Tax Seminar 2015 Know the rules, know your way ahead December 15, 2015
Agenda Corporate Tax Withholding Tax Practical Issues Overview of the TAS Questions and answers 2 2015 Deloitte & Touche (M.E.)
Overview
Overview: Snapshot of Qatar s tax system A territorial tax regime Qatar tax regime is a territorial tax regime Income generated wholly outside Qatar is not subject to tax Two streams of taxes in Qatar: Corporate Tax and Withholding Tax Corporate tax rates Area Withholding tax rates Tax overview Applicable on residents and permanent establishments Tax rate is a flat 10% 35% rate applies to oil and gas operations Applicable on non-residents with no permanent establishments 5% on royalties and technical services 7% on commissions, interest, brokerage fees directors fees, attendance fees, and for other services performed in whole or in part in Qatar 4 2015 Deloitte & Touche (M.E.)
Overview: Types of taxpayers Resident Theoretical implications For natural persons - Permanent home in Qatar - More than183 days during any 12 month period in Qatar - Center of vital interests in Qatar For body corporate - Incorporated under Qatari laws - Headquarters is in Qatar - Place of effective management is in Qatar Practical implications Individuals having permanent residency (Qatari ID Card) Companies registered in Qatar such as - Limited Liability Companies - Single Person Companies - Qatari Shareholding Companies - Family owned establishments - Partnerships Companies registered overseas but effectively managed and controlled from Qatar will be considered as a Qatari resident 5 2015 Deloitte & Touche (M.E.)
Overview: Types of taxpayers Permanent establishment (PE) of a non-resident Theoretical implications A fixed place of business through which the business of a taxpayer is wholly or partially carried on. A PE also includes activity performed by the taxpayer through a person acting on his behalf other than an independent agent - Branch of a foreign entity - Office - Building site - Factory - Workshop - Mine/Place of exploration - Assembly project Practical implications An entity carrying out a long term project, i.e. a project with project life more than one year Use of an agent in Qatar if the agent in Qatar is dependent on its principle Where an overseas entity sends employees to Qatar for more than six months in a calendar year to work on a project Executing a contract to service a resident company through a fixed place of work such as an office space, work station, work shop or a site 6 2015 Deloitte & Touche (M.E.)
Corporate Tax
Corporate Tax Sources of exempt income Sources of exempt income Interest earned by natural persons Interest/Returns from public treasury or public and institutional bonds Capital gains from real estate/ securities earned by natural persons Dividends if the amounts received are derived from - Profit that is subject to tax under this Law - Dividend distributed by a company which is tax exempted under this Law Income generated from non-qatari companies involved in aviation or shipping in State of Qatar Income of natural Qatari/GCC person provided they reside in Qatar Profits from Qatari resident companies wholly owned by GCC nationals Income from handcrafts, agricultural and fishing 8 2015 Deloitte & Touche (M.E.)
Corporate Tax Sources of taxable income Sources of taxable income Any activity executed in the State of Qatar Contracts executed wholly or partly in the State of Qatar Income from real estate in Qatar Income from securities and shares in companies residing in Qatar Interest income on loans and other financial facilities Gross income generated from discoveries, use and extraction of natural resources in the State of Qatar Consideration for services paid to head offices, branches or related companies Gross income subject to tax in the State under a double taxation agreement 9 2015 Deloitte & Touche (M.E.)
Corporate Tax Tax deductible expense Salaries, wages and other employee costs deductible pursuant to an employment contract No deductions for general provision including bad debts, air ticket with exception to employee s end of service Tax deductibility for business expenses Depreciation expense in excess of book depreciation versus tax depreciation is disallowed Donations allowed up to 5% and entertainment is capped at 2% of the taxable income Branches of non-resident companies are allowed a deduction for allocation of head office overheads up to a maximum limit No deduction for branch on interest paid on related party loan 10 2015 Deloitte & Touche (M.E.)
GCC exemption Who is subject to tax? Not a resident of Qatar (taxable on their share of profits in an LLC where there is effective non-gcc shareholding). Branches of GCC Companies are also taxed Who is exempted from tax? Resident anywhere + Company is a resident of Qatar (WLL, SPC, Establishment) etc.)and 100% owned by Qatari or GCC Nationals GCC nationals 11 2015 Deloitte & Touche (M.E.)
Corporate Tax Admin Area Tax overview Area Tax overview Registration Filing requirement Accounting and auditing requirement Tax card within 30 days on incorporation Annual return to be filed within four months from fiscal year end IFRS framework. Audit is mandatory Exemption Retaining books and records Available if criteria met and Minister s approval required for three to maximum six years of exemption Ten years inside Qatar Delay penalties Late filing QR100 per day maximum up to QR36,000 Other areas to consider Transfer pricing General anti avoidance rules Delay interest 1.5% of unpaid tax per month up to a maximum of principal amount of tax Exit tax 12 2015 Deloitte & Touche (M.E.)
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 13 2015 Deloitte & Touche (M.E.)
Withholding Tax
Withholding Tax Introduction/Applicability 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 5% gross amount of royalties and technical fees 7% 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 15 2015 Deloitte & Touche (M.E.)
Withholding Tax Technical fees 5% Computer services including software development, network services and maintenance services Engineering services in various fields including mechanical, electrical and civil Consulting and professional services in the legal and accounting fields Payments of any kind made as consideration for managerial, technical or consultancy services Design services provided by architects and design consultants Advisory services in the areas of behavior and management provided by specialized consultants Maintenance of industrial equipment and repairs performed by specialized technicians 16 2015 Deloitte & Touche (M.E.)
Withholding Tax Royalties 5% Leasing of vessel Leasing of equipment Payments made to a artist or an author to publish his book in Qatar Payments of any kind made as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, films or discs used for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment or for information concerning industrial, commercial or scientific experience. 17 2015 Deloitte & Touche (M.E.)
Withholding Tax Recap Supplier/Contractor Tax card No tax card Service wholly provided outside Qatar Service partially or wholly provided inside Qatar Double taxation agreement available No double taxation agreement No Withholding Tax/retention rules may apply No Withholding Tax no retention Check agreement 5% on technical services and royalties Apply withholding tax 7% on commission, brokerage fees, board of directors fees and any other service 18 2015 Deloitte & Touche (M.E.)
Double taxation treaties Refund process Practice in Qatar Although in theory, DTA supersedes the domestic law, in Qatar, the process to claim a treaty relief is as follows. WHT deducted by the customer and filed in line with Qatar s law Form 2-1 Customer to Provide certificate to the supplier and proof of payment. Copy of form 2-1 Form 2-2 Supplier to Apply for a refund providing reference to treaty and evidence of residence Form 2-3 19 2015 Deloitte & Touche (M.E.)
Practical Issues 2015. For information, contact Deloitte Touche Tohmatsu Limited. 20
Types of tax-payers Qatar Co WLL Resident Customer Foreign Co Qatar Branch (Temporary) Resident Non-resident PE Foreign Co Qatar Branch (Permanent) Non-resident PE Foreign Co Non-resident No PE 21 2015 Deloitte & Touche (M.E.)
Onshore/Offshore split Key rules A clear split between service to be rendered inside and outside Qatar is visible in the contract. Split should be clear in terms of scope, value and the location Should be independent from the scope rendered inside Qatar Supply of goods Work carried out wholly or partly in Qatar Work carried completely outside Qatar 22 2015 Deloitte & Touche (M.E.)
Personnel cost Employer Seconded / International assignment Recruitment agent Hired manpower Employee under local employment contract 23 2015 Deloitte & Touche (M.E.)
Finance Cost Interest 7% Interest paid by branch No WHT on interest paid by a Branch Interest paid by a Branch to head office and related party of the head office is not deductible for tax purposes. Interest paid by Limited Liability Company Interest paid is deductible for tax purposes Withholding tax 7% - Except for interest paid to financial institutions 24 2015 Deloitte & Touche (M.E.)
Related Party Transactions General Anti Avoidance Rules - Bona fide commercial substance not to avoid / reduce tax - Supporting Documents Agreements, invoices, receipts - Priced at arm s length Transfer Pricing - TP Study using CUP method any other method prescribed by OECD allowed subject to prior approval 25 2015 Deloitte & Touche (M.E.)
Capital gains / Exit Tax Hot topic Theoretical implication Practical implication Capital gains Tax is applicable on gains from the alienation of assets Gains from the alienation of non-depreciable / depreciable assets, other than those depreciated under the group regime provided for in Article 10 of this regulations, shall be computed on the basis of the difference between the value of the consideration received or the market value, whichever is higher, and the net book value Gain arising from sale of shares in a WLL company registered in Qatar and owned by a corporate body resident outside Qatar (non-resident with no PE) Gain from transfer of fixed assets to outside Qatar. Assets may include, Rigs Drilling Equipment Boats and Vessels Aeroplanes and Helicopter Trade Name / Intangible Asset transfers 26 2015 Deloitte & Touche (M.E.)
Tax Administration System (TAS)
Introduction of new Tax Administration System (TAS) What is TAS? TAS is a modern information system which will automate the tax payment and management process within the State of Qatar Built in line with the objectives of Qatar National Vision 2030 to maintain fiscal stability and more efficient allocation of available financial resources Transform the government services offered to citizen and enterprises Allow an electronic filing of tax returns with the Taxes Department (TD) 28 2015 Deloitte & Touche (M.E.)
Benefits and objectives Why do we need TAS? Proactively manage the workload and direct resources to service and compliance activities as required Provide taxpayers efficient and quality services Reduce the time of processing Increase taxpayers satisfaction Enhance the communication between Ministry of Finance /TD and taxpayers Improve transparency and certainty 29 2015 Deloitte & Touche (M.E.)
Features available in TAS Information about the TD Ministry of Finance/TD rules governing the Corporate Income Tax and Withholding Tax Access to reference material Access to double taxation treaties Quick access links to other Government departments Easy access to online facilities Monitor account status, obligation status, requests status, etc 30 2015 Deloitte & Touche (M.E.)
The online facilities Application for new tax card and renewal of tax card by filling up the registration form (for new clients) or renewal form (for existing clients) Filing annual tax declarations along with the schedules and exhibits in PDF format Monthly withholding tax filing Approval to change shareholders in Qatar Limited Liability Companies Objection to a tax assessment Appeal against an assessment to the Tax Appeals Committee Application for the tax exemption Request for extension of tax filing Application for change in accounting period Application for withholding tax refund, etc 31 2015 Deloitte & Touche (M.E.)
Registration process TAS portal taxpayer registration E-registration web page form Registration is rejected Validation is incomplete Attach supporting documents in PDF format Data set checked for completeness To follow up with TD for registration process Taxpayer is created on system Draft tax card created and TIN generated Email 1 Confirmation to taxpayer/ agent Validation is complete Email two new credentials confirmation for username and password 32 2015 Deloitte & Touche (M.E.)
Registration process New taxpayer Complete the application form by uploading soft copies CR, trade license, names of the owners, etc. in the system Hard copies are also required to be filed After the TD evaluates the information, two emails will be sent to the email id s provided Email for credentials (Password and User name) Email for system generated Draft tax card Final tax card can be collected in person at the TD Existing taxpayer Existing taxpayers will have their details and documents already migrated to the TAS 33 2015 Deloitte & Touche (M.E.)
Registration process (cont d) 34 2015 Deloitte & Touche (M.E.)
Online tax payers registration application 35 2015 Deloitte & Touche (M.E.)
Tax card 36 2015 Deloitte & Touche (M.E.)
E-filing process E-filing Tax declaration and WHT will be filed online using an e-filing platform The WHT input form will be consistent with the current WHT Form 2-1 The tax return input form for income statement and balance sheet will be consistent with the current Form No. 3 annual Income Tax Return Schedules and exhibits along with the audited financial statement to be uploaded in PDF format Hard copies will also be required to be filed during the initial migration period (expected in 2014 and 2015) 37 2015 Deloitte & Touche (M.E.)
E-filing process 38 2015 Deloitte & Touche (M.E.)
E-filing process (cont d) 39 2015 Deloitte & Touche (M.E.)
Online payment process Login to the system Select the purpose of payment Income tax payment WHT payment Settlement of financial penalties/obligation Print payment order Generate 14 digit payment identification number Based on the payment identification number, bank initiates the transfer Payment confirmation is available in the system Confirmation will be submitted along with the return 40 2015 Deloitte & Touche (M.E.)
Tax assessment Tax assessment as and when released will be notified on the home page of the tax payer and will be available to view upon login Objection to a tax assessment can be raised through the TAS portal by uploading the relevant objection letter stating the reason for objection Appeal against an assessment to the Tax Appeals Committee can be raised through the TAS portal by uploading the relevant appeal letter stating the reason for appeal 41 2015 Deloitte & Touche (M.E.)
Dashboard overview Monitor tax compliance and clearance status Highlights non filing of withholding tax and income tax return Show outstanding queries or issues on tax files Access to current and historic taxpayer information 42 2015 Deloitte & Touche (M.E.)
Dashboard overview 43 2015 Deloitte & Touche (M.E.)
Dashboard overview 44 2015 Deloitte & Touche (M.E.)
Key takeaway points TD has instructed to submit the tax declarations from October 1, 2014 using the e-filing facility in TAS Each taxpayer will identify an authorized agent The approved tax advisor (e.g., Deloitte) will need to submit a new tax representation letter on behalf of the taxpayer 45 2015 Deloitte & Touche (M.E.)
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