Attitude toward Foreign Direct Investment
As noted, Qatar is undergoing massive infrastructure development in pursuit of its 2030 National Vision. Also, Qatar won the right to host the 2022 FIFA World Cup. The development related to the National Vision and the 2022 FIFA World Cup preparations will have a lasting impact on Qatar’s real estate, construction, and finance markets. Companies are scrambling to obtain a portion of the more than USD 200 billion in infrastructure development needed before 2022. Qatar plans to invest between USD 20 billion to USD 25 billion in tourism infrastructure development. The largest planned development is the USD 29 billion metro and rail project which will be implemented in three phases with completion scheduled for 2022. Other focal investment opportunities include roads, industrial zones, and information and communication technology. These developments will stimulate the domestic economy and create substantial export opportunities for foreign businesses. In addition to energy and infrastructure development, significant opportunities exist for foreign investment in medical, safety and security, education, and franchising.
The main economic stimuli in Qatar are oil, gas, and related industries, in particular the development of the North Field, the largest non-associated natural gas field in the world. Qatar's liquefied natural gas (LNG) industry has attracted tens of billions of dollars in foreign investment and made Qatar the world’s largest exporter of LNG. Qatar imposed a moratorium on increasing natural gas production from the North Field in 2012. The moratorium on further development remains in effect. Significant investment in the downstream sector is likely to continue.
Qatar's investment liberalization policies are proceeding on a gradual basis, based on a desire to protect local companies from rapid competition. Nonetheless, Qatar has made progress on legislation that will facilitate the tendering process for foreign and local business alike, as Qatar currently gives preferential treatment to suppliers that use local content in bids for government procurement. When competing for government contracts, goods with Qatari content are discounted by 10 percent and goods from other GCC countries receive a 5 percent discount. As a rule, participation in tenders with a value of QR 1,000,000 or less is confined to local contractors, suppliers and merchants registered by the Qatar Chamber of Commerce, and tenders with a value of more than this amount do not require any local commercial registration to participate, but in practice certain exceptions exist.
Other Investment Policy Reviews
In June 2014, the government concluded a trade policy review through the WTO. The link to the report may be found here: https://www.wto.org/english/tratop_e/tpr_e/tp396_e.htm
Laws/Regulations of Foreign Direct Investment
Investment Law No. 13/2000 is the primary legislation governing foreign investment. Foreign investment is generally limited to 49 percent of the capital for most business activities, with a Qatari partner(s) holding at least 51 percent. However, the law allows, upon obtaining special government approval, up to 100 percent ownership by foreign investors in certain sectors, including: agriculture, industry, health, education, tourism, development and exploitation of natural resources, energy, or mining. Qatar amended the law in 2004 to allow foreign investment in the banking and insurance sectors upon obtaining approval of the Cabinet of Ministers. Moreover, foreign financial services firms are allowed 100 percent ownership at the Qatar Financial Center (QFC). On October 31, 2009, the Council of Ministers agreed on the amendments proposed by the Ministry of Economy and Commerce to allow foreign investors to hold 100 percent ownership in certain activities, including: business consultancy and technical services; information and communication services; cultural services; sports services; entertainment services; and distribution services.
The Emir issued a new procurement law in November 2015 which is scheduled for implementation in June 2016. The new law aims to promote a fair, transparent, simple and speedy tendering process. It will abolish the Central Tendering Committee and instead establish a Government Procurement Department within the Ministry of Finance which will have oversight responsibility overall the majority of government tenders. The new department also aims to create a new website which will consolidate all tenders and provide relevant information to interested bidders, facilitating the process for overseas investors.
A new Public Finance Law (Law No. 2/2015) was enacted in early 2015 it aims to optimize the use of the public funds and institute international best practices and standards in Qatar’s financial regulatory framework. The legislation is trying to help Qatar develop a long term investment strategy by setting up a macroeconomic unit within the Ministry of Finance to monitor overall economic management and planning, including a public investment program established to identify the State’s major projects and ways in which to prioritize them. The law also amended Qatar’s fiscal period from April-April to January-January to fall in line with international standards and extended the 2014/2015 fiscal year until the first of January 2016. International law firms with 15 years of continuous experience in their countries of origin are allowed to set up operations in Qatar, but the license will be granted only if authorities in Qatar are convinced that the field in which the applying firm specializes is of use to Qatar. On the recommendation of the Ministry of Justice, the Cabinet may reduce the number of required years’ experience or fully waive the condition. Cabinet Decision Number 57/2010 states that the Doha office of an international law firm is allowed to practice in Qatar only if their main office in the country of origin remains open for business. In April 2015 the QFC stopped issuing new licenses to foreign law firms in response to complaints made by local Qatari firms of unfair competition.
Foreign firms are required to use a local agent for matters related to sponsorship and residence of employees. Certain sectors are not open for domestic or foreign competition, including public transportation, electricity and water, steel, cement, and fuel distribution and marketing. In these sectors, a single semi-public company has complete or predominant control.
Qatar has begun to liberalize its telecommunications sector to permit outside private investment, starting with the issuance in December 2007 of a second mobile license to a consortium including Vodafone and the Qatar Foundation. The same consortium was awarded the country's second fixed-line license in September 2008. However, there is a minimum requirement of QR 200,000 in initial capital for any telecommunication business, which creates a barrier to entry for small entrepreneurs.
When approving majority foreign ownership in a project, the law states that the project should fit into the country's development plans. It adds that preference should be given to projects that use raw materials available in the local market, manufacture products for export, produce a new product or use advanced technology, facilitate the transfer of technology and know-how to the Qataris, and promotes the development of national human resources.
Non-Qataris may also have the right of land use over real estate for a term of 99 years renewable upon government approval in Cabinet-designated "investment areas." Foreigners can own residential property in select high-end projects, including the Pearl, the West Bay Lagoon, Lusail, and the Al-Khor resort project. Law No. 23/2006 provides for foreigners being issued residency permits without local sponsors if they own residential or business property in Cabinet-designated "investment areas."
Import licenses are issued only to individuals with Qatari nationality, or companies owned or controlled by Qataris. In practice, exceptions are sometimes made for foreign companies, such as those with government contracts.
Qatar is rated the easiest country in which to pay tax globally, according to Paying Taxes 2015, an annual report issued by Price Waterhouse Coopers, the World Bank, and the International Finance Corporation. Qatari nationals are not subject to any kind of corporate or income tax, although nationals are obliged to pay Zakat, which usually amounts to around 2.5 percent of profits. Although there is no income tax on salaries in Qatar, foreign investors are subject to taxation on their investment income. In January 2015, Qatar became the first country in the Gulf Cooperation Council to sign a Foreign Account Tax Compliance Act intergovernmental agreement with the United States.
On January 1, 2010, a tax law went into effect imposing a 10 percent (corporate) flat rate on all non-Qatari companies and foreign partners in Qatari companies. The only exception is in the energy sector where there is a 35 percent tax rate on all oil and gas operations, unless exempted by Emiri Decree. The tax rate and all other tax requirements set forth in agreements related to oil operations will continue to be defined by Law No. 3/2007 on the exploitation of natural wealth and resources.
The tax law applies to revenues from business activities and contracts - which are partly or wholly implemented in Qatar - properties, including sales of stakes in the shareholding companies or privately-owned companies whose assets are mainly comprised of properties. Under Law No. 13/2000, the Ministry of Finance may grant a tax holiday of up to 10 years for new foreign investments in key sectors. Other exemptions may be granted under Law No. 21/2009 on a case-by-case basis for a period of up to 6 years.
Companies established in the Qatar Financial Centre (QFC) enjoyed a tax exemption status since the start of operations in 2005 through 2009. QFC’s new tax regime, levying a flat 10 percent on profits, came into force in 2010, but captive insurance, reinsurance and asset management businesses are exempted.
There are two types of penalties for failing to pay corporate taxes: penalties associated with delays in filing, and delays in payment. Companies, local or foreign, that fail to file their tax return will be fined QR 100 per day up to a maximum of QR 36,000. Those convicted of making false statements on their taxes, or trying to evade taxes face up to three months’ imprisonment and a maximum fine of QR 15,000. A further fine of 20 percent of the tax due will be levied on companies shown to be in violation of the tax law. Penalties may be doubled for repeat offenders. Delayed payment may result in a financial penalty equal to the amount of unpaid tax, in addition to the payment of the tax due.
Judicial decisions in commercial disputes are primarily based on contractual agreements, provided these agreements are not in conflict with applicable Qatari laws. U.S. firms are strongly encouraged to consult a local attorney before concluding any commercial agreement with a local entity.
Qatar announced ambitious infrastructure development plans in the lead up to the 2022 FIFA World Cup and in implementation of the 2030 National Vision. There are in turn enormous opportunities for foreign investment in various sectors associated with this boom, including in the infrastructure, health care, education, tourism and financial services sectors. A new website launched by the Ministry of Finance is expected to be released later this year which will consolidate information on government tenders.
On August 5, 2014, Law No. 9/2014 was issued amending some provisions of Law No. 13/2000 regulating investment of non-Qatari capital in economic activity in publicly listed companies. The effect of this change is to raise the limit of permissible foreign ownership levels in the listed companies to 49 percent, which previously was limited to 25 percent in most listed companies. The newly approved law stipulates that non-Qatari investors are allowed to own up to 49 percent of the shares of a Qatari shareholding company listed on the Qatar Exchange (QE). The 49 percent ownership must be contained within the company’s memorandum of association or articles of incorporation after they gain the approval of the Ministry of Economy and Commerce. Under the amended law, these investors can also own more than the 49 percent, provided they attain cabinet approval. Gulf Cooperation Council nationals will be treated as Qatari citizens in the ownership of companies listed on Qatar Exchange. The effects of these amendments are retroactive. Non-Qatari GCC nationals previously treated as foreigners for the purpose of trading in Qatari stock exchange, will now receive equal treatment to that of a Qatari citizens. Their ownership of Qatari stocks is no longer viewed as foreign ownership; instead their participation is equal to that of a Qatari national.
Doha is home to the Qatar Financial Centre (QFC) which allows major international financial institutions and corporations to set up offices with 100 percent foreign ownership, and all profits to be remitted outside of Qatar. The QFC is not an offshore center nor a free zone nor a property development. Companies licensed by the QFC are free to operate in both the local as well as other international currencies. Financial firms investing in Qatar enjoy an attractive tax regime; all QFC registered companies are subject to a 10 percent corporate tax on locally sourced profits. The QFC legal framework allows buildings in Doha to be designated as QFC sites so licensed firms do not have to be physically based in QFC premises, provided there is no objection from the Ministry of Economy and Commerce, and that they pay local market rents.
There are currently 196 licensed firms at the QFC, representing a spectrum of banks, investment companies, insurance houses, and related professional services. Approximately 70 QFC licensed firms are regulated by Qatar Financial Center Regulatory Authority (QFCRA), the QFC’s independent regulatory body. QFC firms are generally limited to providing services to wholesale clients. However, insurance companies can provide services to both wholesale and retail clients, and retail asset management is allowed.
The Qatar Financial Centre Authority (QFC Authority) issued regulations governing special purpose companies, holding companies and single family offices operating in or from the QFC. The Special Company Regulations and Single Family Office Regulations (the 'Regulations') were issued on 27 September 2012. The Regulations provide for a more attractive legal, regulatory and business environment. They will expand the range of services the QFC firms will offer and the structures they may adopt, notably single family offices and special purpose companies.
On December 9, 2013, Qatar’s financial sector regulatory authorities the Qatar Central Bank, Qatar Financial Center Regulatory Authority, and Qatar Financial Markets Authority launched a joint strategic plan for the “future of financial sector regulation in Qatar.” The plan established a framework for financial regulation, setting out a road map of strategic priorities for the next three years (2014-2016). The goals of the plan are to enhance regulation by developing a consistent risk-based micro prudential framework; expanding macro prudential oversight; strengthening financial market infrastructure; enhancing consumer and investor protection; promoting regulatory cooperation.
There is no ongoing official privatization program of state-owned enterprises, although the State of Qatar promotes and encourages a robust private sector, while offering IPOs for some government owned enterprises. The 2014 law explained above increased the limit on foreign shareholdings on the Qatar Exchange enables increased foreign investment in this regard.
The government of Qatar does not have an official or formal screening of FDI process. The government screens investment proposals and may indicate preferences for locating facilities, capital investments and other matters. Disclosure of financial and employment data is required, but proprietary information is not
Ministry of Economy and Commerce reviews the applications for 100 percent ownership licenses (agriculture, manufacturing, health, education, and tourism) where the license is permitted as long as it does not directly compete with existing Qatari companies locally.