Qatar Withholding Tax Law
Withholding tax (or “retention tax”) enables governments to collect tax revenues from the economic activities of companies operating within its borders. In an international context, it’s generally imposed on a cross-border income payment from a source in Country A to a resident in Country B.
Under the Old Tax Law foreign businesses earning income in Qatar
but not having a permanent presence in Qatar were free from the imposition of tax. Now for businesses without a permanent establishment in Qatar, Article 11 of the New Tax Law imposes a withholding tax on 5% of the gross amount of royalties and technical fees or 7% of the gross amount of interest, commissions, brokerage fees, director's fees, attendance fees and any other payments for services carried out wholly or partly in the State.
The withholding tax procedure is quite clear. Basically any person who pays fees for services to an entity without a permanent presence in Qatar will be required to withhold the requisite amount of funds from the supplier.
This will be administered through a tax card system that all taxpayers in Qatar
will be required to obtain (Article 12).
“The idea behind the withholding tax is that if services are supplied by a person not holding a tax card, then that person will not have a permanent establishment in Qatar and so funds should be withheld from that person.”
The obligation for payment of the withholding tax is place not on the foreign supplier but on the person making payment to such supplier. Any natural or legal person is required to perform the withholding and remit the same to the Ministry by the 16th day of the calendar month following the date of making the withholding.
What these procedures mean is that persons who do not have a tax card will find that their customers are going to withhold the requisite 5% or 7% and remit the same to the Ministry in no more than 47 days. There is as yet no system set up for entities that enjoy an exemption under international tax treaties so it is envisaged that all of the same will need to apply for some form of exemption letter from the Ministry so that there customers have some grounds to justify not making the withholding, other than the tax card.
Article 11 does make the withholding subject to the provisions of tax agreements and some agreements like the United States - Qatar appear to make it clear that a foreign entity paying tax in its home jurisdiction on income earned in Qatar will be exempt from the withholding tax, for reasons discussed above this may not apply to GCC entities. As such, we could find the situation that an American company supplying services to Qatar remotely will not be required to pay any tax in Qatar, but a company in Bahrain providing the same services in Qatar will be required to pay the tax.
Qatar Withholding Tax refund
Procedure – To claim a refund, you must submit an application with the PRTD clearly stating the basis of the claim. In case of withholding tax relief under a tax treaty, your application must be accompanied by a Tax Residency Certificate issued by the competent authority in the payee’s State of Residence and a certificate on the prescribed form issued by the service recipient.
Time limit – The right to claim a refund lapses after 5 years from the date it is established that the PRTD had no right to collect the tax and related financial penalties.
Documents – Required supporting documents include copies of contracts/agreements, tax returns filed, tax card, details of taxes paid, withholding tax statements and deduction certificates and Tax Residency Certificates.
Refund processing period – The PRTD is required to reply in respect of the application within 60 days from the date of submission of the application. Non-response of the part of the PRTD within the 60-day period shall be regarded as a refusal.
We at QShield can help you
navigate through the various requirements and provide you with the assistance needed to close all the formalities on time.