Being highly developed in sectors such as natural gas, petroleum, construction, and having strong economy, geographical location advantages and entrepreneurial friendly perspective, Qatar appears to be a country where investors of many countries have desire to start a business or invest in existing businesses for a long time. Qatar is also a highly preferred location for Turkish investors to start a business or invest in existing businesses, by the help of investment advantages it provides for Turkish investors, its close relationship with the Turkish government and its frequent calls for Turkish investors. Thus, company establishment in Qatar is an issue that Turkish investors are inquisitive about.
Although there are many types of companies, the most preferred type of company by the foreign investors who desire to establish a company in Qatar appears to be limited liability company ("LLC" or "WLL"), which is similar to limited companies in our country. This is because, these companies can be established more easily than other types of companies, they are subject to less restrictions and the partners of company are responsible for company liabilities in terms of their capital shares. In addition, currently there is no minimum capital requirement for the establishment of these companies. (Before 2015, there was a minimum capital requirement of 200,000 Qatari Riyals.)
For all these reasons, general principles of establishing a limited liability company in Qatar will be explained in the following paragraphs.
I. General Principles of Establishing Limited Liability Company in Qatar
Limited liability companies to be established in Qatar by foreign investors can be established with minimum one (1) and maximum fifty (50) partners and maximum 49% of the shares of these companies can be owned by Turkish investors. In this case, at least 51% of the company's shares must belong to natural or legal persons of Qatar. However, there exists an exception to this rule.
Accordingly, foreign investors who will operate in some sectors determined by the Ministry of Economy and Trade of Qatar ("Ministry") can establish a limited company with 100% foreign shareholders by obtaining permission from the Ministry. These sectors are; agriculture, industry, health, education, tourism, natural resources and energy, consultancy, technical services and information services.
However, in practice, it is not always possible to obtain permission for the establishment of a limited liability company with 100% foreign shareholders, since the Ministry does not give permission in this regard or reply the applications too late.
Nevertheless, establishing a company with 100% foreign capital is possible in Qatar Science and Technology Park, which is established as a technology free zone, and in Qatar Financial Center, which is established as a financial free zone. In order to establish a company in these free zones, it is necessary to carry on a business in the fields stipulated by these zones and the application for operating within these zones should be confirmed by the relevant administrations.
In addition to this, 10% of the profits of companies established in Qatar can not be transferred abroad until it reaches 50% of the company's cumulative capital.
Although it may be thought that there are too many restrictions for foreign investors considering the rules explained above, in limited liability companies significant amount of arrangements can be made in favor of foreign investors. Namely, although the shareholding rate cannot exceed 49%, by making some arrangements in the articles of association, the foreign investor can be provided with the authorities to;
- Appoint the general managers of the company,
- Acquire the 90%-95% of the company dividend,
- Veto the critical decisions in the company management,
- Make decisions on the day-to-day business of the company.
II. Principles Regarding Taxation
According to the tax legislation of Qatar, any business activity carried on in Qatar is subject to taxation. In this context, profits from projects undertaken in Qatar, profits from the sale of assets, commission income from Qatar or third countries, rental income, consulting income, the income from sale, lease or franchise of a brand, the income obtained from the payment of the previously deleted debts or the income obtained in case of liquidation are directly taxed. Also, the interest income from banks in third countries that is gained as a result of the taxpayer's income in Qatar is also subject to taxation.
In terms of tax liability, solely the shares or businesses owned by Qatar citizens or citizens of countries that are members of the Gulf Cooperation Council ("GCC") are exempt from tax liability. Turkey is not a member of GCC. Therefore, a company established by or company shares owned by Turkish real or legal persons would be taxpayers under Qatar taxation rules.
However, the companies operating in the fields of industry, agriculture, export, mining and petroleum, tourism, communication or the companies that contribute to the national economy of Qatar may be exempted by taxation by the relevant committees.
Finally, salaries and wages obtained in Qatar are exempted from income tax, social security deductions or other deductions.
To sum up, for all the reasons mentioned above, establishing a company in Qatar is regarded as an attractive opportunity for both Turkish investors and investors from other countries. In this context, some rules and procedures to be taken into consideration when establishing a company in Qatar and important issues regarding taxation are explained in this article which we hope to be beneficial for those interested in this subject.
Originally published 30 April, 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.