On 11 December 2019, Qatar published Executive regulations 39/2019 in the Official Gazette, introduced new Income Tax Law No. 24 of 2018. The new regulations are generally effective from 12 December 2019. Key features of the new regulations are following:
Corporate income tax
- Additional guidance is provided on permanent establishments (PEs) rule, a construction PE will be deemed constituted if the activities exceed 6 months and a service PE will be deemed constituted if the activities continue for the same or connected project for a period or periods aggregating more than 183 days within any 12-month period;
- Audited financial statements required to submit with the income tax return when capital exceeds QAR 200,000; or taxable income exceeds QAR 500,000; or head office is outside of Qatar;
- New rules introduced list of non-deductible expenses, such as (i) taxes paid by taxpayers on behalf of non-residents; (ii) indirect taxes for which a refund or deduction may be claimed; (iii) board of directors’ salaries and remuneration; and (iv) commissions exceeding 3% of total revenue paid to agents of foreign companies;
- Tax losses may be carried forward for 5 years instead of 3 years under the previous regulations;
- New tax depreciation rates are introduced prescribing the straight-line method;
- The deadline for tax registration for new companies is extended from 30 days to 60 days after incorporation; and
- The new regulations introduced debt-to-equity ratio 3:1 for the deduction of interest on related-party loans.
Capital gains tax
- Capital gains tax must be paid and the associated tax return submitted within 30 days.
Withholding tax
- The new regulations broaden the scope of withholding tax on services by including term “consumption test” that clarifies services are considered as having been performed in Qatar where they are used, consumed or utilized in Qatar, even if they are carried out in whole or in part outside Qatar; and
- Amounts subject to withholding tax now are deemed to be paid within 12 months after the payment due date, exception may applies for government agencies or public foundations.
Transfer pricing
- There is a four-tiered approach for TP documentation compliance: (i) a transfer pricing form to be submitted with the annual income tax return; (ii) master file; (iii) local file and (iv) country-by-country (CbC) reporting requirements (already applicable as from the 2018 financial year); and
- Transfer pricing (TP) documentation requirements are introduced as from the tax year ending 31 December 2019.
