Regulation

Qatar: A World Class Business Environment


By Qatar Financial Centre Authority (01/07/2014)

Qatar is one of the world’s most dynamic and fast-growing economies in the Middle East, underpinned by an estimated US$16.7trillion of monetisable oil and gas reserves. Moreover, Qatar is also ranked the 13th most business-friendly country in the world and highest in the Middle East (World Economic Forum Global Competitiveness Report 2013-2014).

The Qatar Financial Centre (QFC) was founded in 2005 to help build a world-class business environment in Qatar, providing a platform for domestic, regional and international growth and contributing to the Qatar National Vision 2030 of building a diversified, knowledge-based economy for the benefit of current and future generations.

The QFC offers both local and foreign firms one of the most business-friendly tax environments in the world, a legal system based on English Common Law, efficient administration, 100 per cent foreign ownership, and one of the region’s most robust regulatory regimes.

The QFC comprises of four independent bodies: the QFC Authority; the QFC Regulatory Authority (QFCRA); the Qatar International Court and Dispute Resolution Centre; and the QFC Regulatory Tribunal.  The QFC is dedicated to helping firms to quickly establish a physical presence in Qatar and the region.

An Evolving Regulatory Regime

Financial Services Firms (Regulated firms)

In December 2012, the State of Qatar passed The Law of the Qatar Central Bank and the Regulation of Financial Institutions (Law No. 13 of 2012), which was an important step towards advancing the framework for financial regulation and supervision in the State of Qatar, promoting financial stability and expanding the ambit of regulation and supervision to cover areas requiring new and enhanced financial regulation in the State.

In line with its responsibilities for financial stability, the Law mandated the Qatar Central Bank (QCB) to act as the competent supreme authority in framing the policies for the regulation and supervision of all financial services and markets in the State. The Law also created a Financial Stability and Risk Control Committee, which provides a formal structure for co-ordination among the regulatory bodies and advances the objective of creating a consistent and co-operative regulatory and supervisory environment within the State.

The QFCRA and The Qatar Financial Markets Authority (QFMA) remain independent regulators under the management and direction of their respective Boards of Directors.

Regulated firms in the QFC continue to be subject to authorisation and supervision by the QFCRA in accordance with the QFC Law, the Financial Services Regulations and QFCRA Rules.

At the end of 2013, the Qatar Central Bank, QFC Regulatory Authority and Qatar Financial Markets Authority jointly launched a strategic plan, which establishes a framework for regulating the financial sector across the State, setting out a roadmap of strategic priorities for the next three years (2014-2016).

The strategic plan is a comprehensive document containing six mutually reinforcing goals, each supported by specific strategies and work plans within the QCB, QFCRA and QFMA. The goals are:

·         enhancing regulation by developing a consistent risk-based micro-prudential framework,

·         expanding macro-prudential oversight,

·         strengthening financial market infrastructure,

·         enhancing consumer and investor protection,

·         promoting regulatory cooperation, and

·         building human capital.

The strategic plan positions Qatar as a leader in the region in financial sector regulation, and supports Qatar’s ambition to be a global financial centre.

Non-regulated firms

Since inception, the QFC has constantly looked to evolve its regulations to keep in line with international best practice, whilst more recently looking to facilitate and encourage the increasing number of non-regulated firms considering Qatar as a place to do business.

The QFC has recently undertaken several legal and structural enhancements, together with process improvements, to encourage a broader range of non-regulated firms and structures to be licensed, facilitated by a more streamlined process.

Special Company (SC) and Single Family Office (SFO) Regulations were originally introduced by the QFC Authority to provide for a more attractive legal, regulatory and business environment. These Regulations extended the types of businesses that can benefit from the QFC’s world class environment and offer new opportunities for SFOs, Holding Companies, Special Purpose Companies and for other types of business.

In December 2013, a number of refinements were introduced to clarify many aspects of QFC legislation and give QFC-licensed firms more certainty and flexibility in their operations. These amendments included Special Purpose Companies, Holding Companies, SFOS and the insolvency regimes in the QFC.

The amendments to the SFO Regulations contain a number of clarifications including the definition of a ‘Single Family’.  They also set out the requirements for establishing an SFO.

The SFO Rules contain further detail about the operation of the SFO, provide for the licensing and registration of SFOs, address the criteria for recognition of an Eligible Firm and describe the procedures and requirements for amending the Articles of Association or transferring the shares in an SFO.

All these changes are ultimately designed to encourage and facilitate the establishment and operation of SFOs and, by offering them a world class tax, regulatory and legal environment, to enable SFOs to grow and prosper in a more competitive world.

The amendments to the SC Regulations include a number of clarifications to definitions, such as Transaction, Special Purpose Companies, Holding Companies, Holding Company Activities and the entities that can hold shares in SPCs as nominees. 

The new SC Rules detail further the operation of the SC Regulations and in particular provide for the incorporation, licensing and registration of Special Companies; the approval of Support Service Providers and various notification requirements placed upon Special Companies by the QFC Authority and the Companies Registration Office.

The amended Insolvency Regulations deal with debtors who are unable to pay their debts or find that their liabilities exceed their assets.  As well as dealing with a number of specific and substantive enhancements, more straightforward amendments have also been made to update the terms and the phrases in the existing Insolvency Regulations. 

The new Insolvency Rules provide for the creation of a register of Insolvency Practitioners and sets out how Insolvency Practitioners can qualify to appear on the register.  The Rules also allow a company to voluntarily apply to be struck off the Register of companies under certain conditions. 

The QFC Authority has also undertaken several enhancements to its licensing and registration processes for non-regulated firms. Crucially, these shorten turn-around-times for licensing and registration applications. Application processing times are generally now one month or less.  Additionally, it has introduced ‘e-immigration’, private access for the immigration related medical check for QFC-licensed firms’ employees and their families and online tax submission.  Taken together, all these initiatives contribute to making the QFC a more efficient business environment.

A Straightforward Tax Regime

In developing its tax regime, the QFC has taken an approach which is unique for financial centres in the region, adopting a low tax rate and a transparent, efficient administrative process.  The business community was widely consulted to ensure that the regime achieved a fair balance between its fiscal objectives and the needs of licensed firms.  The result is a class-leading regime, which creates a competitive environment, supporting and stimulating business activities.

The QFC is not a tax haven. It is a location in which companies can operate onshore in Qatar, regionally and internationally.  The tax regime itself is straightforward in approach. Drawing on established features of other tax regimes, it is clear in its application and effect.  The unnecessary complexity of more mature tax regimes around the world is avoided.  A particular virtue of the QFC regime is that the tax legislation is notably concise. 

The QFC tax regime is based on the following broad principles which are reflected in the QFC tax law and which support the strategic vision of the QFC:

·         Competitiveness – the effective size and scope of the fiscal burden in the QFC is comparable with competitor jurisdictions

·         Compliance with international best practice – the regime aims to comply with OECD standards (see below)

·         Simplicity – the operation of the tax law is as straightforward as possible

·         Fairness – the tax law provides certainty of treatment and is transparent in its application and operation

·         Certainty – the regime offers a tax ruling service which allows firms to manage their tax affairs with confidence

·         Consistency – the system was developed using a holistic approach, which should ensure that the complexities inherent in older tax systems developed and changed over many years are avoided and compliance costs are minimised

·         Efficiency – the tax law is effective within the constraints imposed by competition, so that it generates revenue required by the QFC

·         Harmonisation – as far as possible, the QFC tax system is consistent with the mainstream Qatar Income Tax system, to minimise any tax distortions.

A Competitive and Transparent Tax Environment

At a time when many international jurisdictions are examining ways of increasing business taxation, the QFC’s tax regime is amongst the most favourable in the world, with a tax rate of just 10 per cent on profits that are sourced locally.  QFC-licensed firms can repatriate all their profits and operate in any currency. There are no personal, social or capital taxes.

The QFC Tax Department has co-operated extensively with the relevant authorities of the State of Qatar in reviews conducted under the Organisation for Economic Cooperation and Development (OECD) Global Forum on Transparency and Exchange of Information for Tax Purposes.  Therefore, in addition to being transparent and robust, the QFC’s tax regime is party to effective exchange of information agreements negotiated by the Government of Qatar with other tax authorities around the world. 

In a first for the MENA region, the QFC recently took the unprecedented step of publishing its entire in-house tax guidance manual online.  Called the QFC Tax Manual, it is intended to help payers of corporate tax and their agents interpret the rules and regulations, to provide them with greater certainty and clarity and assist in preparing tax computations and returns.  

Looking Forward

The QFC will continue to leverage its world class business environment to attract firms that are committed to supporting Qatar’s economy, as well as to using the QFC as a platform from which to do business outside of Qatar.  It looks forward to welcoming a broad range of financial services firms, financial sector-related firms and non-regulated businesses including accountants and lawyers, consultants and HR specialists, Holding Companies, Special Purpose Companies and Single Family Offices. The commercial opportunities, both in Qatar’s vibrant economy and the region more generally, are significant and are backed by the State of Qatar’s strong commitment to diversification and growth.