# QUESTION ONE

What are the most common structures used when international clients want to form a company in your jurisdiction? Any examples?

The legal structures according to the Qatari Commercial Law are the following:

1. Joint Liability Company
2. Limited Partnership
3. Joint Venture Company
4. Public Shareholding Company
5. Private Shareholding Company
6. Partnership Limited by Shares
7. Limited Liability Company

# QUESTION TWO

The most common legal structures that foreign entities or natural persons may establish in Qatar, are the Limited Liability Company and a branch of a foreign entity. The process of establishing a branch is subject to the new investment law 1/2019, in which a foreign entity (legal person) may own the branch, whereas a foreign natural person can only own up to 49 per cent of the capital of a Limited Liability Company.

Please detail some of the favourable and unfavourable legislation that businesses considering establishing a presence in your jurisdiction should be aware of? How can you help them to streamline the process?

Qatar has proved its strong economy, by continuing its business activities independently, maintaining one of the highest GDP growth rates in the region, and also maintaining its title as one of the countries with the highest GDP per capita in the world.

We have to differentiate between international entities that come to Qatar to carry out activities connected to government or semi-government projects. These companies can set up a 100 per cent branch owned by their parent companies, which are located and registered abroad, by getting special approval from the Ministry of Economy and Industry in Qatar.

The advantage of setting up a branch 100 per cent owned by a foreign entity, is to ensure that the foreign entity controls the management entirely and has a significant influence in any decision during the board meeting. Hence, the foreign entity controls the management in Qatar and can take any decision at its sole discretion in any investment or organisational change, without getting back to any local partner. However, the disadvantage of doing this, is the corporate tax in which the General and Tax Authority (GTA) levies the tax on the profit the branch generates in Qatar on the basis of 10 per cent from the net profit. The foreign entity can appoint a manager or director to manage the branch, and the director will assume any responsibility in the event of any gross negligence. The director will run the daily business and he/she will have a full authority to sign any document in any private or public entity.

There are also certain benefits investors can get from the government, to invest in Qatar and obtain a share of more than 49 per cent. This process will be clarified in details in the Executive Regulation, which is not yet issued. However, foreign investors cannot invest in banks, insurance companies, commercial agencies, or any sector not approved by the Ministry of Economy and Industry.

Foreign entities, which come to Qatar to establish a limited liability company, are obliged to share a percentage that is not more than 49 per cent of the capital amount. They can increase their profit share up to 97 per cent in the Articles of Association (AOA). The advantage of increasing the profit share to 97 per cent, is to ensure a significant control in any managerial decision, and accordingly, the role of the local partner will be merely passive and has a protective right to sign and not a substantive right.

These foreign entities establish limited liability companies, because they do not have a project with the government or semi-government and therefore the requirements of setting up a branch are not met. If the company generates income, then the General and Tax Authority (GTA) levies the tax on the profit share stated in the AOA. the local partner is entitled to the profit stated in the AOA and will assume the same loss in case the company incurs losses.

Every company, regardless of its legal structure (branch, LLC, partnership), is required to register at the General Tax Authority and obtain a Tax Card. There is a new income tax law 24/2018, which has been published officially in the official gazette in December 2018. The GTA has changed substantially the articles related to the delay penalties, and other requirements that follow the preparation process of file the tax return. Although the companies can apply the International Financial Reporting Standards (IFRS), however, some adjustments require the companies to adjust in the tax return. All companies should meet the deadline of submitting the tax return and audited financial statements according to the Income Tax Law, and any violation of the rules will impose a significant amount of penalties. Further, the GTA has substantiated in the income tax law on the transparency and objectivity of the daily transactions and the process of submitting the tax return; any process that leads to tax evasion imposes the taxpayer to significant penalties and imprisonment.

# QUESTION THREE

What due diligence is required to be undertaken by company formations agents under anti-money laundering laws in your jurisdiction?

Law No 4 of 2010 Promulgating the Law of Combating Money Laundering and Terrorism Financing obliges reporting entities such as financial institutions, independent legal professionals such as auditors, lawyers to report any suspicious transaction they may detect during their review of any business transaction. Further, the central bank is conducting regular ongoing off-site surveillance and on-site inspection of all financial institutions regulated and controlled by the Qatar Central Bank to ensure that all financial institutions comply with the AML/CFT legal requirements. Auditors should report to the financial information unit any suspicious transaction detected during audit, in which this process is in alignment with the International Auditing and Assurance Standards Board (IAASB) and International Code of Ethics for Professional Accountants by International Ethics Standards Board (IESBA).

On the 9th of September 2018, Qatar published new country-by-country reporting (CbCR) requirements in the Official Gazette. Qatar Tax resident firms, which are members of multinational groups that have annual consolidated revenues that exceed QAR 3 billion (approximately USD822 million), are required to comply with the CbCR report filing requirements in Qatar for fiscal years commencing on or after 1 January 2017.