Ian Anderson, head of tax at the QFC Authority, explains the new taxation regime and what it means for international firms looking to establish asset management operations in the country.
The latest Qatar Financial Centre (QFC) tax regime was effective from 1 January 2010. The regime imposes a 10% tax on the profits of firms licensed with the QFC, based on their Qatari (local source) profits. The QFC is not a tax haven, and has no intention of becoming one, but 10% is an internationally competitive rate of tax. There is no personal income tax in Qatar.
The tax regime was designed to be attractive to international financial services companies, delivering a high degree of certainty with clear regulations and transparent administration. Returns are filed on a self-assessment basis with both the return and payment of tax due to be made within six months of the relevant accounting date. Enquiries have to be raised by the tax department within twelve months of filing, otherwise the return is agreed by default.
Tax losses can be carried forward without limit of time to offset against future profits from the business, and group relief is available for companies within the QFC with a 75% ownership relationship. Losses cannot be carried back. There are no capital allowance provisions but deductions are allowed for commercially calculated depreciation charges.
Asset management operations
Companies opening up operations as asset managers will also be subject to tax at the 10% rate. However, the profits of a fund registered in the QFC, and most other funds managed by a QFC Entity, will be completely exempt. There are no withholding taxes on the distribution of profits out of the fund, regardless of the location of the recipient.
The tax department offers a tax ruling facility which enables taxpayers to obtain an advance ruling on planned transactions, or possibly on general areas of business activity, which will benefit the taxpayer by giving certainty on the transactions covered by the ruling.
The ruling is binding on the tax department but does not prevent the taxpayer submitting a return on an alternative basis. This facility has already been utilised by a manager of a fund requiring certainty of tax treatment before publishing the marketing prospectus for a new fund.
The QFC is also a good holding company location for a fund manager looking to establish a base for the development of business across the region. There is a participation exemption for both dividends received from subsidiaries and any capital gains from their disposal. There are no withholding taxes on the payment of interest, dividends or royalties. Qatar also has an extensive and growing network of double tax agreements, including the UK, France, India, Russia, Switzerland, the Netherlands, Malaysia and Singapore.
Overall, the QFC tax regime supports the positioning of the QFC as an attractive location in which to do business in an environment of tax clarity, certainty and transparency.
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