Taxation Law in Qatar One step forward

On 17th November 2009 His Highness the Deputy of the Emir of Qatar issued Law No. (21) of 2009 concerning the Tax Law to apply to income earned on or after 1st January 2010 (New Tax Law). The New Tax law effectively repeals Law No. (11) of 1993 (Old Tax Law). There are a number of changes occasioned by the introduction of the New Tax Law and this article proposes to examine the same in some depth. Income Under the Old Tax law income was defined as including: (a) profits from contracts carried out in Qatar; (b) profits arising from the sale of an asset (c) commissions due to agencies; (d) fees for consultancy services and the like; (e) rent from real estate; (f) franchise and royalty fees; (g) recoupment of bad debts; (h) liquidation profits; and (i) bank interest and returns realised outside of Qatar. The New Tax Law focuses less on profits and now sets out various definitions for types of income. Gross Income is defined as total income and profits from applicable sources. Net Income is defined as Gross Income less allowable deductions. Taxable Income is now Net Income less losses from previous years (up to a three year maximum carry over period). The applicable sources for Gross Income include the Old Tax Law's income sources with reference to Gross Income rather than profits. However, the sources are also expanded to (a) Gross Income derived from the sale of shares in land rich companies; (b) Gross Income from shares held in Qatari companies; (c) interest on loans obtained in Qatar; (d) Gross Income from the exploration Exemptions Whereas foreign workers will be pleased that the exemption from the provisions of the law for salary and wage earners as contained in Article (49) of the Old Tax Law is now is mirrored in Article (2) of the New Tax Law, the situation for Qataris and GCC nationals has been changed slightly with significant implications. The exemption that meant that citizens of Qatar were free from tax is subject to those persons being residents of Qatar as set out in Article (4) of the New Tax Law. In theory, a Qatari citizen who was no longer resident in Qatar, may be required to pay tax on any Taxable Income derived in Qatar. Whilst the number of persons affected by this change will probably be very small, where it is significant is in its consequences for GCC Nationals. Under Law No. 9 of 1989 regarding Equal Tax Treatment for Nationals and Companies of the Gulf Cooperation Council States, GCC citizens and companies wholly...