DOHA: Qatar’s new tax regime will bring about a change in tax planning and strategies for international organisations based in the country, says Ernst & Young which has launched a series of Tax Seminars in Doha.
The seminars are intended to update key audiences about the implications of the new tax law to be enacted by the government. Qatar’s new tax law, which will lower the tax rate on foreign companies to 10 percent from 35 percent, will be effective from January 01 next year.
The first of the seminar series was held recently at the Ramada Plaza Hotel in Doha. Welcoming the Qatar Government’s move on lowering taxes, Finbarr Sexton, Partner, Tax, Ernst & Young Qatar said: “The new tax rate for companies aims to boost international investments and help diversify Qatar’s economy away from hydrocarbons.”
Sexton said soaring hydrocarbon revenue has allowed Qatar to sidestep the global recession and attract foreign companies. “In the coming years, however, competition to attract inflows will be intense.
The relatively high rate of corporate taxation is a major obstacle to encouraging foreign investment. This revision will offer Qatar a distinct competitive advantage in positioning itself as a destination of choice for investment flows,” he said.
Lowest in region
John Bradley, Director, Tax Advisory, Ernst & Young Qatar said of the roll out of the new law: “The new law is aimed at encouraging foreign investors to set up businesses in Qatar rather than servicing the market from outside. The new rate of 10 percent will be the lowest tax regime among countries that levy corporate taxes in the region. For those companies that operate in Qatar, the law will herald a new era of low taxes and the enactment of the law will be well received – it is a very much a pro inward investment move by the Qatari Government”.
Liana Liston, Executive Manager, Tax Advisory, Ernst & Young Qatar noted that the law retains a 35 percent tax rate for the oil and gas sector with the lower rate being applicable for other sectors.
There are a number of key changes in the new law including the introduction of withholding taxes on a number of sources of income and the first steps towards the introduction of transfer pricing rules, with the law clearly highlighting the importance of an arms length pricing principles for transactions between related parties.
Banks operating in the domestic market will benefit from the reduced 10 percent rate and therefore the Government has introduced a level playing field for banks operating in the domestic market and the Qatar Financial Centre – such a move is consistent with the Government’s plan to have a single regulator for both markets, said Ernst &Young. The tax break on Qatar Financial Centre (QFC) free zone registered companies is expected to end in January 2010 and they would then pay the same 10 per cent tax as would be due outside the centre.
The Economist Intelligence Unit estimates that the value of Qatar’s exports will nearly treble to $114bn by 2014, and Qatar’s gross domestic product (GDP) will grow by more than 15 percent a year in real terms for the next three years, according to Standard & Poor’s.
