Income Tax Amendments Highlights
07 February 2023
On the 2nd of February 2023, the Shura Council’s declared
Issuance of the Law No.11 of the year 2022 amending certain provisions of the Income Tax Law of 2018.
Law No. (11) of 2022 amending some Provisions of the Income Tax Law, Promulgated by Law No. (24) of 2018. The amendments came into force on the date of their publication in the official gazette. These amendments are related to several articles in the income tax law and its Executive Regulation, and the General Tax Authority is expected to reflect these amendments and relevant implementation details in due course.
We have summarized some of the amendments:
1. Some amendments and expressions in the following definitions:
Permanent establishment (PE): A fixed place of business through which the project carries out business in whole or part. The project definition in the amendments implies carrying out any business that generates income or profit.
New definitions have been added and were not available in the previous law:
The Project: Carrying out any business that generates income or profit.
The Qatari Project: A project run by a resident of the country.
Foreign Project: A project run by a resident of a foreign country.
Residency criteria: The amendments have replaced the previous one from the effective place of management to the main and actual place of its management and leadership (strategic functions) is in the country.
Other amendments to the new definitions provide guidance on new provisions of the Tax Law. Some of the key new definitions include “technical service fees”, “interest”, “project”, “dividends”, “actual place of administration”, “business”, etc.
Relief for foreign tax
The taxpayer may, if he pays a foreign tax on taxable income in the State, deduct that foreign tax within the limits of the amount of the tax due in the State, taking into consideration the following:
1- Considering the foreign tax as a tax on income imposed by a foreign country or one of its political subdivisions or local authorities.
2- The foreign tax should be paid.
3- Reduction of the foreign tax by any amounts refunded by the taxpayer from the foreign country.
“It is not permissible to claim a foreign tax deduction on income exempt from tax in the country.”
Penalty for non-compliance
In addition to the penalties that have been introduced in the previous income tax law and its executive Regulation, the new amendments have introduced a flat penalty of an amount equal to 15% of net income in cases where the “physical existence and substance tests” on the projects are not met.
Global Minimum Tax
The Regulation outlines the provisions necessary to address the requirements arising from the digitization of the economy and sets a minimum tax on covered entities located in the country based on their specified excess profits in a manner equivalent to the Global Base Erosion Rules (GLoBE) for combating tax base erosion, provided that it is not less than (15) fifteen percent.
The Minister shall issue the necessary decisions to implement these obligations, and his decisions in this regard shall be binding on all entities and entities in the State, including the agencies that apply special tax systems according to the laws regulating them”.
Expansion of the scope of income tax
The new amendments to the scope of income tax have been expanded to include income tax on income generated from dividends, interests, royalties, real estate, and immovable properties as long as this income is not attributable to a foreign permanent establishment (PE) of the Qatari project. “If a Qatari project carries out business in a foreign country through a foreign permanent establishment located therein, then the profits accruing to the permanent foreign establishment are not subject to tax, provided that they are subject to tax in that foreign country where the PE is established.”
Additionally, income generated by a Qatar project from different services such as marketing, procurement, fees paid to obtain guarantees, communication and broadcasting services etc, will be subject to income tax in Qatar.
Economic Substance Regulations (ESR) reporting requirements
The amendments of the Law of 2022 have introduced a new article on the ESR’s requirements, under which any “qualified entity” that meets specific criteria will be required to submit the report on the minimum indicators of its substantial activities. The requirements for qualifying for reporting and the definition/scope of “minimum indicators” will be provided by the updated Executive Regulations in due course.
Ultimate Beneficiary Ownership details
The amendments specify and indicate that entities, partnerships, trust funds, non-profit organizations, legal persons, or legal arrangements should ensure that all required information about their UBO, including but not limited to their identifications, are available to the GTA when required.
Dr. Antonio Ghaleb: +974 77771870
Halim Ghaleb: +974 5566 2751
©2023 Antonio Ghaleb and Partner CPA-member of HLB International. All rights reserved. These highlights have been prepared for general guidance on matters of interest only and do not constitute professional advice. You should obtain professional advice before taking action on the information contained in these highlights. Antonio Ghaleb and Partner CPA and its employees do not give any representation or warranty (express or implied) regarding the accuracy or completeness of the information contained in these highlights. Antonio Ghaleb and Partner CPA and its employees do not assume any responsibility, liability, duty of care for any negative consequences that may result in reliance to these highlights and for any decision based on them.