DOING BUSINESS IN QATAR

Overview

Qatar boasts the third largest gas reserves in the world and over the past 15 years has experienced considerable economic growth driven largely by the huge investment in LNG projects.

Economic diversification and a growing economy means that there are many opportunities for investment in Qatar. Companies and individuals wishing to expand their business opportunities will find a legal environment that is accessible and relatively well regulated.

LEGAL BACKGROUND

Qatar is a civil code jurisdiction. The Qatari legal system and its key laws are modelled on those of Egypt which, in turn, are modelled on the Napoleonic codes of France.

The judiciary in Qatar was expressly established as an independent body by the provisional constitution and was divided into two court systems: the civil court and commercial system and the Shari’a court which administers Islamic laws.

It should be noted that the Courts in Qatar do not rely on a formal system of precedent and there is no formal reporting of court decisions. This can lead to an increased level of unpredictability in litigious matters. With the exception of the laws of the Qatar Financial Centre (“QFC”) all laws in Qatar are issued in Arabic only and formal translations are generally not made available by the Qatari authorities. Any proceedings before the Qatari Courts are heard only in Arabic.

STRUCTURES FOR DOING BUSINESS IN QATAR

Foreign companies or individuals wishing to establish a business presence in Qatar have various options available to them. Set out below are the most common forms of establishment.

A. Limited Liability Company (“LLC”)

The general rule for operating a business and incorporating an LLC in Qatar is that any company registered in Qatar must be at least 51% owned by a Qatari national or a company wholly owned by Qatari nationals. This requirement is found in the Foreign Investment Law.

An LLC must comprise of a minimum of one and a maximum of fifty partners. The partners are free to determine the capital of an LLC divided into equal shares of not less than QR 10 each. The liability of each partner for the LLC’s debt is limited to his share capital.

Where agreed by the shareholders, the management of the LLC can be conducted by the foreign shareholder. Further, the profits of the LLC can be split in proportions different to the shareholding proportions to reflect the different degrees of participation which the respective shareholders have in the LLC’s management and operation. The foreigner’s share of profit will be taxable.

B. Article 207 Company Law1

Article 207 companies are essentially joint venture arrangements, which are owned partly by the government or a public authority in partnership with foreign investors.

The main advantage of an Article 207 company is that the Companies Law only applies to the extent that it does not conflict with the Memorandum and Articles of Association, Joint Venture Agreement or other contracts of establishment. The shareholders are therefore able to draft those documents free from all or any of the restrictions contained in the Companies Law. Also, the foreign investor’s share ownership in an Article 207 company can be more than 49%, with the approval of the Council of Ministers.

C. Branch of a Foreign Company

A foreign company may, with approval from the Ministry of Economy and Commerce, establish a 100% foreign-owned branch office in Qatar to invest for economic development purposes or to facilitate the performance of public services. If the company is engaged in certain sectors, namely business consultancy; technical services; information technology; cultural; sport and leisure activities; distribution services; agriculture; manufacturing; health tourism; development and exploitation of natural resources; energy and mining, a branch may be established. This provision is however, narrowly applied and rarely used. The application process is longer and more involved than the others, and ministerial approval is assessed on a case-by-case basis.

D. Temporary Branch of a Foreign Company

Another exception to the general rule is that the Ministry of Economy and Commerce may grant a temporary branch licence to operate in Qatar to a foreign company which is a party to a contract with a state agency. The foreign company becomes fully licensed and registered in Qatar. However, the license and registration are based upon the contract and therefore limited to the duration of the contract and the works to be performed under the contact. If additional contracts are obtained they must be

1 This is a reference to Article 207 of the Commercial Companies Law No. 11 of 2015 (“Companies Law”).

02 | Doing Business in Qatar

registered and appended to the foreign company’s commercial registration. A company which is a party to a subcontract which stems from a main contract with a state agency may also qualify for this exception.

E. Representative Trade Office

A representative trade office (“RTO”) is a method to establish a “shop front” in Qatar. The RTO can be used to promote a foreign company in Qatar and introduce it to Qatari companies and projects but the RTO cannot conduct business in Qatar i.e. it may not earn revenue.

F. Qatar Financial Centre

The Qatar Financial Centre (“QFC”) operated by the Qatar Financial Centre Authority, is a financial and business centre established by the Government of Qatar in February 2005. The QFC Law permits 100% ownership of authorised institutions by non-nationals and a complete repatriation of profits. The QFC’s commercial and regulatory environment and systems conform to international standards and are separate from and independent of the existing Qatari systems. The QFC Regulatory Authority (“QFRA”) manages and enforces the QFC’s regulatory systems, while the QFC Companies Registration Office, registers limited liability companies and limited liability partnerships within the QFC.

The QFC law prescribes a range of activities which may be conducted in, or from, the QFC. These activities are primarily financial services or related support services. Within the range of permitted activities are non-regulated activities and regulated activities. Firms planning to conduct regulated activities, such as banking, insurance or securities businesses, will need to apply for authorization from the QFRA. Firms planning to conduct unregulated activities may apply for a license through a simpler process.

G. Qatar Science and Technology Park

The Qatar Science and Technology Park (“QSTP”) offers a “free zone” legal and business environment to foreign or local technology-based companies. In order to set up in the QSTP the company’s main activity must relate to the advancement of technology. This reflects the primary purpose of QSTP which is to promote scientific research (rather than provide a business park facility).

Applications for carrying out business within the QSTP are submitted to a licensing board who will determine the grant and scope of such a license. Companies whose activities are authorised by the QSTP can have 100% foreign ownership and are exempted from all tax.

THE TRADE CONCEALMENT LAW

Individuals and companies wishing to set up in Qatar should be aware that the Trade Concealment Law is aimed at preventing non-Qataris from engaging, and Qataris from colluding with non-Qataris, in commercial and professional activities which circumvent the Foreign Investment Law. Violation of this law can result in heavy fines and/or imprisonment.

COMMERCIAL AGENCIES IN QATAR

The commercial agency arrangement is for a foreign company wishing to make direct sales in Qatar without establishing an LLC, branch or any formalised business presence in Qatar. The Commercial Agency Law allows for the appointment of a local commercial agent to market goods and services in Qatar with commission being paid to the agent. Exclusive agencies must be registered at the Ministry of Economy and Commerce. The commercial agent must be a Qatari national or a company which is owned by Qatari nationals.

A significant disadvantage of the agency arrangement is that once established it can be very difficult to terminate an agency relationship and if terminated the principal must compensate the agent.

EMPLOYMENT IN QATAR

Aside from a few limited exceptions, companies operating in Qatar are subject to the local Labour Law and Immigration Law. One of the key features of the Labour Law includes a “Qatarization” plan, which obligates companies to implement a plan to employ qualified Qatari-nationals rather than non-Qataris. In the absence of a qualified Qatari national, the company is free to hire a foreign national. A foreign national working and residing in Qatar must be sponsored by his/her employer and obtain a work and residence visa. Another important aspect of the Labour Law is the mandatory end of service benefits for workers.

REAL PROPERTY IN QATAR

The general rule is that non-Qataris may not own real property in Qatar. However, there is an exception in that non-Qataris are now permitted to own real estate in certain restricted areas, namely the Pearl, West Bay Lagoon, and Al Khor Resort.

The Foreign Investment Law allows foreigners to enter into long term leases of land allocated for implementation of their investment projects for up to fifty years and to freely transfer those investments (or their interests therein).

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TAX IN QATAR

Qatar does not have personal income tax. The Qatar Tax Law imposes a 10% flat income tax rule on businesses other than those wholly owned by GCC nationals. The Qatar Tax Law establishes a new withholding tax regime on payments to non-residents of 5% of the gross amount of royalties and technical fees, and 7% of the gross amount of interest, commissions, brokerage fees, directors fees and any other payments for services carried out wholly or partly in Qatar.

GENERAL

This guide only highlights material legal issues which DLA Piper believes are relevant to a potential foreign investor in Qatar. It does not constitute legal advice nor does it purport to address every legal issue or summarise current rules, structures or regulatory frameworks.

The regulatory system in Qatar is dynamic and subject to frequent changes in application and interpretation. This guide is based on material available to DLA Piper as at March 2016 and will require amendment from time to time as legislation is amended or new policies or interpretations are adopted by government authorities, courts and/or regulators. We recommend that you obtain legal advice and liaise with the relevant government authorities on how the law applies to foreign investors in respect of a particular investment or business activity at the relevant time.

We hope you find this guide to be a useful overview of the high level legal issues in relation to doing business in Qatar. Please do not hesitate to contact us if you have any queries regarding the material set out in this guide or if you require specific legal advice in respect of an establishment in Qatar.

FOR FURTHER INFORMATION, PLEASE CONTACT

Ben Gillespie Head of Corporate Middle East T +971 4 438 6305 ben.gillespie@dlapiper.com

Simon PalmerOffice Managing Partner Doha, QatarT +974 4420 6100 simon.palmer@dlapiper.com

The information contained in this briefing does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered.

DLA Piper is a global law firm operating through various separate and distinct legal entities. Further details of these entities can be found at www.dlapiper.com.

This publication is intended as a general overview and discussion of the subjects dealt with, and does not create a lawyer-client relationship. It is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation. DLA Piper will accept no responsibility for any actions taken or not taken on the basis of this publication. This may qualify as “Lawyer Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.

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