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Doing Business In

Qatar

A worldwide association of independent auditing, accounting and consulting firms

PREFACE
THE BOOK was prepared by MGI INTERNATIONAL - Qatar. The content of THE BOOK is directed towards entities interested in knowing more about investing in Qatar. THE BOOK can serve only to draw attention to what are considered to be important matters. Whilst every care has been taken in the preparation of THE BOOK, no responsibility can be accepted for inaccuracies. The reader has to appreciate that information supplied is subject to change from time to time, especially in Qatar, which is undergoing a continuous upgrade for rules and regulations. It is important that the businessman or potential investor obtains professional guidance before undertaking any business in Qatar. THE BOOK will be updated each 6 months from the date of issuance. Issued in 3/1/2006

DISCLAIMER
MGI is a worldwide association of independent auditing, accounting and consulting firms. Each member firm undertakes no responsibility for the activities, work, opinions or service of the other member firms.

MGI International - Qatar Rabih N. Kerbaj Senior Partner

Doha, Qatar P.O.Box 24836 Tel: +974-4874760 Fax: +974-4874059 Email: mgiqatar@qatar.net.qa

THE BOOK
By MGI International Qatar

What is the first thing you want to know about Qatar? Snap Shots
1. Overview of The State of Qatar 1.1. History 1.2. Government Constitution 1.3. Government Foreign Policy 1.4. Tax System 2. Overview of the Economy 2.1. Gross Domestic Product (GDP) 2.2. Natural Resources 2.2.1. Crude Oil 2.2.2. Natural Gas 2.3. Economic Structure 2.4. Essential Industries 2.4.1. Oil Based Industries 2.4.2. Gas Based Industries 2.4.3. Future Industrial Projects 3. Banking and Financial System 3.1. Banking System 3.1.1. Qatar Central Bank 3.1.2. Commercial Banks 3.1.3. Doha Securities Market 3.1.4. Islamic Banking 3.2. Financial System 3.2.1. Sources of Finance for Foreign Investors 3.2.2. Investment Incentives 3.2.2.1.General Privileges for Foreign Investors 3.2.2.2.Some of the Proposed Incentives 3.2.2.3.Other Privileges

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3.2.3. Restrictions on Foreign Investment 3.2.3.1-Land 3.2.3.2-Contracting 4. Forms of Business Enterprise 4.1.Partnerships 4.1.1. Simple Partnership 4.1.2. Joint Partnership 4.2.Limited Partnership 4.3.Limited Companies 4.3.1. Private Limited Company 4.3.2. Public Limited Company 4.4.Branches of Foreign Companies 4.5.Joint Ventures

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5. Labor Relations and Social Security 5.1.Labor Market 5.1.1. Labor Supply 5.1.2. Labor Relations 5.2.The Right to Work Non Nationals 5.3.Labor Regulations 6. Government/Politics 6.1.Government Attitudes and Incentives 6.2.Relationship of Government and Business 6.2.1. General 6.2.2. Regulatory Environment 6.2.3. Privatization 6.3.Legal System

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7.

Taxation 7.1. 7.2. 7.3. 7.4. 7.5. 7.6. 7.7. 7.8. 7.9. 7.10. 7.11. Income Tax Direct Tax Indirect Tax Determination of Tax Payable Tax Rates Accounting Principles Withholding Tax Tax Exemptions Deemed Profit Taxes Tax Treaties Other Taxes

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8.

What are the rules and regulation regarding foreign trade in Qatar? 8.1. Ways to do Business 8.2. Documentations 8.3. Customs Duties 8.4. Valuation 8.5. Special Import Requirements 8.6. Duty Exemptions 8.7. Taxes 8.8. Restrictions 8.9. Exports

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Questions asked What do you have to do if you intend on doing business in Qatar? MGI INTERNATIONAL World Wide

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What is the first thing you want to know about Qatar?


Qatar has the highest GDP per capita income in the world__ The per capita income in Qatar stood around USD 44,000 in 2005. Qatar has the third largest reserves of natural gas in the world. Qatar plans 27 mega industrial projects by 2010 at USD 60 billion Qatar introduces USD 2.5 billion project "Pearl of the Gulf" man-made Island Lusail City USD 5 billion project will be built north of Doha__ will accommodate for up to 200,000 people completion by 2010. Qatar builds a USD 5 billion new airport, the biggest in the region Real estate boom in Qatar up by 25 to 30 per cent Qatar builds a 32-square kilometer North Beach Development of 10 resort hotels, two golf courses, 3000 lifestyle villas, 12,000 apartments, as well as huge commercial and retail shopping areas. Qatari officials unveiled a USD 15 billion infrastructure plan__ in a bid to put the ambitious Gulf state on the world tourist map over the next 10 years. A 110 million USD investment in West Bay in Doha Hotel industry in Qatar growing__ 8 new hotels with 2,550 rooms will be added in the next two years. Occupancy rates in star hotels in the country had currently peaked at between 80 and 90 per cent. The rate averaged 70 per cent in 2003. Over USD 300 million to be invested in district cooling schemes. Qatari officials expect at least USD 45 billion to be invested in expansion projects by the coming few years The government have taking many issues regarding that by offering many incentives for Qatari and foreign investors. Investments in Oil and Gas Petrochemicals are expected to reach 70 billion USD in the coming 7 years. Revenues of GDP and its subsidiaries are expected to reach 122 Billion QR in the year 2010 at an assumption of fairly moderate price. Qatar GDP is expected to reach 223 billion QR by 2010 and a per capita income of 65000 USD

Snap Shots

Market Exchange Rate US$1 = 3.64 Qatari riyals Natural resources: petroleum, natural gas, fish Population 865,000 Population growth rate: 2.7% Net migration rate: 17migrant(s)/1,000 population Ethnic groups: Arab 40%, Pakistani 15%, Indian 20%, Iranian 10%, other 15% Government type: traditional monarchy National holiday: Independence Day, 3 September (1971) Political parties and leaders: none Political pressure groups and leaders: none Flag description: maroon with a broad white serrated band (nine white points) on the hoist side Labor force: 460,000 Nominal Gross Domestic Product: $23.2 billion (2005): $25.0 billion Real GDP Growth Rate: 7.0% (2005) Major Import Products: Machinery and transport equipment, manufactured goods, food and live

animals
Inflation Rate (consumer prices): 4.7% (2005) Industries: crude oil production and refining, ammonia, fertilizers, petrochemicals, steel

reinforcing bars, cement, commercial ship repair


Oil - proved reserves: 14.5 billion bbl Natural gas - production: 900 trillion cubic feet Natural gas - proved reserves: 14.41 trillion cu m Exports - partners: Japan 41.9%, South Korea 15.8%, Singapore 9.1%, India 5.4% Imports - partners: France 30%, US 10%, Saudi Arabia 10%, UAE 6.0%, Germany 5%, Japan

5%, UK 5%, Other 29% Oil and Gas contribution to GDP in 2005 is 65% Oil and Gas exports represents 87% of total exports

1. Overview of The State Of Qatar Qatar is located in the southern Arabian Gulf covering an area of 11,437 km2. Doha is its capital city, in which most of the business and social life are located. It is now witnessing swift development in its infrastructure and construction. Qatars natural resources are its major Economic strength. Proved reserves of Natural gas are estimated to be 7000 km and that is the third largest reserve in the world. Moreover the oil reserves are estimated to be 14.5 billion barrels. The increase in the market price of these natural resources have pushed the GDP of Qatar into high records making Qatar the world wealthiest in terms of per capital incomes 1.1.History Qatar has entered in the realm of Islamic civilization in the 7th century, and played a role in the spread of Islam across the sea. In order to drive the Portuguese out, Qatar aligned with the Turks in the mid of the 16th century. But like any other Gulf nation, Qatar stayed under the role of the Ottoman Empire for 400 years During the First World War, Qatar signed a protection treaty with Britain in 1916. It stayed under the Britain supervision till 1971 when Britain decided to give Qatar complete independence. 1.2.Government Constitution Since the issuance of the law No.13 in 2000, foreign investments have increased significantly. This law allows foreign investors to have full ownership of their investment in certain areas. Regulatory laws still govern these foreign investments such as the equity of the local partner should be 51% and that of the foreign investor 49%. 1.3.Government Foreign Policy Starting from the eighteenth century, Qatar was rule by the Al Thani family who came from the Gebrin oasis in the south of Nejd. As a result, Qatar became an emirate ruled by the Emir who is the head of the state. The council of ministers is the supreme executive authority that directs, supervises, and coordinates the works of ministries and state agencies. The advisory council supports the Emir and it is constituted of 35 very well chosen to be of support in advising the Emir of the welfare of the country. It was first formed in 1972. 1.4.Tax System It is important to make notice that employee earnings are not taxed. Self employed foreign professionals are subject to income tax according to there income that ranges from 100,000 QR to 5,000,000 QR. No social security insurance deduction from the salaries of employees. All limited companies and all public share holding companies should have auditors. Accounting and auditing principles are subject to the international accounting and auditing standards in the preparation of financial statements.

2. Overview of the Economy 2.1.Gross Domestic Product (GDP) The majority of Qatar GDP comes from Oil and Gas industries. The government is taking some serious action to minimize its dependence on its natural resources. Its hydrocarbon resources remain the cornerstone of Qatars economy. The increase in the production and prices of Oil and Gas during the last five years has doubled the GDP of Qatar. Its nominal growth levels averaged 15.6% over the past 10 years between 1995 and 2005. 2.2.Natural Resources 2.2.1. Crude Oil In addition to Qatars abundance of natural gas, Qatars crude oil reserves are estimated to be 14.5 billion barrels. Its daily production capacity is expected to increase from 800,000 to 875,000 barrels per day till the year of 2006. The onshore Dukhan field is the largest reserve of crude oil. It consumes about 2 billion barrels of crude oil. 30% of the productions of oil some from the onshore fields while about 70% are produced from the offshore fields The main fields are: Maydan Mazham Bul Hanine Idd Al Sharqi Al-Shaheen Al-Rayyan 2.2.2. Natural Gas Qatar has the third largest reserves of natural gas in the world. Its north gas field is its main field with proven reserves of about 164 billion barrels of oil. Its the largest proven reserve in the world covering an area of 6,000 square kilometers. These reserves would last for over 200 years. Two main projects have initiated in Qatar which are QatarGas and RasGas. Qatar Petroleum manages and develops these two major LNG projects with foreign shareholders. 2.3.Economic Structure The studies that were prepared on Qatar GDP by QNB shows that 62% of the GDP is from the oil sector, and 38% is contributed by the non oil sectors. That shows how much Qatar economy is dependent on its oil revenue. Non oil sectors include: Finance Insurance and Real Estate Manufacturing Industry Building and Construction Other Services: Government Services Social Services

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2.4.Essential Industries Qatar aims at diversifying its income sources by enhancing its industrial sector through development of the north gas field, iron and steel, petrochemical and refining industries. Qatar has achieved through these developments high standards in quality management and cost efficiency. With these outstanding performances, Qatar became one of the best industrially developed countries in the region. 2.4.1.Oil Based Industries Oil Refining Industry Qatar oil reserves as of December 2004 have been identified to be 14.5 billion barrels. Qatar daily production capacity is 700,000 barrels per day. As a result the expected time for replenishing of the oil reserves is 56 years. 2.4.2.Gas Based Industries Iron and Steel Qatar Steel Company (QASCO) Initially was set up as a joint venture in 1974 between the government of Qatar 70% and two Japanese companies Cobi Steel Ltd 20% and Tokyo Boeki Ltd 10%. Its production capacity is 1.2 million tons of molten steel and a rolling mill capacity of 740,000 tons per year. Fertilizers Chemical Fertilizers Industry (QAFCO) QAFCO is a joint venture established in 1969 with Yara international Norway and Industries Qatar. QP owns 75% and the Qatari shareholders 25% of the 75% Industries Qatar share. The production capacity of QAFCO is over 6000 tons per day of ammonia, 8,000 tpd of urea. Petrochemicals Petrochemical Industry (QAPCO) Qatar Petrochemical Company is a joint venture between QP of 80% and the French company Elf Atochem of 10% and the Italian company Enichem of 10%. This joint venture was established in 1974. In 1994 an expansion process started raising the production capacity of ethylene to 525 thousand metric tons, polyethylene to 380.5 thousand, and sulfur to 45.5 thousand metric tons. Cement Cement Industry Qatar National Cement Company (QNCC) was established in 1965 with a production capacity of 1340 thousand tons of both cement varieties and 28.3 thousand tons. 2.4.3.Future Industrial Projects Qatar Chemical Company Ltd. (Q-Chem) Qatar Chemical Company Ltd. (Q-Chem) is a joint venture formed in 1998 between Qatar pe troleum with a share of 51% and Chevron Philips Chemical Company with a 49% share. Its production capacity is 500,000 tpa of Ethylene 453,000 tpa of High-Density Polyethylene, 47000 tpa of Hexane-1, and 36000 tpa of Sulfur Qatar Vinyl Company (QVC) Qatar Vinyl Company (QVC) is a joint venture inaugurated in 2001 between QP 25.5% QAPCO

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31.9%, Norsk Hydro of Norway 29.7%, and Atofina of France 12.9%. In 2004 the production capacity was 346,000 tons of Caustic Soda, 200 thousand tons of EDU and 291 thousand tons of VCM. Qatar Fuel Additives Company (QAFAC) was operational at 1999 in Mesaieed. Industries Qatar owns 50%, OPIC Netherlands Antilles N.V. owns 20%, LCY Investments Corporation 15% and International Octane Ltd. of Canada 15%. Its production capacity of 600,000 tpa of Methyl Tertiary Butyl Ether, 830,000 tpa of methanol Manufacturing Industries Established in 1990 with a capital of 200 million QR, Qatar Industrial Manufacturing Company (QIMCO) aims to set up ventures in various fields of industrial production at home and in the GCC countries, develop its marketing and commercial capabilities and help subsidiary companies to secure reasonable share of the market. In 1999, the company's direct investment reached QR320 million in more than 16 industrial projects. QR143 million of this capital is paid by the company while the balance is covered by financial facilities from commercial banks. 3. Banking and financial system 3.1.Banking System Investments in banks and insurance companies have still some restrictions which are mentioned in the Laws governing these sectors. Foreign investors need permission to invest in this sector. 3.1.1.Qatar Central Bank Qatar Central Bank was established in 1993 with a mandate to work in the field of issuing currency and act as the bank of the government and the bank of banks in addition to its main task of managing the monetary policy of the State. The bank's capital has been raised to QR500 million. The Major Roles of QCB: Like any other central bank, QCQ monitor and supervises the local commercial banks and exchange businesses. It also plays a role in managing the monitory policy of the country and in the payment system were it plays a vital link between all banks through the electronic fund transfer infrastructure.

3.1.2.Commercial Banks The currently operating banks in Qatar are 15 banks Seven of which are National banks, seven foreign banks and a government owned institution Qatar industrial development bank which was established in 1997. 3.1.3.Doha Securities Market In the year 1997, Doha Security Market was initiated. The value of traded shares by then was 320 million Qatari Riyal, while in 2005 it reached high records were it became 46.5 billion QR. This remarkable advancement shows how the country economy is booming. In 29 May 2002 non Qatari investors were allowed to invest in Doha Security Market by the Law of Investment Funds. Never the less the GCC nationals have been allowed to invest in not more than 25% in industry and service sectors.

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3.1.4.Islamic Banking Islamic banking in Qatar has witnessed tremendous changes in 2005 in its growth and popularity. 3.2.Financial System 3.2.1.Sources of Finance for Foreign Investors There are no detailed statistics published by the government concerning foreign direct investment in Qatar. Foreign investors may take loan for financing a project from GCC or any other financial institute. 3.2.2.Investment Incentives
Qatar political and social stability have encouraged foreign investors to invest in different economic sectors. These encouragements come from the governments actions towards supporting foreign investments.

3.2.2.1. General Privileges for Foreign Investors: Freedom to import and repatriate funds. Freedom to transfer profits and assets. Freedom to exchange money at stable rates. The benefits of a free market economy. Some of the General Incentives for Investments: Investors have the right to import materials and equipment required for the establishment, operation or expansion of projects. Investors are exempted from income tax effective from the date of commercial commissioning of projects for ten years Duty-free imports of equipment and machinery required for projects. Duty-free imports of raw and half manufactured materials needed for industrial projects and not available locally. No exchange control regulations No export duties

3.2.2.2. Some of the Proposed Incentives: Preparing investment opportunities and initial studies for industrial projects. Preparing feasibility studies on the technical and economic aspects for projects and providing technical advice for the prospective private investor. Providing suitable land sites in industrial estates for industrial projects at reasonable lease rates and long lease terms. Assisting the licensed industrial projects to get loans from Qatar Industrial development Bank and other finance establishments. Providing advice and assistance for investors regarding the available information, data and studies on their chosen investment projects. Providing the project with power, fuel, water and natural gas at competitive prices.

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3.2.2.3. Other Privileges Fully equipped industrial estate. Long term loans with competitive interest rates for small and medium scale industrial projects from Qatar Industrial Development Bank. Flexible regulations and procedures to import workforce for industrial and other investments. Flexible and sound labor laws that safeguard the rights of all investment parties and workforce. Suitably priced health care. Flexible legislation and procedures for registering commercial and industrial establishments Easy access to government officials to resolve investment difficulties. Independent judicial system. No income taxes on corporate profits Industrial land at a nominal rent of five Qatari Riyal per square meter per year Low electricity and water costs 3.2.3.Restrictions on Foreign Investment 3.2.3.1. Land Ownership of land by foreigners is not allowed by the Qatar government. Foreign investors can invest in some sectors such as the commercial, industrial and agricultural but with the participation of a Qatari partner who should own at least 51% of the entitys capital. This is regulated by the Law No.25 of 1990. 3.2.3.2. Contracting Foreigners are allowed to participate up to 49% in projects if they have the expertise and knowhow. 4. Forms of Business Enterprise 4.1.Partnerships 4.1.1. Simple Partnership A simple partnership is formed by two or more persons who are jointly and severally liable for the partnerships debts. The contract of incorporation of a simple partnership must be in writing and should be signed by every partner; otherwise it is null or void. 4.1.2. Joint Partnership A joint partnership consists of two categories of partners: Simple partners, who are responsible for the running of the business and who are jointly and severally liable for the partnerships debts Sleeping Partners, who are liable for the partnership's debts only to the extent of money they invested or are committed to invest in the partnership. 4.2.Limited Partnership A limited share partnership is similar to a joint partnership but it has at least 10 sleeping partners

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4.3.Limited Companies 4.3.1. Private Limited Company This company is the form most commonly used by foreign investors because it is simple to incorporate, has favorable tax regime, and the liability of each member for its debt is limited to his capital share. The capital of a private limited company must not be less than QR 200,000 divided into equal shares of at least QR 1,000 each. The company's capital must be paid up in full on incorporation. The company must keep a register showing the names, address, nationalities and occupation of its members and the number of shares owned by each. A private limited company cannot conduct insurance, banking or investment broking activities. The articles of association, which should be signed by all shareholders, must include the following statements: Name and address of the company Names of the shareholders, their titles, their nationalities and their place of residence. The address of the companys head office. The objective for which the company is incorporated. The amount of capital, whether it will be cash or otherwise, which each partner subscribes. Conditions of assignments of shares. The duration of the company. The names of the persons entrusted with the management. The method of distribution of profits and losses.

4.3.2. Public Limited Company The procedures to incorporate a public limited company are lengthy and governed by the provisions of the commercial companies law. 4.4.Branches of Foreign Companies The Law No.25 of 1990 regulates foreign participations in business. A foreign company, may, by an Emiri Decree, establish a branch in Qatar to invest money for economic development purposes, or to facilitate the performance of public service, or to achieve a public service in the industrial, agricultural, mining, tourism or contacting sectors. A foreign company is also allowed to import materials required for such projects provided there are no similar products in the local market. A Qatari service agent must be appointed whose duties are confined to assisting in securing visas and permits and the provision of labor and accommodation. The agent bears no responsibility for the business of his principal. In general, a branch of a foreign company is established only for the duration of the projects it has been awarded to carry out. The Minister of Finance, Economy and Commerce is the place to apply for in order to establish an Emiri Decree A copy of the foreign company's Memorandum and Articles of association duly authenticated. An Arabic translation of the objects clause is required. An Arabic agreement with the Qatari partner showing the type and duration of the business A certificate that the foreign company is not black listed by the Israeli Boycott Office

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The name of the foreign company representative in Qatar who is authorized to sign on behalf of the company (Power of Attorney)

4.5.Joint Ventures Joint ventures are formed through two or more natural or legal persons working together to carry out a commercial enterprise.

5. Labor Relations and Social Security 5.1.Labor Market 5.1.1. Labor Supply Qatar has a labor force consisting primarily of expatriate workers. The largest groups of foreign workers come from India, Pakistan, the Philippines and South Asia. The Government has recently begun diversifying the workforce by increasing the percentage of workers from outside this region. There is also a significant number of Arab, European and American experts and professionals working in the country. Even though the dependence of Qatar on foreign workforce is high given the severe shortage of Qatari labor, the policy of the government is to ensure the employment of the Qatari nationals to the biggest extent. The government gives facilities in labor supply such as facilitating recruiting foreign labor for a low cost, liberal immigration and employment rules for foreign skilled and unskilled, and flexible sound labor laws that safeguard the rights of all investment parties and workforce 5.1.2. Labor Relations Trade unions are not permitted in Qatar. However, Qatar passed a new labor law in May 2004 which allows Qatari workers the right to strike, to form workers committees and to join international labor organizations with ministerial approval. Strikes are forbidden in vital industries including oil and gas, water and power, transport, communications and hospitals. All workers have the right to form joint committees with employers to conduct joint negotiations over all workrelated issues. Where workers committees exist, they will represent the interest of all employees. Furthermore, if the number of employees exceeds 30, they may directly elect representatives. If the joint committees fail to settle the disagreements, they must be submitted to the Labor Department in the Ministry of Civil Service Affairs and Housing for mediation. If unsettled, they go to a Committee of Settlement composed of representatives of the Ministry, employer and employees. If still unsettled, disagreements will then be referred to an Arbitration Committee headed by a judge. The Arbitration Committee will be composed of representatives of the Minister, the Qatar Chamber of Commerce and Industry, and the Qatar General Union of Workers. 5.2.The Right to Work Non Nationals To reside or work in Qatar, nationals of countries other than GCC citizens must obtain special permits before entry to Qatar, except in the case of transit and visit visas. Applications for permits must be based on a formal offer and are normally made through the Qatari embassy. In other

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cases, visas are sent to applicants from Qatar if their expertise is required from the Qatari employer. 5.3.Labor Regulations Qatar is taking a more active role in the International Labor Organization and is in the process of drafting a new labor law. Until then, employment related matters are regulated by the labor law No. 3 of 1962 and later amendments. By law, a Qatari sponsor is required for any expatriate labor. Thus it is recommended that investors settle all related visa labor issues in early stages of negotiation with their Qatari counterpart who shall handle securing visas, permits, providing labor and accommodation. In the case of sponsorship transfer of the expatriate from one sponsor to another, it must be approved by the current sponsor and the Ministry of Interior. However, employees who filed valid and approved complaints of abuse by employers to the Ministry of Interior can be transferred without the current employers agreement. An expatriate hired locally is only entitled to two sponsorship transfers during residence in Qatar, provided that age is below 60 years. Expatriates hired abroad are not allowed to change sponsorship. If for any reason a residence permit is canceled, the expatriate is not allowed to return to Qatar on a work visa for a period of two years. Wages and salaries are normally agreed between the employer and employee. There is no requirement to pay employees either an annual bonus or a share of profit. A normal working week consists of eight hours per day, six days per week. This is reduced to six hours per day during the month of Ramadan. Overtime should be paid at a minimum rate of time and a quarter (time and half being more usual) except on Fridays and public holidays when the minimum is time and a half. A legal minimum of two weeks annual leave is due to employees with less than five years continuous service. After this period the minimum is four weeks per annum. However, in practice, the amount of yearly leave depends considerably on the employer. The employer is liable to pay all the employees air fares to home on the beginning and the end of contract

6. Government/Politics 6.1.Government Attitudes and Incentives Qatar political and social stability have encouraged foreign investors to invest in different economic sectors. These encouragements come from the governments actions towards supporting foreign investments. 6.2.Relationship of Government and Business 6.2.1. General The government has adopted a number of strategies to enhance the economys status. 6.2.2. Regulatory Environment Foreign investments in Qatar are regulated by a number of strict regulations which controls these investments. The prices for some commodities are regulated by the ministry of Finance. While the environmental regulations for development projects are operated by the Ministry of Municipal Affairs.

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6.2.3. Privatization There are some significant actions concerning privatization of some economic sectors. However, the government is still fully involved in many economic sectors such as oil and gas production, the transportation, telecommunication and the petrochemical industry. 6.3.Legal System The judiciary is independent, in both its religious and civil branches, exercising the authority vested in it by the countrys constitution. The civil courts are required to apply Qatari Laws (established by Amir Decrees; see Appendix 3 for a listing of the principal laws relating to doing business) in enforcing agreements between parties. The Muslim religious laws (the Shariah) are used mainly to regulate family matters. 7. Taxation

Introduction In Qatar there are no personal taxes, social insurance or other statuary deductions from salaries and wages paid in the country. According to law No. 9 of 1989, GCC nationals are to be treated as Qatari citizens for income tax purposes. Qatari and GCC nationals and their corresponding wholly owned companies are not subject to income tax in Qatar. Foreign individuals, partnerships and companies operating in Qatar should pay income taxes, whether they operate through branches or as partners with foreign companies. By law, a business activity is any occupation, profession, service trade, contract execution or any other business that is intended to make profit. The income tax system and filling procedure in Qatar is covered by law No.11 of 1993 which was issued on 14 July 1993. This law is supported by a tax practice directives law No. 2 of 1995 issued on 1 April 1995. 7.1.Income Tax Income includes the aggregate of all gains and profits which are realized or have arisen from the carrying of an activity in Qatar. In general capital gains arising from the sate of business assets and business interests are included as ordinary income. Income reported for tax purposes on a contract executed in Qatar must include income from work completed abroad, income from the supply of equipment and materials, and all income from activities within Qatar. 7.2.Direct Taxes The income arising from different activities in Qatar is subject to direct tax. These activities include rent, sale rent, liquidation profits, consultancy fees, written off debts, commissions from agencies or from representation agreements, and profits received from any project in Qatar or by the sale of its assets.

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7.3.Indirect Taxes Customs duties are levied on imported goods. 7.4.Determination of Tax Payable Tax liabilities are computed in a manner similar to general British and American practice on the basis of profits disclosed by audited financial statements, adjusted for tax depreciation and any items disallowed by the Income Tax Department. Annual Depreciation Rates
Assets Buildings such as offices, dwellings, stores, hospitals and clubs Roads and bridges inside the establishment Storage tanks, and pipelines Maritime craft Service Station buildings and driveway Plants, machinery, and mechanical devices other than indicated in this schedule Office furniture and equipment Service replacement plant (including construction and road making equipment and workshops and their equipment Trailers and Carts Automobiles and motorcycles Aero planes Drilling and clean-out tools Trucks (of any size) Machinery for servicing and lubrication of service machinery Refinery machines and pipelines and small tanks Computer equipment Rates 5% 5% 5% 7.5% 20% 15% 15% 15% 15% 20% 25% 15% 20% 15% 10% 33.3%

Provisions General provisions such as bad debts and stock obsolescence are disallowed. Specific bad debts written off will be deductible to the extent that they are in accordance with the conditions set by the tax administration. Head Office Charges Charges of a general or administrative nature raised by a head office on its Qatar branch are allowed as a deductible to the extent that they are in accordance with the conditions set by the tax administration. Charges of a general or administrative nature raised by a head office on its Qatar branch are allowed as a deduction subject to a ceiling of 3% turnover less sub-contract costs. In the case of banks the limit is 1% of gross banking income. The allowable ceiling for insurance companies is set at 1% of gross premiums after deducting reinsurance premiums. The allowable ceiling for head office charges on a project which has income streams arising in Qatar and overseas is set at 3% of total income after deducting subcontract costs, the supply value of imported machinery and equipment, revenues arising from work performed overseas, and other income which does not relate to activities in Qatar.

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Losses The law contains provisions which allow for the carry forward of trading losses for set off against future profits. However, losses cannot be carried forward for a period exceeding 3 years from the end of the tax year in which the losses were incurred. Losses cannot be set off against prior year income. Loss carry forward relief is not available to a contractor who winds up an activity in Qatar and subsequently resumes that activity. Withholding of Final Contract Payments According to income tax practice directives issued on January 1993 and May 1995, payments for contractors are withheld until a receipt of a tax clearance certificate is obtained from the income tax department. 7.5.Tax Rates
Income Tax Rates: Qatari Riyals 0 - 100,000 100,001 500,000 500,001 - 1,000,000 1,000,001 1,500,000 1,500,001 2,500,000 2,500,001 5,000,000 5,000,001 and above Tax Rates Nil 10% 15% 20% 25% 30% 35%

7.6.Accounting Principles International Accounting Standards and generally accepted methods of commercial accounting are recommended. Prior approval from the tax administration is required if a different accounting method is to be applied. 7.7.Withholding Tax There is no withholding tax. 7.8.Tax Exemptions Companies or individuals can apply for tax exemption on projects to a special committee. The committee evaluates applications by the projects contribution to the support of Industry, Agriculture, Trade, Oil, Mineral, Tourism, Communications, land reform, or any other activities that are of social and economic benefit to the country. Other projects that may be exempted are projects that fall into the States planned development and economic objectives and that has the Governments approval. Exempted projects from taxation are required to keep proper accounting records and tax authorities require submitting financial statements within 4 months from the end of the tax year. 7.9.Deemed Profit Taxes By law, the tax administration will issue an assessment for tax on deemed profits basis if the tax payer fails or delays in submitting a tax declaration, does not maintain proper books and records, does not provide information requested by the tax authority or the declaration submitted is deemed not correct

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7.10.Tax Treaties Qatar has signed double tax treaties with Algeria, Bangladesh, France, India, Morocco, Romania, Russia, Senegal and Tunisia. Several countries, including Japan, the United States and the United Kingdom, allow some unilateral relief against their own taxes for Qatar income tax paid. 7.11.Other Taxes Taxation of Individuals There is no personal taxation levied in Qatar Taxation of Professionals The income tax practice directives issued in April 1995 include new guidance on the taxation of private professions such as medical practices, dental practices, consultancy services and other sole trader activities. The owner of the profession is allowed a deduction of 10% of the annual net profits of the business as a charge against taxable profits. The allowable deduction is subject to a maximum annual limit of 20,000 QR. To qualify for the deduction, the owner must be engaged full-time in the activities of the business. The directives clearly highlight the intention of the tax department to levy income tax on selfemployed individuals in Qatar. The tax department has indicated that all costs and expenses wholly and necessarily incurred to earn business income will be allowable as a deduction. However, there is a clear to disallow costs such as private accommodation costs, airfare, pension contributions, and general costs that are not directly related to the profession. The determination of taxable income and the tax applied are in accordance with the income tax regulations specified in Decree Law No. 11 of .1993. Sales Tax or Value Added Tax There is no sales tax or value added tax. Estate and Gift Tax There are no estate or gifts taxes.

8.

What are the rules and regulation regarding foreign trade in Qatar? 8.1.Ways to do Business Foreign investors need to appoint an agent or sponsor so as to start a business here in Qatar. It is important to distinguish between two types of agents Incase a project is planed to be executed; a service agent is required take care of all the administrative work with the government. Foreign ownership cant exceed 49% of the capital with a Qatari partner owning 51%. Incase there is intend to import to Qatar any kind of commodity, a commercial agent is required to act as a distributor or sales representative.

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8.2.Documentations The most common instrument used for controlling imports and exports is the letter of credit (L/C). After opening a letter of credit, the supplier should provide certificate of origin and an invoice and shipping document including a description of the goods to be imported. 8.3.Customs Duties Qatar applies a five percent tariff on almost all products excluding alcohol beverages and tobacco products which is 100 %. Goods manufactured in GCC countries and some food products such as wheat, powdered milk, rice, flour are exempted from tariffs. 8.4.Valuation The basic value for the assessment of duty is the CIF value of the goods. Where only the FOB price can be established, duty is based upon FOB price plus 15% 8.5.Special Import Requirements All importers are required by law to have an import license for almost all products. Such import licenses are issued only to Qatari nationals. Even in the case of joint ventures between foreign and Qatari partners, agency/dealership agreements issued by foreign suppliers can be registered only in the name of the Qatari partner in the Commercial Registration Department of the Ministry of Economy and Commerce. Foreign investors entering into joint ventures with Qatari partners are allowed a maximum of 49 percent interest in the business. Taken together, the above represents a formidable array of privileges and preferences, which can disadvantage foreign investors in the Qatari market. Despite stated fines and penalties, the practice of a Qatari illegally lending his name to a foreign-owned/operated business has been common, but on a reduced scale in recent years. All imported meat and poultry products require a health certificate from the country of origin and a Halal Slaughter Certificate issued by an approved Islamic center. All imported beef and poultry products require a health certificate from the country of origin. As is the case with other products, importers of foodstuffs should have an import license, which is issued only to Qatari nationals by the Government. A Qatar Embassy or consulate in the country of origin must legalize all shipping documents. 8.6.Duty Exemptions Duty exemptions are not generally given unless there is a substantial investment from the foreign joint venture party.

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8.7.Taxes One of the things that should be known about Qatar is that its not a tax free zone. Taxes are paid on corporate income. The Rate ranges from zero on profits less than 100,000QR to 35% on profits more than 5,000,000 QR. 8.8.Restrictions Once a foreign employee is resident in Qatar there is normally no difficulty in importing personal effects free of customs duty. The import and sale of alcohol and pork products are prohibited. The import of personal computers is normally not allowed unless an employee has a letter from his employer stating that the computer is required for business purposes The import of pets is allowed. A valid health certificate issued by a Veterinarian registered with Public Health Authorities in the country of departure must be produced for pets imported into Qatar. There is no know rabies in Qatar, but animals being imported must be immunized against this disease. 8.9.Exports Exports are not taxed.

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Questions asked
What is the rule of Qatar Investment Promotion? IPD with its various rules provides investors with reliable information about Qatar business environment, current investment projects, suitable business partners and government incentives. www.investinqatar.com.qa What is a reliable media source in Qatar? Al Jazeera channel, launched in November 1996, was the first independent Arabic language satellite channel to broadcast out of the Arab world with a declared mandate of dedicating its resources to providing news information to Arab audiences at large. Al Jazeera media services include Al Jazeera Website (Arabic & English); Al Jazeera Mobile which provides updated info to users through SMS, MMS and WAP technology, Al Jazeera Media Training and Development Center, Al Jazeera International, Al Jazeera Live, Al Jazeera Center for studies and Opinion Polls. Can a business operate in Qatar without a Qatari sponsor? Although the requirement of an agent or sponsor is believed to be abolished in the years to come, it is obliged for any foreign investor to have a sponsor to run the business in Qatar. The Qatari partner should at least own 51% of the capital in accordance to the Qatari Law No. 13 of 2000 In March 2005 a new legislation was enacted by the State of Qatar to establish Qatar Financial Center. Its most important role is to approve and issue licenses to individuals, business and other entities that wish to incorporate or establish in the Center. Who can be referred to open a business in Qatar? The government is supporting foreign investors from the ministry of Economy and commerce through the investment promotion department. Other ministries and government organizations can be very helpful. What are the regulations on imports and exports in Qatar? Qatar Investment No. 13 of 2000 can guide foreign investors through the establishing of a new business in accordance with laws and procedures in force in the state.

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What are the current major projects in the State of Qatar?


Al- Khaleej Gas Project (AKG) Dolphin Project Qatar/Kuwait Gas Supply Project RasGas LNG 3, 4 & 5 RasGas LNG 6 & 7 Qatargas II Project Qatargas III Project Gas-to Liquids (GTL) Projects Oryx GTL Project Pearl GTL Sasol Chevron ExxonMobil Marathon ConocoPhillips ConocoPhillips Cracker at Ras Laffan Qatofin Q-Chem II Project DME Project with MGC PWA Doha North Sewage Treatment Plant QDREIC Sewage transfer and Treatment System, Qatar QP Ras Laffan Common Cooling Water System Phases II & III QP Al Shaheen Refinery, Qatar QP Messaieed fuel storage tanks, Qatar

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What to do if you intend on doing business in Qatar


After you have done extensive research about Qatar, or simply, read THE BOOK, it is time to move on to the next step. Plan your visit to Qatar Ask your self questions like where is the first place you should go to in Qatar, who to get in touch with and what exactly you should be looking for. Visiting Qatar will enable you to first hand experience all the information you have read about. Find a Lawyer After you have assimilated an idea about the business you want to venture into, you need a good lawyer. In order to understand the business environment and how it works, you should be assisted by a lawyer with experience in the Qatari market. A good lawyer will be able to protect your interests and sometimes it could spell the difference between success and failure. Make contact with the ministries The Qatari government is very supportive and is putting huge efforts to provide a suitable business environment for foreign investors. As a result seek more knowledge through simply visiting those ministries. It would also help to have an experienced individual in the local market to follow up on governmental procedures. Do Market research and Feasibility study Business men need a lot more than a hunch to start a new business. The main understanding of any project or business comes from conducting a feasibility study which studies the chances any business in the Qatar market. For this you would want to get the help of an international consultancy agency in Qatar. Find a partner Finding the right partner or sponsor in Qatar is one of the most important tasks. Understand the culture Learn understand and appreciate the Qatari culture. Each country has its own social and ethical values that should be respected.

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About Us MGI World Wide MGI INTERNATIONAL - Qatar What is it that YOU need?
Do you need the international services of a multi-national consultancy firm, but want the high partner involvement and personal attention of that offered by a local firm? With MGI International, you can have both! MGI International is a member of the worldwide MGI group where its clients enjoy the benefits of a strong, supportive professional relationship, built on a high level of personal interaction with partners and staff. Is yours a big organization or family business, with potential for successful, profitable growth? Or do you, personally, need consultancy expertise? Are you an entrepreneur with great ideas but need advise on what to do next? With MGI International, you have the security of knowing that, wherever in the world you wish to do business, the quality of your advice is always assured. All MGI member firms have to pass a stringent quality control re view before being accepted for membership. Existing members are also regularly reviewed, in order to ensure that high standards continue to be maintained.

Who is MGI International ?


MGI has supported the growth of thousands of companies throughout the world. Our clients and member firms have access to the combined knowledge and expertise of over 575 partners and 4,000 staff worldwide! MGI International is a member firm of the worldwide network of 235 offices in 75 countries around the world called MGI. It is a friendly local service with a window on the world. Supporting our clients, business associates, partners and staff with great business solutions and services. Many members in MGI hold senior positions in their local political, business, community and service groups and, through these associations, keep up- to-date, fully informed and closely in touch with their city, state or country often to the extent of being influential in regional growth and development.

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What does MGI International offer you?


As a client of an MGI member firm, you can benefit from on a wide range of local and international services. Internationally, MGI International offers the following services: Immediate access to current financial information on almost every country Comprehensive details on current business practices, taxation and accounting procedures worldwide. Expertise in international business structures. The ability to explore business opportunities and establish strategic alliances through MGI's global network

Locally, MGI International is vitally pro-active in client servicing in many areas including: Auditing and reviewing financial statements, recommendations to the management. Evaluating financial and accounting systems, including internal control and supervision. Taxation consultancy, advice, compliance, returns and interface with government bodies Administrative Financial consultancy, feasibility studies, financial & administrative systems Accounting procedures for corporate, private and government bodies Setting up infrastructures of companies, identification of defects in the existing systems, proposing solutions and implementing them Projections, budgeting and strategic planning Systems development and human resource evaluation The selection and implementation of computer software and hardware The design of management information systems Marketing studies and advertising consultancy and applications Legal studies Specialized business education and professional development programs, courses and seminars

How to contact MGI International


Please feel free to contact us for any inquiry or request on the following: Tel: +974 4874760 Fax: +974 4874059 E-mail: mgiqatar@qatar.net.qa It will be our pleasure to send you a representative to attend to your needs.

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