Taxation of individuals

Qatar operates a territorial taxation system, which means an individual is taxable in Qatar if one has generated qualifying Qatar-source income, regardless of one's tax residence.

Income tax is not imposed on employed individuals' salaries, wages, and allowances.

A self-employed individual may be subject to income tax if one derives qualifying income from sources in Qatar.

 

Social Contribution  

Qatar's impending Social Security Law, set to come into effect in early 2023, will impact all working nationals to varying degrees depending on the type of employment. Here's what to anticipate with respect to the law's impact for various employee categories, as well as the contributions expected, pension allowance calculations and retirement eligibility.

All Qatari nationals, whether operating in the public or private sector are now subject to mandatory enrollment under the newly established pension scheme once the new Social Security Law takes effect.

The new Social Security Law has been issued replacing the Retirement and Pension Law. It has come into effect starting the Jan. 3, 2023, except for certain provisions specified by the law that became effective as of the date of publication, July 3.

The new law permits optional enrollment for self-employed Qatari nationals under the new pension scheme. Self-employed Qatari nationals would be required to make contributions in the form of a 21 percent deduction from their monthly earnings.

The introduction of a housing allowance is a new entitlement under the Social Security Law. Subject to certain conditions, participants who have contributed to the fund for 15 years are entitled to receive a housing allowance; ranging in an amount up to 6,000 Qatari rials (approximately $1,648). The additional housing allowance will be added to the base salary for purposes of calculating the monthly contribution or deduction for the participant and will be included in the pension allowance calculation upon retirement.

In addition to payment upon retirement, employers will remain liable to compensate eligible participants for their housing allowance entitlement for the first 15 years of the employee's service upon termination of employment caused by the employee's death or disability.

The new pension scheme increased the total contribution to 21 percent of monthly salary, rather than the 15 percent contribution prescribed under the old Pension Law. The employer must contribute an amount equal to 14 percent of the total amount attributed to monthly salary including housing allowances upon eligibility, and the employee will be subject to a 7 percent salary deduction.

A minimum monthly allowance of 15,000 Qatari rials (approximately $4,120) is granted to eligible employees working in the public sector; however, no minimum amount has been determined for the private sector yet.

Pension allowances granted shall be a maximum of 100,000 Qatari rials (approximately $27,465) per month in all cases, except for those who are already effectively enrolled with an amount exceeding 100,000 Qatari rials.

Under the old Pension Law, the pension allowance was calculated by multiplying 5 percent of the last earned salary by the employee's total years of service. Under the new Law, the 5 percent figure is reduced to 3 percent of the last earned salary.

Newly enrolled participants can only carry over a maximum of five years of their service prior to the effective date of the new Social Security Law; provided that the previous years of service are compliant with the pension scheme conditions.

Age. Under the new Social Security Law, the minimum age of retirement has been increased from 40 years of age to 50 years.

Duration of Service. The minimal period required to qualify for a pension entitlement has been increased to 25 years of service, rather than 15 years. Those who complete 30 years of service or above are eligible to receive additional benefits.

End-of-service gratuity is not yet addressed under the new Social Security Law. However, employees may remain eligible for end-of-service gratuity entitlements under the Labor Law (Law No. 14 of the year 2004, the Labor Law), subject to certain conditions.

Under the Labor Law, employees may not be eligible to receive any end-of-service gratuity payment in the event that they are eligible to receive pension or retirement scheme entitlements under a plan and the value of the entitlement payments exceed the value of the end-of-service gratuity entitlements.

Similarly, eligible participants under the new Social Security Law are not entitled to benefit from more than one pension or retirement scheme. If more than one scheme is applicable, the employee will be entitled to the scheme of higher value.

In the event that participation in the pension scheme is suspended due to the termination of employment and monthly contributions, prior to the age of 50, and as a result of voluntary resignation or termination for misconduct; the pension allowance will be reduced by 2.5 percent for every year difference between the age of which employment was terminated up to the age of 50. Pension eligibility in such cases remains conditional upon fulfillment of the mandatory 25 years of contributions.

Taxation of legal persons

An entity that is wholly or partially foreign owned and that derives income from sources in Qatar is taxable in Qatar. In the case of a joint venture, the tax liability of the joint venture is dependent upon the foreign partners’ share of the joint venture's profit. Currently, no corporate income tax (CIT) is levied on a corporate entity that is wholly owned by Qatari nationals and GCC nationals that are resident in Qatar.

Unless specifically exempt from tax, an entity will be taxable in Qatar if it has generated Qatar-source income, regardless of the place of its incorporation.

Taxable income generally is subject to a flat (CIT) rate of 10%, with certain exceptions available.

The following tax rates apply in the specific circumstances noted:

• If a special agreement was reached with the government of Qatar prior to 1 January 2010, the rate specified in the agreement continues to apply. If no rate is specified in the agreement, a rate of 35% will be used.

• The rate applied with respect to oil operations, as defined in Law No. 3 of 2007, may not be less than 35%.

• Payments made to non-residents with respect to certain service activities not connected with a PE in Qatar are subject to WHTs.

• In addition to the above, fully owned subsidiaries of listed entities are now taxable to the extent of non-exempt ownership (i.e. foreign or non-exempt Qatari / GCC ownership). Previously, there was a perception amongst taxpayers that such subsidiaries were tax exempt.

Value Added Tax - VAT

Currently, Qatar imposes no VAT or sales tax on operations in Qatar. However, the introduction of VAT in Qatar under a common GCC framework is expected to be introduced in the near future. The anticipated tax rate is 5%.