Links Group Of Companies

There are only a few ways that foreign entities (individuals or companies who are not nationals of the State of Qatar) can establish a business presence in Qatar. This article by Simmons & Simmons. Qatar-based legal consultants, provides a useful guide to the options available.

Qatar is one of the smaller Gulf states in terms of population and geographical area, but boasts the third largest gas reserves in the world. This abundance of natural resources, the recent legal liberalisation, economic diversification and a burgeoning economy opens many opportunities for investment.

Foreign investors are welcomed and various incentives are available to attract foreign capital, including tax breaks and exemptions from customs duty. Foreign investors can transfer their investments and profits can be repatriated, as can proceeds of sale and capital on liquidation.

Foreign investors may only invest in Qatar in accordance with the provisions of the Foreign Investment Law (Law No.13 of 2000).

Foreign investors may invest in all parts of the national economy (other than those set out below) with a Qatari partner who must own at least 51% of the enterprise.

Foreign investors may not invest in commercial agencies or, broadly speaking, real estate. Approval from the Council of Ministers is required for foreign investment in banking or insurance.

The Ministry of Economy and Commerce may permit foreign investors to own more than 49% of a company in specified sectors, namely agriculture, industry, health, education, tourism, and the development of natural resources, energy or mining.

Foreign capital is guaranteed against expropriation (although the state may acquire assets for public benefit on a non-discriminatory basis, provided the full economic value of the asset is paid).

A foreign company which is performing a specific contract in Qatar may set up a branch office if the project ‘facilitates the performance of a public service or utility’.

A foreign company operating in Qatar under a Qatari government concession to extract, exploit or manage the State's national resources is exempt from the Foreign Investment Law. In practice this covers all the oil majors.

A company formed by a foreign entity with the government or a government entity (an Article 68 Company) will be subject to special rules.

Establishing a company

A company is the normal vehicle to set up an on-going business

Various exemptions are available to attract foreign capital

In almost all cases a Qatari partner will be required

Branch office

Used where a foreign company is performing a specific contract in Qatar

Authorised by the Ministry of Economy & Commerce where the project ‘facilitates the performance of a public service or utility’

No need for a Qatari partner

The branch is only entitled to perform the specific contract for which it is registered

The branch will be fully taxable unless it is granted a special exemption

A special regime applies to branches of foreign engineering consultancy firms

Commercial Agency

The foreign company does not establish a presence in Qatar, instead an agent is appointed to market goods and services within Qatar

Exclusive agencies must be registered and are governed by Qatari agency law

Under a registered agency, commission is payable on all sales of the products within the territory even if the sales are not due to the activities of the agent

It is difficult to terminate a registered agency – compensation is payable upon the termination of the agency as well as on expiry of a fixed term agency

Representative Trade Office

A new method of establishing a ‘shop window’ in Qatar

Can be used to promote a foreign company in Qatar and introduce it to Qatari companies and projects

Cannot be used to contract to do business in Qatar: Business must be carried out by a foreign entity (where the contract can be performed substantially outside Qatar) or by a company or branch authorised to do business in Qatar.

Limited Liability Companies (LLCs) and Article 68 Companies are the two most attractive vehicles to foreign investors. (Other possible legal entities under Qatari law are the Simple Partnership, the Joint Partnership and the Qatari Shareholding Company (QSC) – however, foreign participation in these bodies is restricted.)

Limited Liability Company

Minimum capital of QR 200,000

Must have at least 51% Qatari ownership, unless an exemption has been obtained

The parties' profit shares do not necessarily have to reflect their shareholdings

10% of each year's net profits must be kept within a company until the reserve stands at 50% of the share capital

May not raise capital by public subscription and may not issue freely transferable shares or bonds

Shares may only be transferred after they have first been offered to the other shareholders by way of pre-emption, unless the other shareholders have agreed to waive their right

May not carry out banking or insurance business or provide investment advice or investment services to third parties

Article 68 Company

Formed by an investor, which may be foreign, with the Government or a 51+% Government-owned entity

The foreign investor's share of the company is a matter for negotiation but can be greater than 51%

Corporate structure is a ‘Qatari Shareholding Company with Government Participation’

Falls outside the Foreign Investment Law and, to a certain extent, the Commercial Companies Law

Virtually all companies use a ‘facilitator’ or ‘government liaison officer’ to carry out all the necessary registration formalities. This will include obtaining residence permits, driving licences, telephone, power and water connections. A facilitator will know all the relevant procedures and requirements and will help minimise frustration when setting up. The steps set out below are just a high level guide to what is required.

Company Formation

The following are necessary to incorporate a company and obtain a commercial registration:

• Memorandum and Articles of Association in Arabic which conform with the standard form prepared by the Ministry of Economy & Commerce
• Notarised, authenticated and consularised copies of the foreign company's Certificate of Incorporation, Memorandum and Articles of Association
• Documents indicating the deposit of the share capital at a bank
• A lease contract for the office of the company
• Chamber of Commerce registration

Once the company has been incorporated and the commercial registration issued, the share capital can be released to the company's directors or the general manager for the purposes of running the company. The following licences must then also be obtained:

• Municipal licence
• Signage licence
• Employer's Immigration Department identity card

Branch Office

The following are required to establish a branch office and obtain a commercial registration:

• Authorisation from the Ministry of Economy & Commerce to establish a branch
• Notarised, authenticated and consularised copies of the foreign company's Certificate of Incorporation and Memorandum and Articles of Association
• A notarised, authenticated and consularised power of attorney from the foreign company to the manager of the branch
• A copy of the contract in respect of which it is sought to establish the branch office
• Chamber of Commerce registration
• A lease contract for the office of the company

Once the branch has been approved and the commercial registration issued, the following licences must also be obtained:

• Municipal licence
• Signage licence
• Employer's Immigration Department identity card

If applicable, the company or branch will also need to be entered in the Importers' Register and, or Contractors' Register.

Companies

Income tax is levied on businesses other than those wholly owned by GCC nationals

Income tax is charged on all profits arising in Qatar, including profits on the sale of the company's assets

The share of profits of the Qatari or GCC partner in a business is exempt from tax

An income tax exemption can be granted for a period of up to 10 years for major projects if they meet certain criteria

Some countries have double tax treaties with Qatar. If not, unilateral relief may be available, for example UK unilateral relief is available against UK taxes where Qatari income tax has been paid.

The corporate tax laws in the State of Qatar have changed from a sliding scale determined by profits to a flat rate. The tax rate is now 10% of taxable income (turnover minus costs) during the taxable year.

Individuals

There is no income tax on personal salaries.

Customs duty

The new GCC customs duty is 5% on most items. Exemptions from customs duty can be obtained for the import of equipment relating to particular projects as well as primary or semi-manufactured materials that are not available locally. In addition to customs duty, legalisation fees are payable on import documentation.

An initiative is in place which aims to increase the number of Qatari nationals in the public sector workforce. This new Labour Law introduces ‘Qatarisation’ initiatives for private sector entities. The employment of Qatari nationals is one of the criteria taken into account when tax exemptions are granted.

All contracts of employment are governed by the Labour Law

They must be in Arabic and approved by the Labour Department

In particular, employers should be aware of the requirement to pay end of service benefits to employees

Companies will need to obtain residence and work permits for their expatriate staff. A new Labour Department Committee has been established to supervise applications for bringing in foreign workers.

All expatriate employees must be sponsored by their employer who is responsible for them while they are in Qatar

Ownership of land by foreigners is restricted.

Land for projects can be given to foreign investors on long term leases for periods of up to 60 years which may be renewed

A recent law now permits foreigners to own properties in three new developments for the first time

Once a business entity has been established it will need to protect its interests when contracting with other entities.

The parties to an international contract are free to choose the law and jurisdiction which will govern that contract. (If they do not choose an applicable law, the contract will be governed by the Qatari Civil Code.)

The parties may also agree in writing to refer disputes to arbitration

Traditionally, intellectual property rights were not as well protected in Qatar as foreign investors were used to, however new trademark and copyright laws were enacted in 2002.
Trademarks

Trademarks can be registered at the Trademark Office

Registrations are valid for 10 years from date of filing (renewable)

Trademarks can be cancelled if not used for periods of five consecutive years in Qatar

If the international classification of goods and services is used, a separate application must be made for each class

Non-Qataris have the same rights as Qataris provided that their country treats Qatar reciprocally

Copyright

The Qatari copyright law protects original literary and artistic works including computer programs and databases which are creative in the selection and arrangement of their subject matter.

Protection extends to, amongst others, non-Qataris whose work is first published in Qatar or is published in another country and then published in Qatar within 30 days of the first publication date, and to works protected by international agreements.

Patents

There is no Qatari patent law – cautionary notices can be published in the press

A GCC patent can be obtained by filing at the Patent Office in Riyadh, Saudi Arabia

Design Right

Inventive designs or industrial models can be registered under the Trademark Law.

Protection lasts for five years (renewable for two further five year periods).

It is advisable to provide staff in Qatar, as well as those back at your head office, a briefing on local culture and customs. When setting up, a local facilitator can be extremely useful to guide you through the system and advise you on cultural issues. However it is also vital to have a well-briefed representative from your organisation on the ground to work alongside your facilitator and, or local partner.