangladesh, France, India, Morocco, Romania,Russia, Senegal and Tunisia.Several countries, including Japan, the United States and the United Kingdom, allow some

unilateral relief against their own taxes for Qatar income tax paid.

7.11.Other Taxes

Taxation of IndividualsThere is no personal taxation levied in Qatar

Taxation of Professionals

The income tax practice directives issued in April 1995 include new guidance on the taxation ofprivate professions such as medical practices, dental practices, consultancy services and othersole trader activities. The owner of the profession is allowed a deduction of10% of the annual

net profits of the business as a charge against taxable profits. The allowable deduction is subjectto a maximum annual limit of20,000 QR. To qualify for the deduction, the owner must beengaged full-time in the activities of the business.The directives clearly highlight the intention of the tax department to levy income tax on self-employed individuals in Qatar. The tax department has indicated that all costs and expenses

wholly and necessarily incurred to earn business income will be allowable as a deduction.However, there is a clear to disallow costs such as private accommodation costs, airfare,pension contributions, and general costs that are not directly related to the profession.

The determination of taxable income and the tax applied are in accordance with the income taxregulations specified in Decree Law No. 11 of.1993.

Sales Tax or Value Added TaxThere is no sales tax or value added tax.

Estate and Gift TaxThere are no estate or gifts taxes.

8.

What are the rules and regulation regarding foreign trade in Qatar?

8.1.Ways to do BusinessForeign investors need to appoint an agent or sponsor so as to start a business here in Qatar. It

is important to distinguish between two types of agents

Incase a project is planed to be executed; a service agent is required take care of all the

administrative work with the government. Foreign ownership cant exceed 49% of the capital witha Qatari partner owning 51%.Incase there is intend to import to Qatar any kind of commodity, a commercial agent is requiredto act as a distributor or sales representative.

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8.2.DocumentationsThe most common instrument used for controlling imports and exports is the letter of credit (L/C).

After opening a letter of credit, the supplier should provide certificate of origin and an invoice andshipping document including a description of the goods to be imported.

8.3.Customs DutiesQatar applies a five percent tariff on almost all products excluding alcohol beverages andtobacco products which is 100 %. Goods manufactured in GCC countries and some foodproducts such as wheat, powdered milk, rice, flour are exempted from tariffs.

8.4.ValuationThe basic value for the assessment of duty is the CIF value of the goods. Where only the FOBprice can be established, duty is based upon FOB price plus 15%

8.5.Special Import RequirementsAll importers are required by law to have an import license for almost all products. Such import

licenses are issued only to Qatari nationals. Even in the case of joint ventures between foreignand Qatari partners, agency/dealership agreements issued by foreign suppliers can be registered

only in the name of the Qatari partner in the Commercial Registration Department of the Ministryof Economy and Commerce. Foreign investors entering into joint ventures with Qatari partnersare allowed a maximum of49 percent interest in the business.Taken together, the above represents a formidable array of privileges and preferences, whichcan disadvantage foreign investors in the Qatari market. Despite stated fines and penalties, thepractice of a Qatari illegally lending his name to a foreign-owned/operated business has beencommon, but on a reduced scale in recent years.

All imported meat and poultry products require a health certificate from the country of origin anda Halal Slaughter Certificate issued by an approved Islamic center.

All imported beef and poultry products require a health certificate from the country of origin. As isthe case with other products, importers of foodstuffs should have an import license, which is

issued only to Qatari nationals by the Government. A Qatar Embassy or consulate in the countryof origin must legalize all shipping documents.

8.6.Duty Exemptions

Duty exemptions are not generally given unless there is a substantialinvestment from the

foreign joint venture party.

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8.7.TaxesOne of the things that should be known about Qatar is that its not a tax free zone. Taxes are paid

on corporate income. The Rate ranges from zero on profits less than 100,000QR to 35% onprofits more than 5,000,000 QR.

8.8.RestrictionsOnce a foreign employee is resident in Qatar there is normally no difficulty in importing personal

effects free of customs duty. The import and sale of alcohol and pork products are prohibited.The import of personal computers is normally not allowed unless an employee has a letter fromhis employer stating that the computer is required for business purposes

The import of pets is allowed. A valid health certificate issued by a Veterinarian registered withPublic Health Authorities in the country of departure must be produced for pets imported intoQatar. There is no know rabies in Qatar, but animals being imported must be immunized against

this disease.

8.9.Exports

Exports are not taxed.

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Questions asked

What is the rule of Qatar Investment Promotion?

IPD with its various rules provides investors with reliable information about Qatar businessenvironment, current investment projects, suitable business partners and governmentincentives.www.investinqatar.com.qa

What is a reliable media source in Qatar?

Al Jazeera channel, launched in November1996, was the first independent Arabic languagesatellite channel to broadcast out of the Arab world with a declared mandate of dedicating itsresources to providing news information to Arab audiences at large. Al Jazeera media servicesinclude Al Jazeera Website (Arabic & English); Al Jazeera Mobile which provides updated info

to users through SMS, MMS and WAP technology, Al Jazeera Media Training andDevelopment Center, Al Jazeera International, Al Jazeera Live, Al Jazeera Center for studies

and Opinion Polls.

Can a business operate in Qatar without a Qatari sponsor?

Although the requirement of an agent or sponsor is believed to be abolished in the years to

come, it is obliged for any foreign investor to have a sponsor to run the business in Qatar. TheQatari partner should at least own 51% of the capital in accordance to the Qatari Law No. 13 of

2000

In March 2005 a new legislation was enacted by the State of Qatar to establish Qatar FinancialCenter. Its most important role is to approve and issue licenses to individuals, business and

other entities that wish to incorporate or establish in the Center.

Who can be referred to open a business in Qatar?

The government is supporting foreign investors from the ministry of Economy and commercethrough the investment promotion department. Other ministries and government organizations

can be very helpful.

What are the regulations on imports and exports in Qatar?

Qatar Investment No. 13 of2000 can guide foreign investors through the establishing of a newbusiness in accordance with laws and procedures in force in the state.

http://www.investinqatar.com.qa/

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What are the current major projects in the State of Qatar?

Al- Khaleej Gas Project (AKG) Dolphin Project Qatar/Kuwait Gas Supply Project RasGas LNG 3, 4 & 5 RasGas LNG 6 & 7 Qatargas II Project Qatargas III Project Gas-to Liquids (GTL) Projects Oryx GTL Project Pearl GTL Sasol Chevron ExxonMobil Marathon ConocoPhillips ConocoPhillips Cracker at Ras Laffan Qatofin Q-Chem II Project DME Project with MGC PWA Doha North Sewage Treatment Plant QDREIC Sewage transfer and Treatment System, Qatar QP Ras Laffan Common Cooling Water System Phases II & III QP Al Shaheen Refinery, Qatar QP Messaieed fuel storage tanks, Qatar

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What to do if you intend on doing business in Qatar

After you have done extensive research about Qatar, or simply, readTHE BOOK, it is time to move on

to the next step.

Plan your visit to QatarAsk your self questions like where is the first place you should go to in Qatar, who to get intouch with and what exactly you should be looking for.Visiting Qatar will enable you to firsthand experience all the information you have read about.

Find a LawyerAfter you have assimilated an idea about the business you want to venture into, you needa good lawyer. In order to understand the business environment and how it works, you

should be assisted by a lawyerwith experience in the Qatari market. A good lawyer will beable to protect your interests and sometimes it could spell the difference between successand failure.

Make contact with the ministriesThe Qatari government is very supportive and is putting huge efforts to provide a suitablebusiness environment for foreign investors. As a result seek more knowledge throughsimply visiting those ministries. It would also help to have an experienced individual in the

local market to follow up on governmental procedures.

Do Market research and Feasibility studyBusiness men need a lot more than a hunch to start a new business. The mainunderstanding of any project or business comes from conducting a feasibility study whichstudies the chances any business in the Qatar market. For this you would want to get thehelp of an international consultancy agency in Qatar.

Find a partnerFinding the right partner or sponsor in Qatar is one of the most important tasks.

Understand the cultureLearn understand and appreciate the Qatari culture. Each country has its own social andethicalvaluesthat should be respected.

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About Us

MGI World Wide

MGI INTERNATIONAL - Qatar

What is it that YOU need?

Do you need the international services of a multi-national consultancy firm, but want the highpartner involvement and personal attention of that offered by a local firm?

With MGI International, you can have both! MGI Internationalis a member of the worldwide MGI group where its

clients enjoy the benefits of a strong, supportive professional relationship, built on a high level of personalinteraction with partners and staff.

Is yours a big organization or family business, with potential for successful, profitable growth? Or doyou, personally, need consultancy expertise?

Are you an entrepreneur with great ideas but need advise on what to do next?

With MGI International, you have the security of knowing that, wherever in the world you wish to do business, thequality of your advice is always assured. All MGI member firms have to pass a stringent quality control re viewbefore being accepted for membership. Existing members are also regularly reviewed, in order to ensure thathigh standards continue to be maintained.

Who is MGI International?

MGI has supported the growth of thousands of companies throughout the world. Our clients and member

firms have access to the combined knowledge and expertise of over575 partners and 4,000 staffworldwide!

MGI Internationalis a member firm of the worldwide network of235 offices in 75 countries around the world

called MGI.

It is a friendly local service with a window on the world. Supporting our clients, business associates, partners andstaff with great business solutions and services.

Many members in MGI hold senior positions in their local political, business, community and service groups and,

through these associations, keep up- to-date, fully informed and closely in touch with their city, state or country often to the extent of being influential in regional growth and development.

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What does MGI Internationaloffer you?

As a client of an MGI member firm, you can benefit from on a wide range of local and internationalservices.

Internationally, MGI Internationaloffers the following services:

Immediate access to current financial information on almost every country Comprehensive details on current business practices, taxation and accounting procedures worldwide. Expertise in international business structures.

The ability to explore business opportunities and establish strategic alliances through MGI's globalnetwork

Locally, MGI Internationalis vitally pro-active in client servicing in many areas including:

Auditing and reviewing financial statements, recommendations to the management. Evaluating financial and accounting systems, including internal control and supervision. Taxation consultancy, advice, compliance, returns and interface with government bodies Administrative Financial consultancy, feasibility studies, financial & administrative systems Accounting procedures for corporate, private and government bodies Setting up infrastructures of companies, identification of defects in the existing systems, proposing

solutions and implementing them

Projections, budgeting and strategic planning

Systems development and human resource evaluation The selection and implementation of computer software and hardware The design of management information systems Marketing studies and advertising consultancy and applications Legal studies Specialized business education and professional development programs, courses and seminars

How to contact MGI International

Please feel free to contact us for any inquiry or request on the following:

Tel: +974 4874760

Fax: +974 4874059E-mail: mgiqatar@qatar.net.qa

It will be our pleasure to send you a representative to attend to your needs.

mailto:mgiqatar@qatar.net.qa