Doing business in Qatar: 6 Rules of the game
Amidst a recession-plagued global economy, Qatar seems like a foreign investor’s dream. But it does have its own unique set of challenges.
Corporate tax is low; there are no restrictions on transferring profits from your venture home; no income tax on salaries and no import duties on machinery and raw materials.[boxify cols_use =”1″ cols =”2″ position =”right” order =”none” box_spacing =”10″ padding =”10″ background_color =”#3c3c3c” border_style =”solid” ]
- Qatar has no foreign currency exchange controls.
- The parties to an international contract are free to choose the law and jurisdiction which will govern that contract. Otherwise, the contract will be governed by the Civil Code Law 22 of 2004. In the event of a dispute: Qatari courts determine civil and commercial disputes in accordance with Qatari legislation. If no legislation is available with respect to a particular matter, Qatari civil and commercial courts will look to, among other things, Shariah law and established commercial practices.
- The parties may also agree in writing to refer disputes to arbitration. Qatar has acceded to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). According to the Convention, arbitration awards made in countries that are party to this convention should be enforceable in Qatar.
If you don’t want to go it alone, there are several agencies who can help you get established, for a fee, but it’s worth verifying their experience.
So where do you start?
1. Research the market thoroughly
Identify consumer preferences and get to know your competition.
Assess and plan for the main risks to your new venture.
2. Choose the right business entity
The Foreign Investment Law 13 of 2000 places two main restrictions on foreign investors:
- The percentage of foreign ownership.
- The types of business in which foreign investors can invest.
The Ministry of Business and Trade has relaxed its position on foreign ownership of local companies and specified priority sectors in which foreign investors may own more than 49% and even 100% of the business, namely: business consulting; technical services; information technology; cultural, sports and leisure services; distribution services; agriculture; manufacturing; health; tourism; development and exploitation of natural resources; energy and mining. In addition, 100% foreign ownership is allowed in the special economic zones of the Qatar Financial Centre and Qatar Science and Technology Park.
An investor will have to apply for approval and the business idea should meet certain criteria; it should be innovative and creative, enhance business in Qatar or create new jobs thereby transferring specialised skills.
If a foreign investor receives approval, a One-Person Company (OPC) is most often used by the investor.
- Minimum capital of QR200,000. Must be fully paid up, which means the funds cannot be withdrawn for a certain period of time.
- One shareholder owns 100% of the company’s shares.
The company will still be allowed to sponsor employees and transfer profits home.
49% foreign ownership – finding a local partner
The majority of investors, however, will most likely incorporate a limited liability company under the Commercial Companies Law, which means appointing a local partner who holds a minimum of 51% of the company’s shares.
It is crucial to find the right local partner who is appropriate to the kind of business you’ll be operating.
In practice many foreign investors have free reign over the company and put a revenue sharing agreement in place, so that their a partner takes less than 51% of the profit. But it’s a misconception to think a Qatari partner can be completely silent and uninvolved. Their support in managing the process of obtaining a license, visas and permits for staff etc. will be necessary. Their commitment to the business, regardless of the size of their existing portfolio, is what the expat is paying for. A rigorous assessment of a potential partner’s business reputation and their ability to influence in the market is important. Their connections and contacts should play a big role in the business.
Expat business owners sometimes express resentment at having to turn over 51% of their hard earned profit to their local partner. But as one Qatari sponsor points out, every partner is taking on 51% of the total risk, financial and otherwise. By definition, if the business does badly, that’s their loss as well.
A few essential things to know about the Limited Liability Companies:
- Must have at least 51% Qatari ownership.
- 10% of each year’s net profits must be kept within the company until the legal reserve stands at 50% of the share capital.
- Liable to pay a corporate income tax of 10% on profits sourced in Qatar.