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Tax Seminar 2015

Know the rules, know your way ahead

December 15, 2015

2 © 2015 Deloitte & Touche (M.E.)

Agenda

Corporate Tax

Withholding Tax

Practical Issues

Overview of the TAS

Questions and answers

Overview


• Qatar tax regime is a territorial tax regime

• Income generated wholly outside Qatar is not subject to tax

Two streams of taxes in Qatar: Corporate Tax and Withholding Tax

Overview: Snapshot of Qatar’s tax systemA territorial tax regime

Area Tax overview

Corporatetax rates

• Applicable on residents and permanent establishments• Tax rate is a flat 10%• 35% rate applies to oil and gas operations

Withholdingtax rates

• Applicable on non-residents with no permanent establishments• 5% on royalties and technical services• 7% on commissions, interest, brokerage fees directors’ fees,

attendance fees, and for other services performed in whole or in part in Qatar


Overview: Types of taxpayersResident

Theoretical implications Practical implications

• For natural persons- Permanent home in Qatar- More than183 days during any 12

month period in Qatar- Center of vital interests in Qatar

• For body corporate- Incorporated under Qatari laws- Headquarters is in Qatar- Place of effective management is in

Qatar

• Individuals having permanent residency (Qatari ID Card)

• Companies registered in Qatar such as- Limited Liability Companies- Single Person Companies- Qatari Shareholding Companies- Family owned establishments- Partnerships

• Companies registered overseas but effectively managed and controlled from Qatar will be considered as a Qatari resident


Overview: Types of taxpayersPermanent establishment (PE) of a non-resident

Theoretical implications Practical implications

• A fixed place of business through which the business of a taxpayer is wholly or partially carried on. A PE also includes activity performed by the taxpayer through a person acting on his behalf other than an independent agent

- Branch of a foreign entity- Office- Building site- Factory- Workshop- Mine/Place of exploration- Assembly project

• An entity carrying out a long term project, i.e. a project with project life more than one year

• Use of an agent in Qatar – if the agent in Qatar is dependent on its principle

• Where an overseas entity sends employees to Qatar for more than six months in a calendar year to work on a project

• Executing a contract to service a resident company through a fixed place of work such as an office space, work station, work shop or a site

Corporate Tax


Corporate TaxSources of exempt income

Sources of exempt income• Interest earned by natural persons• Interest/Returns from public treasury

or public and institutional bonds• Capital gains from real estate/

securities earned by natural persons• Dividends if the amounts received

are derived from- Profit that is subject to tax under

this Law- Dividend distributed by a

company which is tax exempted under this Law

• Income generated from non-Qatari companies involved in aviation or shipping in State of Qatar

• Income of natural Qatari/GCC person provided they reside in Qatar

• Profits from Qatari resident companies wholly owned by GCC nationals

• Income from handcrafts, agricultural and fishing


Corporate TaxSources of taxable income

Sources of taxable income• Any activity executed in the State of

Qatar• Contracts executed wholly or partly

in the State of Qatar• Income from real estate in Qatar• Income from securities and shares

in companies residing in Qatar• Interest income on loans and other

financial facilities

• Gross income generated from discoveries, use and extraction of natural resources in the State of Qatar

• Consideration for services paid to head offices, branches or related companies

• Gross income subject to tax in the State under a double taxation agreement


Corporate TaxTax deductible expense

• Salaries, wages and other employee costs deductible pursuant to an employment contract

• Depreciation expense in excess of book depreciation versus tax depreciation is disallowed

• No deductions forgeneral provision including bad debts, air ticket with exception to employee’s end ofservice

• Donations allowed up to 5% and entertainment is capped at 2% of the taxable income

• Branches of non-residentcompanies are allowed a deduction for allocation of head office overheads up to a maximum limit

• No deduction for branch on interest paid on related party loan

Tax deductibility for business

expenses


GCC exemption

GCC nationals

Who is exempted from tax?

Resident anywhere+

Company is a resident of Qatar (WLL, SPC, Establishment)

etc.)and 100% owned by Qatari or GCC Nationals

Who is subject to tax?

Not a resident of Qatar (taxable on their share of profits in an LLC where there is effective

non-GCC shareholding). Branches of GCC Companies

are also taxed


Corporate TaxAdmin

Area Tax overview

Registration Tax card within 30 days on incorporation

Filing requirement

Annual return to be filed within four months from fiscal year end

Accounting and auditing requirement

IFRS framework. Audit is mandatory

Delay penalties Late filing – QR100 per day maximum up to QR36,000

Delay interest1.5% of unpaid tax per month up to a maximum of principal amount of tax

Area Tax overview

Exemption

Available if criteria met and Minister’s approval required for three to maximum six years of exemption

Retaining books and records

Ten years inside Qatar

Other areas to consider

Transfer pricingGeneral anti avoidance rulesExit tax


Corporate TaxCorporate tax calendar (key dates)

Action When?

Registration/Tax card• First application within 30 days on incorporation• Renewal within 30 days of expiry

Annual return and paymentof tax

• Four months from the fiscal year end• Extension allowed

Extension in filing deadline • One month before the filing deadline

Objection • Within 30 days of notice of assessment/penalty

Appeal• Within 30 days of refusal of the department or

completion of 60 days from date of objection and no response

Change in accounting period • 90 days before the expiry of the deadline for filing the return

Reporting supplier contracts • 30 days from the signing of the contracts

Withholding Tax


• Applicable on all services rendered on or after 1 January 2010

• Applies to payments made to non-residents with respect to activities not connected with a permanent establishment in Qatar

− 5% – gross amount of royalties and technical fees

− 7% – gross amount of interest, commissions, brokerage fees, director’s fees, attendance fees and any other payments for services carried out wholly or partly in Qatar

Withholding TaxIntroduction/Applicability


Withholding TaxTechnical fees – 5%

Engineeringservices in various

fields includingmechanical,

electricaland civil

Computerservices

including softwaredevelopment,

network servicesand maintenance

services

Maintenanceof industrial

equipment andrepairs performed

by specializedtechnicians

Advisoryservices in the

areas of behaviorand management

provided byspecializedconsultants

Designservicesprovided

by architectsand designconsultants

Consultingand professional

services in the legaland accounting

fields

Payments ofany kind made

as considerationfor managerial,

technical orconsultancy

services


Payments of any kind made as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, films or discs used for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment or for information concerning industrial, commercial or scientific experience.

Withholding TaxRoyalties – 5%

Leasing of equipment

Leasing of vessel

Payments madeto a artist or an author to publish his bookin Qatar


Withholding TaxRecap

Supplier/Contractor

Tax card No tax card

No Withholding Tax/retention

rules may apply

Service wholly provided outside

Qatar

Service partially or wholly provided

inside Qatar

Double taxation agreement available

No double taxation

agreement

Check agreement

Apply withholding tax

5% on technical

services and royalties

7% on commission, brokerage fees, board of directors fees and

any other service

No Withholding

Tax – no retention


Although in theory, DTA supersedes the domestic law, in Qatar, the process to claim a treaty relief is as follows.

Double taxation treaties | Refund processPractice in Qatar

WHT deducted by the customer and filed in line with Qatar’s law

Form 2-1

Customer to Provide certificate to the supplier and proof of payment. Copy of form 2-1

Form 2-2

Supplier to Apply for a refund providing reference to treaty and evidence of residence

Form 2-3

© 2015. For information, contact Deloitte Touche Tohmatsu Limited. 20

Practical Issues


Customer

Qatar Co WLL

Foreign Co –Qatar Branch (Temporary)

Foreign Co –Qatar Branch (Permanent)

Foreign Co

Resident

Resident

Non-resident PE

Non-resident PE

Non-resident No PE

Types of tax-payers


• A clear split between service to be rendered inside and outside Qatar is visible in the contract.

• Split should be clear in terms of scope, value and the location

• Should be independent from the scope rendered inside Qatar

Onshore/Offshore splitKey rules

Work carried out wholly or partly

in Qatar

Work carried completely

outside QatarSupply of goods


Personnel cost

Employer

Employee under local employment contract

Hired manpower

Seconded / International assignment

Recruitment agent


Finance CostInterest – 7%

Withholding tax 7% - Except for interest paid to financial institutions

• Interest paid is deductible for tax purposes

• No WHT on interest paid by a Branch• Interest paid by a Branch to head office and

related party of the head office is not deductible for tax purposes.

Interest paid by branch

Interest paid by Limited Liability Company


Related Party Transactions

- Bona fide commercial substance – not to avoid / reduce tax

- Supporting Documents – Agreements, invoices, receipts

Transfer Pricing

General Anti Avoidance Rules

- Priced at arm’s length

- TP Study using CUP method – any other method prescribed by OECD allowed subject to prior approval


Capital gains / Exit Tax

Hot topic Theoretical implication Practical implication

Capital gains

• Tax is applicable on gains fromthe alienation of assets

• Gains from the alienation ofnon-depreciable / depreciableassets, other than thosedepreciated under the groupregime provided for in Article10 of this regulations, shall becomputed on the basis of thedifference between the valueof the consideration receivedor the market value, whicheveris higher, and the net bookvalue

• Gain arising from sale of shares in aWLL company registered in Qatarand owned by a corporate bodyresident outside Qatar (non-residentwith no PE)

• Gain from transfer of fixed assets tooutside Qatar. Assets may include, Rigs Drilling Equipment Boats and Vessels Aeroplanes and Helicopter Trade Name / Intangible Asset

transfers

Tax Administration System (TAS)


• TAS is a modern information system which will automate the tax payment and management process within the State of Qatar

• Built in line with the objectives of Qatar National Vision 2030 to maintain fiscal stability and more efficient allocation of available financial resources

• Transform the government services offered to citizen and enterprises

• Allow an electronic filing of tax returns with the Taxes Department (TD)

Introduction of new Tax Administration System (TAS)What is TAS?


• Proactively manage the workload and direct resources to service and compliance activities as required

• Provide taxpayers efficient and quality services

• Reduce the time of processing

• Increase taxpayers satisfaction

• Enhance the communication between Ministry of Finance /TD and taxpayers

• Improve transparency and certainty

Benefits and objectivesWhy do we need TAS ?


• Information about the TD

• Ministry of Finance/TD rules governing the Corporate Income Tax and Withholding Tax

• Access to reference material

• Access to double taxation treaties

• Quick access links to other Government departments

• Easy access to online facilities

• Monitor account status, obligation status, requests status, etc…

Features available in TAS


• Application for new tax card and renewal of tax card by filling up the registration form (for new clients) or renewal form (for existing clients)

• Filing annual tax declarations along with the schedules and exhibits in PDF format

• Monthly withholding tax filing

• Approval to change shareholders in Qatar Limited Liability Companies

• Objection to a tax assessment

• Appeal against an assessment to the Tax Appeals Committee

• Application for the tax exemption

• Request for extension of tax filing

• Application for change in accounting period

• Application for withholding tax refund, etc…

The online facilities


Registration process

Validation is incomplete

Attach supporting documents in PDF format

Validation is complete

To follow up with TD for registration process

Email 1

Confirmation to taxpayer/

agent

Email two new credentials

confirmation for username and

password

TAS portal taxpayer registration

E-registration web page form

Taxpayer is created on system

Draft tax card created and TIN

generated

Data set checked for completeness

Registrationis rejected


• Complete the application form by uploading soft copies CR, trade license, names of the owners, etc. in the system

• Hard copies are also required to be filed

• After the TD evaluates the information, two emails will be sent to the email id’s provided

− Email for credentials (Password and User name)

− Email for system generated ‘Draft tax card’

− Final tax card can be collected in person at the TD

Registration process New taxpayer

Existing taxpayer

• Existing taxpayers will have their details and documents already migratedto the TAS


Registration process (cont’d)


Online tax payers registration application


Tax card


• Tax declaration and WHT will be filed online using an e-filing platform

• The WHT input form will be consistent with the current WHT Form 2-1

• The tax return input form for income statement and balance sheet will be consistent with the current Form No. 3 – annual Income Tax Return

• Schedules and exhibits along with the audited financial statement to be uploaded in PDF format

• Hard copies will also be required to be filed during the initial migration period (expected in 2014 and 2015)

E-filing processE-filing


E-filing process


E-filing process (cont’d)


Online payment process

Login to the system

Generate 14 digit payment identification number

Based on the payment identification number, bank

initiates the transfer

Payment confirmation is available in the

system

Select the purposeof payment

Settlement of financial penalties/obligation

Income tax payment

WHT payment

Print payment order

Confirmation will be submitted along with the return


• Tax assessment as and when released will be notified on the home page of the tax payer and will be available to view upon login

• Objection to a tax assessment can be raised through the TAS portal by uploading the relevant objection letter stating the reason for objection

• Appeal against an assessment to the Tax Appeals Committee can be raised through the TAS portal by uploading the relevant appeal letter stating the reason for appeal

Tax assessment


• Monitor tax compliance and clearance status

• Highlights non filing of withholding tax and income tax return

• Show outstanding queries or issues on tax files

• Access to current and historic taxpayer information

Dashboard overview


Dashboard overview


• TD has instructed to submit the tax declarations from October 1, 2014 using the e-filing facility in TAS

• Each taxpayer will identify an authorized agent

• The approved tax advisor (e.g., Deloitte) will need to submit a new tax representation letter on behalf of the taxpayer

Key takeaway points

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte network”) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries and territories, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s more than 200,000 professionals are committed to becoming the standard of excellence.

About Deloitte & Touche (M.E.)

Deloitte & Touche (M.E.) is a member firm of Deloitte Touche Tohmatsu Limited (DTTL) and is the first Arab professional services firm established in the Middle East region with uninterrupted presence since 1926.

Deloitte is among the region’s leading professional services firms, providing audit, tax, consulting, and financial advisory services through 26 offices in 15 countries with more than 3,000 partners, directors and staff. It is a Tier 1 Tax advisor in the GCC region since 2010 (according to the International Tax Review World Tax Rankings). It has received numerous awards in the last few years which include Best Employer in the Middle East, best consulting firm, and the Middle East Training & Development Excellence Award by the Institute of Chartered Accountants in England and Wales (ICAEW).

© 2015 Deloitte & Touche (M.E.). All rights reserved.

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