Headline Verdana Bold Qatar Tax Seminar 2016 Managing the sharp climb of tax expansion

Transcription

1 Headline Verdana Bold Qatar Tax Seminar 2016 Managing the sharp climb of tax expansion December 14, 2016

2 Agenda Topic Overview of the Qatar Tax s System Corporate Tax Withholding Tax Practical Issues Questions and answers Appendix 2016 Deloitte & Touche (M.E.). All rights reserved. 2

3 Overview Qatar Tax System 2016 Deloitte & Touche (M.E.). All rights reserved. 3

4 Overview of Qatar s Tax System The Department Department of tax Tax Policies Section International Tax Convention Section Revenue Control Section Inspection and Assessment Section Inventory and Follow up Section 2016 Deloitte & Touche (M.E.). All rights reserved. 4

5 Overview of Qatar s Tax System Timeline Evolution of the current s tax system November 2009 January 1, 2010 June 2011 August Announcement of Law 21 of 2009 Implementation Date Executive Regulations Circular 2/2011 issued Circular 3/ 2011 issued Circular 4/2011 issued Introduction of TAS 2016 Deloitte & Touche (M.E.). All rights reserved. 5

6 Overview of the Qatar s Tax System A Territorial Tax System Income from a source inside Qatar is taxed; whether by Resident or a Non-Resident (with our without a Permanent Establishment) All activities in the Qatar Contracts wholly or partly executed in Qatar Real Estate Income from shares (securities) in Qatari resident companies Interest income on loans Exploration of natural resources Exemptions Salaries and wages earned by individuals Income from public bonds Capital gains realized by a natural person from real estate and shares (securities) Dividends from outside Qatar; and those already taxed in Qatar Handicraft, Agriculture and Fishing Income earned by resident Qatari Nationals and companies wholly owned by Qatari National (explained further) 2016 Deloitte & Touche (M.E.). All rights reserved. 6

7 Overview of Qatar s Tax System Types of Tax Payers Resident Permanent Home, 183 days, center of vital interest Incorporated in Qatar, head office or place of effective management Corporate Tax Tax Non- Resident Permanent Establishm ent Fixed place of business e.g. Branch, Office, Workshop, Construction site, Exploration site Dependent Agent Non- Resident without Permanent Establishm ent Resident overseas Has no fixed place of business Withholding Tax 2016 Deloitte & Touche (M.E.). All rights reserved. 7

8 Overview of Qatar s Tax System Types of Tax Payers illustrative example Qatar Co WLL Resident Qatar Co QSC Resident Foreign Co Qatar Branch (Temporary) Non-resident PE Law firm in the UK Non-resident No PE Head office Non-resident No PE Related parties Non-resident with PE 2016 Deloitte & Touche (M.E.). All rights reserved. 8

9 Corporate tax 2016 Deloitte & Touche (M.E.). All rights reserved. 9

10 Corporate Tax Computation of tax liability Item Gross Income Less: Tax Exempt Income Less: Activity Cost Less: Administrative Cost Adjust: Tax Adjustments Less: Carried Forward Loss Net Taxable Income / (loss) Tax Liability (NTI x Tax Rate) Description Gross income from all activities in Qatar Income exempt under Article 4 of the law or another special exemption Total cost incurred to perform the taxable activities and generate taxable income General and Administrative cost to operate and manage the business Tax adjustments e.g. depreciation adjustment, non-deductible expenses Any unutilized tax losses from the previous three tax years The remainder will be the net taxable income or loss To apply the appropriate tax rate (10/35) and exempt share of profit attributable to Qatari resident shareholder, if any 2016 Deloitte & Touche (M.E.). All rights reserved. 10

11 Corporate Tax Tax deductible expense Salaries, wages and other employee costs deductible pursuant to an employment contract Depreciation expense in excess of book depreciation versus tax depreciation is disallowed No deductions for general provision including bad debts, air ticket with exception to employee s end of service Tax deductibility for business expenses Donations allowed up to 5% and entertainment is capped at 2% of the taxable income Head Office Administration and Support fees up to a maximum limit No deduction for branch on interest paid on related party loan 2016 Deloitte & Touche (M.E.). All rights reserved. 11

12 Corporate Tax Administrative Area Tax overview Area Tax overview Registration Filing requirement Tax card within 30 days on incorporation Annual return to be filed within four months from fiscal year end Exemption Available if criteria met and Minister s approval required for three to maximum six years of exemption Accounting and auditing requirement Delay penalties Delay interest IFRS framework. Audit is mandatory Late filing QR100 per day maximum up to QR36, % of unpaid tax per month up to a maximum of principal amount of tax Retaining books and records Other areas to consider Ten years inside Qatar Transfer pricing General anti avoidance rules Exit tax 2016 Deloitte & Touche (M.E.). All rights reserved. 12

13 Corporate Tax Corporate tax calendar (key dates) Action Registration/Tax card Annual return and payment of tax When? First application within 30 days on incorporation Renewal within 30 days of expiry Four months from the fiscal year end Extension allowed Extension in filing deadline One month before the filing deadline Objection Within 30 days of notice of assessment/penalty Appeal Change in accounting period Within 30 days of refusal of the department or completion of 60 days from date of objection and no response 90 days before the expiry of the deadline for filing the return Reporting supplier contracts 30 days from the signing of the contracts 2016 Deloitte & Touche (M.E.). All rights reserved. 13

14 Withholding tax 2016 Deloitte & Touche (M.E.). All rights reserved. 14

15 Withholding Tax Overview Applicable on all services rendered on or after 1 January 2010 Applies to payments made to non-residents with respect to activities not connected with a permanent establishment in Qatar Five percent (5%) Seven percent (7%) gross amount of royalties and technical fees gross amount of interest, commissions, brokerage fees, director s fees, attendance fees and any other payments for services carried out wholly or partly in Qatar 2016 Deloitte & Touche (M.E.). All rights reserved. 15

16 Withholding Tax Recap Supplier/Contractor Tax card No tax card Service wholly provided outside Qatar Service partially or wholly provided inside Qatar No Withholding Tax/retention rules may apply Double taxation agreement available Check agreement No double taxation agreement Apply withholding tax No Withholding Tax no retention 5% on technical services and royalties 7% on commission, brokerage fees, board of directors fees and any other service 2016 Deloitte & Touche (M.E.). All rights reserved. 16

17 Tax Administration System (TAS) and FAQs 2016 Deloitte & Touche (M.E.). All rights reserved. 17

18 Tax Administration System Key Features Application & Renewals of tax cards Application for Refunds & Exemption Filing of Annual Income Tax Returns Tax Administration System (TAS) Special requests Such as change in partner, Change of yearend Extension Of Deadline Filing of Monthly WHT returns Objections & Appeals 2016 Deloitte & Touche (M.E.). All rights reserved. 18

19 Frequently asked questions Ownership vs. Profit sharing percentage Tax exemptions for Qatari and GCC Nationals Capital Gains and Exit Tax 2016 Deloitte & Touche (M.E.). All rights reserved. 19

20 Qatar Financial Centre (QFC) 2016 Deloitte & Touche (M.E.). All rights reserved. 20

21 QFC Background Set up in % foreign ownership Objective Permitted Activities QFC Organisation Structure International Standards Independent Legislations Role QFC Authority and QFC RA 2016 Deloitte & Touche (M.E.). All rights reserved. 21

22 QFC Taxation Is it Tax Haven? Foreign Tax Credit An Onshore Centre Carried Forward Losses QFC OECD Standards (Tax Treaties) Participation Exemption Transfer Pricing / Thin Capitalisation Territorial Basis (Source) 2016 Deloitte & Touche (M.E.). All rights reserved. 22

23 QFC - Example/QFC Holdco Foreign QFC Parent Co Management fees Dividends Interest Funds flowing out (to Parent Co) No withholding tax on management fees, dividends or interest payments No exchange control regulations TP Manual to clarify TP guidelines QFC Holdco Management fees When Holdco exits subs participation exemption on capital gains Dividends Interest Funds flowing in (from subs) Tax free receipt of dividends from subs QFC sub Qatar State Qatar State sub Foreign Foreign sub At time of exit, participation exemption covers capital gains on disposal of subs May utilise State of Qatar double tax treaties 2016 Deloitte & Touche (M.E.). All rights reserved. 24

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