Company Formations: A jurisdiction guide to setting up a business
Dr. Antonio Ghaleb
AG & Partner CPA
Dr. Antonio Ghaleb has more than 15 years of extensive audit, accounting, tax finance, management, and risk management experience gained from the leading audit and tax consultancy firms in the world. He earned a doctorate in Business Administration (DBA) from a reputable and accredited university in the USA. He is a member of the American Institution of Certified Public Accountant (AICPA) and the Guam Board of Accountancy. He is also certified in Risk Management Assurance (CRMA) and is a Chartered Global Management Accountant (CGMA).
He established his Qatar-accredited audit firm, in 2017 and is specialised in audit, tax, and business advisory services.
+974 4497 9530
# QUESTION ONE
What are the most common structures used when international clients want to form a company in your jurisdiction? Any examples?
The legal structures according to the Qatari Commercial Law are the following:
- Joint Liability Company
- Limited Partnership
- Joint Venture Company
- Public Shareholding Company
- Private Shareholding Company
- Partnership Limited by Shares
- Limited Liability Company
# QUESTION TWO
The most common legal structures that foreign entities or natural persons may establish in Qatar, are the Limited Liability Company and a branch of a foreign entity. The process of establishing a branch is subject to the new investment law 1/2019, in which a foreign entity (legal person) may own the branch, whereas a foreign natural person can only own up to 49 per cent of the capital of a Limited Liability Company.
Please detail some of the favourable and unfavourable legislation that businesses considering establishing a presence in your jurisdiction should be aware of? How can you help them to streamline the process?
Qatar has proved its strong economy, by continuing its business activities independently, maintaining one of the highest GDP growth rates in the region, and also maintaining its title as one of the countries with the highest GDP per capita in the world.
We have to differentiate between international entities that come to Qatar to carry out activities connected to government or semi-government projects. These companies can set up a 100 per cent branch owned by their parent companies, which are located and registered abroad, by getting special approval from the Ministry of Economy and Industry in Qatar.
The advantage of setting up a branch 100 per cent owned by a foreign entity, is to ensure that the foreign entity controls the management entirely and has a significant influence in any decision during the board meeting. Hence, the foreign entity controls the management in Qatar and can take any decision at its sole discretion in any investment or organisational change, without getting back to any local partner. However, the disadvantage of doing this, is the corporate tax in which the General and Tax Authority (GTA) levies the tax on the profit the branch generates in Qatar on the basis of 10 per cent from the net profit. The foreign entity can appoint a manager or director to manage the branch, and the director will assume any responsibility in the event of any gross negligence. The director will run the daily business and he/she will have a full authority to sign any document in any private or public entity.
There are also certain benefits investors can get from the government, to invest in Qatar and obtain a share of more than 49 per cent. This process will be clarified in details in the Executive Regulation, which is not yet issued. However, foreign investors cannot invest in banks, insurance companies, commercial agencies, or any sector not approved by the Ministry of Economy and Industry.
Foreign entities, which come to Qatar to establish a limited liability company, are obliged to share a percentage that is not more than 49 per cent of the capital amount. They can increase their profit share up to 97 per cent in the Articles of Association (AOA). The advantage of increasing the profit share to 97 per cent, is to ensure a significant control in any managerial decision, and accordingly, the role of the local partner will be merely passive and has a protective right to sign and not a substantive right.
These foreign entities establish limited liability companies, because they do not have a project with the government or semi-government and therefore the requirements of setting up a branch are not met. If the company generates income, then the General and Tax Authority (GTA) levies the tax on the profit share stated in the AOA. the local partner is entitled to the profit stated in the AOA and will assume the same loss in case the company incurs losses.
Every company, regardless of its legal structure (branch, LLC, partnership), is required to register at the General Tax Authority and obtain a Tax Card. There is a new income tax law 24/2018, which has been published officially in the official gazette in December 2018. The GTA has changed substantially the articles related to the delay penalties, and other requirements that follow the preparation process of file the tax return. Although the companies can apply the International Financial Reporting Standards (IFRS), however, some adjustments require the companies to adjust in the tax return. All companies should meet the deadline of submitting the tax return and audited financial statements according to the Income Tax Law, and any violation of the rules will impose a significant amount of penalties. Further, the GTA has substantiated in the income tax law on the transparency and objectivity of the daily transactions and the process of submitting the tax return; any process that leads to tax evasion imposes the taxpayer to significant penalties and imprisonment.
# QUESTION THREE
What due diligence is required to be undertaken by company formations agents under anti-money laundering laws in your jurisdiction?
Law No 4 of 2010 Promulgating the Law of Combating Money Laundering and Terrorism Financing obliges reporting entities such as financial institutions, independent legal professionals such as auditors, lawyers to report any suspicious transaction they may detect during their review of any business transaction. Further, the central bank is conducting regular ongoing off-site surveillance and on-site inspection of all financial institutions regulated and controlled by the Qatar Central Bank to ensure that all financial institutions comply with the AML/CFT legal requirements. Auditors should report to the financial information unit any suspicious transaction detected during audit, in which this process is in alignment with the International Auditing and Assurance Standards Board (IAASB) and International Code of Ethics for Professional Accountants by International Ethics Standards Board (IESBA).
On the 9th of September 2018, Qatar published new country-by-country reporting (CbCR) requirements in the Official Gazette. Qatar Tax resident firms, which are members of multinational groups that have annual consolidated revenues that exceed QAR 3 billion (approximately USD822 million), are required to comply with the CbCR report filing requirements in Qatar for fiscal years commencing on or after 1 January 2017.
AG & partner CPA was founded and registered by the Ministry of Economy and Commerce in Qatar under Commercial Registration number 103317.
The firm is specialised in auditing, accounting, tax, and business advisory services; which include financial consultancy services, budgeting, forecasting, and planning, internal audits, due diligence assignments, business restructuring, accounting systems and accounting treatment of the complex transactions.
Additionally, the firm assists in company establishment, credit facility reviews and liquidation services. All work complies with the International Standards of Auditing (ISA), code of ethics and objectivity, and International Financial Reporting Standards (IFRS).
The practice works firmly with clients to help them optimise tax legally, in compliance with current rules and regulations.
Doing business in Qatar
Foreign investors can transfer dividends to their home country without paying any tax. There is no restriction nor threshold to the amount that will be transferred from Qatar to any other country.
All expatriates’ salaries are exempted from any individual tax in which this gives investors another incentive to consider Qatar as an investment destination.
Qatar has no sales tax or value-added tax, which attracts foreign investors to build up manufacturing or trading capacities for local market consumption or exportation with minimal taxation. The government is encouraging potential investors to build up factories that add value to the economy. Dependent on conditions and government requirements, such as feasibility studies and other capital requirements, the same factories will get an exemption from the government to pay corporate tax, and customs duty.
The government has also started a new vehicle, which is a free zone area. Qatar Economic Zone (QEZ), enables potential investors to establish foreign entities owned 100 per cent by foreign investors.
Company Formations: A jurisdiction guide to setting up a business
Antonio Ghaleb is accredited in Qatar and holding the auditor’s registration number 348. Also he is a member of the following institutions: a) American Institution of Certified Public Accountant (AICPA), b) Guam Board of Accountancy, c) Certified in Risk Management Assurance “CRMA”, d) Chartered Global Management Accountant designation “CGMA”, and e) International Financial Reporting Standards (IFRS).
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