Income Tax in Qatar
Most countries levy two kinds of income tax: corporate income tax and personal income tax. However, did you know that Qatar is just one of the handful of countries that only levies corporate income tax? Moreover, it is just 10%, making it one of the smallest in the world. Some types of personal incomes might be taxed, but not your employment income. Yet, we are here to help.
Qatar income tax law
According to Act No. 24 of 2018, the income tax rate is 10% of the taxpayer’s taxable income for the said fiscal year. Something you must know if you wish to start a business in Qatar is that resident companies are subject to this tax rate. However, they receive exemptions according to the percentage of dividends they distribute to Qatari natural persons and by the percentage of the company owned by Qataris.
As you might know, if you’re interested in company formation in Qatar, a different Qatar income tax rate might apply for companies operating in the oil and gas sector or in companies where government officials or agencies are partial owners.
Personal income tax in Qatar
As said, in principle, there is no Qatar income tax for personal income. Yet, there are a couple of clarifications that must be made.
The Qatari law understands “personal income” as income derived from wages and salaries. Yet, when someone does any kind of commercial activity in Qatar, they must pay the corporate income tax rate. For the Qatar income tax law, commercial activity means “any profession, vocation, service, trade, industry, speculation, contractual work, or profit and income-making business”. What about rental income? It is also subject to a 10% tax rate.
Corporate income tax in Qatar
Now, if you want to set up a company in Qatar, you must know that, as we said, there is a company income tax of 10% of the company’s total state income which must be paid annually. Therefore, if you’re interested in company formation in Qatar it is essential to know that this rate is only applicable to businesses.
Moreover, Qatar has a territorial tax system. This means the Qatar income tax only applies to income generated in Qatar, which is an excellent benefit if you wish to start a business in Qatar.
Another thing you should know about company formation in Qatar and its taxation is that business costs are deductible and whichever losses your business has can be rolled over by three years.
How to calculate corporate income tax in Qatar?
The first question here is what income is taxable in Qatar. If you’re looking to set up a company in Qatar, you should know that you’re required to pay corporate income tax over the following sources of income:
- Any commercial activity within Qatar;
- Contracts executed partially or totally in Qatar;
- Stocks, shares, and real estate income in Qatar;
- Services provided by the company in question, its branches or related firms;
- Income on loans provided by the Qatari state.
Which income is exempted?
As in many countries, the Qatar income tax has several exemptions. Thus, if you want to start a business in Qatar, the following income is exempted from taxation:
Profits arising from public treasury bonds, development bonds, and public corporation bonds;
Dividends and income from shares under certain conditions established in the law;
Small businesses with three employees or less;
Income of agriculture, fishing, aerial, and maritime transportation companies in Qatar;
Capital gains on the disposal of real estate and securities are exempt from the capital gains tax if it is not part of a taxable activity.
Tax residency in Qatar
Now, to fully benefit from the juicy Qatari income tax benefits, you must be a Qatari tax resident. As usual, it is not the same to be a personal resident than a corporate resident.
To be a person resident, you must comply with one of the following criteria:
Have a permanent home in Qatar;
Have been in Qatar for over 183 days (consecutive or separate) in a 12-month period;
Have a center of vital interests in Qatar.
To be a corporate resident, you must comply with one of the following:
Being incorporated following the company formation rules in Qatar,
Having your head office in Qatar;
Having your place of effective management and control in Qatar.
Different income tax rates for specific businesses
As explained, the taxable income is generally taxed at 10%, yet, there are some exceptions. Therefore, if you’re looking to start a business in Qatar that is related to the oil and gas industry, some special tax rates might apply:
A rate of 35% for oil, gas, and petrochemical operations will be levied unless there is a special agreement with the government before January 1st, 2010.
Payments made to non-residents regarding services not related to the permanent establishment in Qatar are generally subject to withholding taxes.
Fully owned subsidiaries of listed companies are taxable to the extent of the non-exempt ownership percentage.