Doing Business in Qatar
Introduction
There are only limited options, but there are a few ways in which foreign entities (i.e. individuals or companies who are not nationals of the State of Qatar) can seek to establish a business presence in Qatar. In this article, of Simmons & Simmons, legal consultants in Qatar, provides a useful guide to the options available.
Qatar is one of the smaller Gulf states in terms of population and geographical area, but boasts the third largest gas reserves in the world. This abundance of natural resources coupled with recent legal liberalisation, economic diversification and a burgeoning economy means that there are many opportunities for investment in Qatar. Foreign investors are welcomed and various incentives are available to attract foreign capital including tax breaks and exemptions from, customs duty. Foreign investors can transfer their investments and profits can be repatriated as can proceeds of sale and capital on liquidation.
Qatar is very much a market where local knowledge is key. Simmons & Simmons, legal consultants in Qatar set out below 10 key points to consider when doing business in this region. In this article Simmons & Simmons, provide a useful guide to the options available.
- Foreign investors may only invest in Qatar in accordance with the provisions of the Foreign Investment Law (Law No. (13) of 2000).
- Foreign investors may invest in all parts of the national economy (other than those set out below) with a Qatari partner who must own at least 51 % of the enterprise.
- Foreign investors may not invest in commercial agencies or, broadly speaking, real estate. Approval from the Council of Ministers is required for foreign investment in banking or Insurance.
- The Ministry of Economy and Commerce may permit foreign investors to own more than 49% of a company in specified sectors, namely agriculture, industry, health, education, tourism, and the development of natural resources, energy or mining.
- Foreign capital is guaranteed against expropriation (although the state may acquire assets for public benefit on a non¬discriminatory basis, provided the full economic value of the asset is paid for the asset).
- A foreign company which is performing a specific contract in Qatar may set up a branch office if the project "facilitates the performance of a public service or utility".
- A foreign company operating in Qatar under a Qatari government concession to extract, exploit or manage the State's national resources is exempt from the Foreign Investment Law. In practice this covers all the oil majors.
- A company formed by a foreign entity with the government or a government entity (an Article 68 Company) will be subject to special rules.
Establishing a company
- A company is the normal vehicle where an on-going business is being set up.
- Various exemptions are available to attract foreign capital.
- In almost all cases a Qatari partner will be required.
Branch office
- Used where a foreign company is performing a specific contract in Qatar.
- Authorised by the Ministry of Economy and Commerce where the project "facilitates the performance of a public service or utility".
- No need for a Qatari partner.
- Branch is only entitled to perform the specific contract for which it is registered.
- Branch will be fully taxable unless it is granted a special exemption.
- A special regime applies to branches of foreign engineering consultancy firms.
Commercial Agency
- The foreign company does not establish a presence in Qatar, instead an agent is appointed to market goods and services within Qatar.
- Exclusive agencies must be registered and are governed by Qatari agency law.
- Under a registered agency, commission is payable on all sales of the products within the territory even if the sales are not due to the activities of the agent.
- It is difficult to terminate a registered agency; in addition compensation is payable upon the termination of the agency, including upon the expiry of a fixed term agency.
Representative Trade Office
- A new method of establishing a "shop window" in Qatar.
- Can be used to promote a foreign company in Qatar and try to introduce it to Qatari companies and projects.
- Cannot be used to contract to do business in Qatar. Business must be carried out by a foreign entity (where the contract can be performed substantially outside Qatar) or by a company or branch authorised to do business in Qatar.
The two forms of vehicle most likely to be of interest to foreign investors are Limited Liability Companies (LLCs) and so-called Article 68 Companies. (Other possible legal entities under Qatari law are the Simple Partnership, the Joint Partnership and the Qatari Shareholding Company (QSC) but foreign participation in these bodies is restricted).
Limited Liability Company
- Minimum capital of QR 200,000
- Must have at least 51 % Qatari ownership unless an exemption has been obtained.
- The parties' profit shares do not necessarily have to reflect their shareholdings.
- 10% of each year's net profits must be kept within a company until the reserve stands at 50% of the share capital.
- May not raise capital by public subscription and may not issue freely transferable shares or bonds;
- Shares may only be transferred after they have first been offered to the other shareholders by way of pre-emption, unless the other shareholders have agreed to waive their right.
- May not carry out banking or insurance business or provide investment advice or investment services to third parties.
Article 68 Company
- Formed by an investor, which may be foreign, with the Government or a 51 +% Government owned entity.
- The foreign investor's share of the company is a matter for negotiation but can be greater than 51 %.
- Corporate structure is a "Qatari Shareholding Company with Government Participation"
- Falls outside the Foreign Investment Law and, to a certain extent, the Commercial Companies Law.
Using a "facilitator" or "government liaison officer"
Virtually all companies use a "facilitator" or "government liaison officer" to carry out all the necessary registration formalities. Such a facilitator will also be invaluable for obtaining residence permits, driving licenses and telephone, power and water connections etc. A facilitator will know all the ins and outs of the relevant procedures and requirements and will help minimise any frustrations which might otherwise be experienced when setting up. Consequently, the steps set out below are only a brief high level guide to what is required.
Company Formation
The following are required in order to incorporate a company and obtain a Commercial Registration
- Memorandum & Articles of Association in Arabic which conform with the standard form prepared by the Ministry of Economy and Commerce.
- Notarised, authenticated and consularised copies of the foreign company's Certificate of Incorporation, Memorandum and Articles of Association.
- Documents indicating the deposit of the share capital at a bank.
- A lease contract for the office of the company.
- Chamber of Commerce Registration.
Once the company has been incorporated and the Commercial registration issued the share capital can be released to the company's directors or the general manager for the purposes of running the company. The following licenses must then also be obtained:
- Municipal license.
- Signage license
- Employer's Immigration Department identity card.
Branch Office
The following are required in order to establish a branch office and obtain a Commercial Registration:
- Authorisation from the Ministry of Economy and Commerce to establish a branch.
- Notarised, authenticated and consularised copies of the foreign company's Certificate of Incorporation and Memorandum and Articles of Association.
- A notarised, authenticated and consularised power of attorney from the foreign company to the manager of the branch
- A copy of the contract in respect of which it is sought to establish the branch office.
- Chamber of Commerce Registration.
- A lease contract for the office of the company.
Once the branch has been approved and the Commercial Registration issued the following licences must also be obtained:
- Municipal license.
- Signage license.
- Employer's Immigration Department identity card.
If applicable, the company/branch will also need to be entered in the Importers' Register and/or Contractors' Register.
Companies
- Income tax is levied on businesses other than those wholly owned by GCC nationals.
- Income tax is charged on all profits arising in Qatar, including profits on the sale of the company's assets.
- The share of profits of the Qatari or GCC partner in a business is exempt from tax.
- An income tax exemption can be granted for a period of up to 10 years for major projects if they meet certain criteria.
- Some countries have double tax treaties with Qatar, if not unilateral relief may be available, for example UK unilateral relief is available against UK taxes where Qatari income tax has been paid.
Tax is payable at the following progressive rates:
| Taxable Income in Qatari Riyals | Rate |
|---|---|
| 0 – 100, 000 | Exempt |
| 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 + | 35% |
Individuals
There is no income tax on personal salaries.
Customs duty
The new GCC customs duty is 5% on most items. Exemptions from customs duty can be obtained for the import of equipment relating to a particular project as can exemptions from customs duty for the import of primary or semi-manufactured materials where they are not available locally. In addition to customs duty, legalisation fees are payable on import documentation.
- A "Qatarisation" initiative is in place which aims to increase the number of Qatari nationals in the public sector workforce. The new Labour Law introduces Qatarisation initiatives for private sector entities. The employment of Qatari nationals is one of the criteria taken into account when tax exemptions are granted.
- All contracts of employment are governed by the Labour Law
- They must be in Arabic and approved by the Labour Department.
- In particular, employers should be aware of the requirement to pay end of service benefits to employees.
- Companies will need to obtain residence and work permits for their expatriate staff. A new Labour Department Committee has been established to supervise applications for bringing in foreign workers.
- All expatriate employees must be sponsored by their employer who is responsible for them while they are in Qatar.
- Ownership of land by foreigners is restricted.
- Land for projects can be given to foreign investors on long term leases for periods of up to 60 years which may be renewed.
- A recent law now permits foreigners to own properties in three new developments for the first time.
Once a business entity has been established it will need to protect its interests when contracting with other entities.
- The parties to an international contract are free to choose the law and jurisdiction which will govern that contract. (If they do not choose an applicable law, the contract will be governed by the Qatari Civil Code.)
- The parties may also agree in writing to refer disputes to arbitration.
Traditionally, intellectual property rights were not as well protected in Qatar as foreign investors were used to, however new trademark and copyright laws were enacted in 2002.
Trademarks
- Trademarks can be registered at the Trademark Office.
- Registrations are valid for 10 years from date of filing (renewable).
- Trademarks can be cancelled if not used for periods of 5 consecutive years in Qatar.
- The international classification of goods and services is used, a separate application must be made for each class.
- Non-Qataris have the same rights as Qataris provided that their country treats Qatar reciprocally.
Copyright
- The Qatari copyright law protects original literary and artistic works including computer programs and databases which are creative in the selection and arrangement of their subject matter.
- Protection extends, inter alia, to non-Qataris whose work is first published in Qatar or is published in another country and then published in Qatar within 30 days of the first publication date, and to works protected by international agreements.
Patents
- There is no Qatari patent law - cautionary notices can be published in the press.
- A GCC patent can be obtained by filing at the Patent Office in Riyadh, Saudi Arabia.
Design Right
- Inventive designs or industrial models can be registered under the Trademark Law.
- Protection lasts for 5 years (renewable for 2 further 5 year periods).
Finally, a 'soft' point but don't forget to provide your staff (both those based in Qatar and those to whom they will be reporting in the head office) with a briefing on local culture and customs.
We have already mentioned that a facilitator who knows the system can be extremely useful to guide you through the required paperwork and practical steps and to advise you on cultural issues but it is also vital to have a well-briefed individual from your organisation on the ground when setting up to work alongside a facilitator and/or local partner.