Global Tax Alert | 11 August 2014

Qatar Financial Centre Authority issues amendments to QFC Tax Regulations

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The Qatar Financial Centre Authority (QFCA) recently released an updated version of the Qatar Financial Centre (QFC) Tax Regulations, effective from 18 June 2014.1

The updated tax regulations are based on the experience of the QFC Tax Department since the regulations were first enacted in 2010, and are designed to improve the overall attractiveness of the QFC fiscal environment, by allowing QFC entities to benefit from a strong and transparent legal and regulatory environment.

The revised legislation and regulations introduce new provisions that include:

  • Alignment of the QFC Tax Regulations with the new rules for Special Purpose Companies and Holding Companies that are within the definition of Special Funding Companies, which may elect for special tax exemption status
  • Exemption of funds that make investment on behalf of a Single Family Office
  • The opportunity for unregulated Qatari-owned entities to elect for a concessionary tax rate of 0% to apply to their operations within the QFC
  • Establishment of an incentive scheme for new QFC entities based around the effective use of tax losses
  • Exemption from taxation of fees paid by way of a distribution and other fees paid in priority to other distributions and performance fees under the special exempt status incentive (management fees from a registered fund or special investment fund are taxable)

New technical and administrative changes include:

  • Exemption of dividend income received by a QFC entity
  • Exemption of interest and other yields on public treasury bonds
  • Profits derived from intangible fixed assets including intellectual property, patents, trademarks or similar assets not registered in Qatar or the Riyadh Patent Office may now be considered local source income taxable in the QFC
  • Management fees received from a registered fund or a special investment fund, which has elected for special exempt status, shall not be exempted
  • Non-deductibility of expenses not actually incurred or not supported by documentary evidence
  • Limitations on expenditures incurred in Qatar prior to the granting of the QFC license, or the commencement of activities within the terms of the QFC license
  • Certain conditions must be met to obtain a deduction for a QFC branch in respect of interest expense incurred by a Head Office on indebtedness
  • Limitation on the deductibility of charitable donations – 5% of the chargeable profit prior to deduction of any donations
  • Introduction of definitions of Partners of General and Limited Partnership and Members of a Limited Liability Partnership and remuneration
  • Introduction of the term “disguised partners or members”

  • Limitation on the deductibility of remuneration of partners, members and disguised partners or members around the “just and reasonable” test in addition to the current deductibility cap
  • Inclusion of “partnerships” on group and control definition and allowing partnerships to avail of group relief provisions
  • Participation exemption provisions around a disposal arising from intra-group transfer of asset
  • Amending the time limit for appeals, cost of obtaining an advance ruling and redefining new penalty rates applicable

Endnote

1. The QFCA Board of Directors approved the amendments to the Tax Regulations on 10 June 2014. These were subsequently signed and approved by the Ministry of Finance on 18 June 2014.

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Qatar), Doha
  • Finbarr Sexton
    +974 4457 4200
    finbarr.sexton@qa.ey.com
  • Marcel Kerkvliet
    +974 4457 4201
    marcel.kerkvliet@qa.ey.com
  • Paul Karamanoukian
    +974 4457 4211
    paul.karamanoukian@qa.ey.com

EYG no. CM4652