Setting upBusiness inQatar – 10 keypoints

Contents

Foreign investment restrictions 2

Choosing the most appropriate business medium 3

Company structures 5

Commercial registration and other formalities 6

Taxation 8

Staff 9

Property 10

Commercial contracts 11

Intellectual property 12

Culture and customs 13

Simmons & Simmons 14

Offices 15

Qatar is one of the smaller Gulf states in terms of population and geographicalarea, but boasts the third largest gas reserves in the world. This abundance ofnatural resources coupled with recent legal liberalisation, economicdiversification and a burgeoning economy means that there are manyopportunities for investment in Qatar.

Foreign investors are welcomed and various incentives are available to attractforeign capital including tax breaks and exemptions from customs duty. Foreigninvestors can transfer their investments and profits can be repatriated as canproceeds of sale and capital on liquidation.

Qatar is very much a market where local knowledge is key. We set out below 10key points to consider when doing business in Qatar. Please contact Simmons &Simmons if you would like more detailed information.

1

Foreign investment restrictions

� Foreign investors may only invest in Qatar in accordance with the provisions of the ForeignInvestment Law (Law No. (13) of 2000).

� Foreign investors may invest in all parts of the national economy (other than those set out below)with a Qatari partner who must own at least 51% of the enterprise.

� Foreign investors may not invest in commercial agencies or, broadly speaking, real estate. Approvalfrom the Council of Ministers is required for foreign investment in banking or insurance.

� The Ministry of Economy and Commerce may permit foreign investors to own more than 49% andup to 100% of a company in specified sectors, namely agriculture, industry, health, education,tourism, and the development of natural resources, energy or mining.

� Foreign capital is guaranteed against expropriation (although the state may acquire assets for publicbenefit on a non-discriminatory basis, provided the full economic value of the asset is paid for theasset).

� A foreign company which is performing a specific contract in Qatar may set up a branch office ifthe project “facilitates the performance of a public service or utility”.

� A foreign company operating in Qatar under a Qatari government concession to extract, exploit ormanage the State’s national resources is exempt from the Foreign Investment Law. In practice thiscovers all the oil majors.

� A company formed by a foreign entity with the government or a government entity (an Article 68Company) will be subject to special rules.

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Choosing the most appropriate business medium

Establishing a company

� A company is the normal vehicle where an on-going business is being set up.

� Various exemptions are available to attract foreign capital.

n In almost all cases a Qatari partner will be required.

Branch office

� Used where a foreign company is performing a specific contract in Qatar.

� Authorised by the Ministry of Economy and Commerce where the project “facilitates theperformance of a public service or utility”.

� No need for a Qatari partner.

� Branch is only entitled to perform the specific contract for which it is registered.

� Branch will be fully taxable unless it is granted a special exemption.

� A special regime applies to branches of foreign engineering consultancy firms.

Commercial Agency

� The foreign company does not establish a presence in Qatar, instead an agent is appointed tomarket goods and services within Qatar.

� Exclusive agencies must be registered and are governed by Qatari agency law.

� Under a registered agency, commission is payable on all sales of the products within the territoryeven if the sales are not due to the activities of the agent.

� It is difficult to terminate a registered agency; in addition compensation is payable upon thetermination of the agency, including upon the expiry of a fixed term agency.

3

Representative Trade Office

� A method of establishing a “shop window” in Qatar.

� Can be used to promote a foreign company in Qatar and try to introduce it to Qatari companiesand projects.

� Cannot be used to contract to do business in Qatar. Business must be carried out by a foreign entity(where the contract can be performed substantially outside Qatar) or by a company or branchauthorised to do business in Qatar.

4

Company structures

The two forms of vehicle most likely to be of interest to foreign investors are Limited LiabilityCompanies (LLCs) and so-called Article 68 Companies. (Other possible legal entities under Qatari laware the Simple Partnership, the Joint Partnership and the Qatari Shareholding Company (QSC) butforeign participation in these bodies is restricted).

If the foreign investor is permitted to own 100% of the company (by the Ministry of Economy andCommerce as a result of investing in certain specified sectors) the single shareholder company can beused as the vehicle for such investment.

Limited Liability Company

� Minimum capital of QR 200,000.

� Must have at least 51% Qatari ownership unless an exemption has been obtained.

� The parties’ profit shares do not necessarily have to reflect their shareholdings.

� 10% of each year’s net profits must be kept within a company until the reserve stands at 50% of theshare capital.

� May not raise capital by public subscription and may not issue freely transferable shares or bonds.

� Shares may only be transferred after they have first been offered to the other shareholders by wayof pre-emption, unless the other shareholders have agreed to waive their right.

� May not carry out banking or insurance business or provide investment advice or investmentservices to third parties.

Article 68 Company

� Formed by an investor, which may be foreign, with the Government or a 51+% Government ownedentity.

� The foreign investor’s share of the company is a matter for negotiation but can be greater than51%.

� Corporate structure is a “Qatari Shareholding Company with Government Participation”

� Falls outside the Foreign Investment Law and, to a certain extent, the Commercial Companies Law.

Single shareholder company

� Minimum capital of QR200,000.

� May be foreign owned only if permitted by Ministry of Economy and Commerce.

� Subject to the laws relating to limited liability companies unless contradicted by a specific lawrelating to single shareholder companies.

5

Commercial registration and other formalities

Using a “facilitator” or “government liaison officer”

Virtually all companies use a “facilitator” or “government liaison officer” to carry out all the necessaryregistration formalities. Such a facilitator will also be invaluable for obtaining residence permits, drivinglicences and telephone, power and water connections etc. A facilitator will know all the ins and outs ofthe relevant procedures and requirements and will help minimise any frustrations which mightotherwise be experienced when setting up. Consequently, the steps set out below are only a brief highlevel guide to what is required.

Company Formation

The following are required in order to incorporate a company and obtain a Commercial Registration:

� Memorandum & Articles of Association in Arabic which conform with the standard form preparedby the Ministry of Economy and Commerce and have been approved by the Ministry.

� Notarised, authenticated and consularised copies of the foreign company’s Certificate ofIncorporation, Memorandum and Articles of Association.

� Letter from a bank indicating the deposit of the share capital at that bank.

� A lease contract for the office of the company.

� Chamber of Commerce Registration.

Once the company has been incorporated and the Commercial Registration issued the share capitalcan be released to the company’s directors or the general manager for the purposes of running thecompany. The following licences must then also be obtained:

� Municipal licence.

� Signage licence.

� Employer’s Immigration Department identity card.

Branch Office

The following are required in order to establish a branch office and obtain a Commercial Registration:

� Authorisation from the Ministry of Economy and Commerce to establish a branch.

� Notarised, authenticated and consularised copies of the foreign company’s Certificate ofIncorporation and Memorandum and Articles of Association.

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� A notarised, authenticated and consularised power of attorney from the foreign company to themanager of the branch.

� A copy of the contract in respect of which it is sought to establish the branch office.

� Chamber of Commerce Registration.

� A lease contract for the office of the company.

Once the branch has been approved and the Commercial Registration issued the following licencesmust also be obtained:

� Municipal licence.

� Signage licence.

� Employer’s Immigration Department identity card.

If applicable, the company/branch will also need to be entered in the Importers’ Register and/orContractors’ Register.

7

Taxation

Companies

� Income tax is levied on businesses other than those wholly owned by GCC nationals.

� Income tax is charged on all profits arising in Qatar, including profits on the sale of the company’sassets.

� The share of profits of the Qatari or GCC partner in a business is exempt from tax.

� An income tax exemption can be granted for a period of up to 10 years for major projects if theymeet certain criteria.

� Some countries have double tax treaties with Qatar, if not unilateral relief may be available, forexample UK unilateral relief is available against UK taxes where Qatari income tax has been paid.

Tax is payable at the following progressive rates:

Taxable income in Qatari Riyals Rate0 – 100,000 Exempt100,001 – 500,000 10%500,001 – 1,000,000 15%1,000,001 – 1,500,000 20%1,500,001 – 2,500,000 25%2,500,001 – 5,000,000 30%5,000,001+ 35%

Individuals

There is no income tax on personal salaries.

Customs duty

The new GCC customs duty is 5% on most items. Exemptions from customs duty can be obtained forthe import of equipment relating to a particular project as can exemptions from customs duty for theimport of primary or semi-manufactured materials where they are not available locally. In addition tocustoms duty, legalisation fees are payable on import documentation.

8

Staff

� A “Qatarisation” initiative is in place which aims to increase the number of Qatari nationals in thepublic sector workforce. The Labour Law introduces Qatarisation initiatives for private sectorentities. The employment of Qatari nationals is one of the criteria taken into account when taxexemptions are granted.

� All contracts of employment are governed by the Labour Law. They must be in Arabic and approvedby the Labour Department.

� In particular, employers should be aware of the requirement to pay end of service benefits toemployees.

� Companies will need to obtain residence and work permits for their expatriate staff. A LabourDepartment Committee has been established to supervise applications for bringing in foreignworkers.

� All expatriate employees must be sponsored by their employer who is responsible for them whilethey are in Qatar.

9

Property

� Ownership of land by foreigners is restricted.

� Land for projects can be given to foreign investors on long term leases for periods of up to 60 yearswhich may be renewed.

� Law no. (17) of 2004 permits foreigners to own freehold property in three new developments (WestBay, The Pearl and Al Khor) and leasehold property in a further 18 developments.

10

Commercial contracts

Once a business entity has been established it will need to protect its interests when contracting withother entities.

� The parties to an international contract are free to choose the law and jurisdiction which will governthat contract. (If they do not choose an applicable law, the contract will be governed by the QatariCivil Code.)

� The parties may also agree in writing to refer disputes to arbitration.

11

Intellectual property

Traditionally, intellectual property rights were not as well protected in Qatar as foreign investors wereused to, however trademark and copyright laws were enacted in 2002 and a new patent law in 2006.

Trademarks

� Trademarks can be registered at the Trademark Office.

� Registrations are valid for 10 years from date of filing (renewable).

� Trademarks can be cancelled if not used for periods of 5 consecutive years in Qatar.

� The international classification of goods and services is used, a separate application must be madefor each class.

� Non-Qataris have the same rights as Qataris provided that their country treats Qatar reciprocally.

Copyright

� The Qatari copyright law protects original literary and artistic works including computer programmesand databases which are creative in the selection and arrangement of their subject matter.

� Materials are registered at the Qatar Copyright Office in order to be protected.

� Protection extends, inter alia, to non-Qataris whose work is first published in Qatar or is published inanother country and then published in Qatar within 30 days of the first publication date, and toworks protected by international agreements.

Patents

� Qatari patent law of 2006 provides for registration of inventions and foreign patents at the QatarPatent Office.

� A GCC patent can be obtained by filing at the Patent Office in Riyadh, Saudi Arabia.

Design Rights

� Inventive designs or industrial models can be registered under the Trademark Law.

� Protection lasts for 5 years (renewable for 2 further 5 year periods).

12

Culture and customs

Finally, a ‘soft’ point but don’t forget to provide your staff (both those based in Qatar and those towhom they will be reporting in the head office) with a briefing on local culture and customs.

We have already mentioned that a facilitator who knows the system can be extremely useful to guideyou through the required paperwork and practical steps and to advise you on cultural issues but it isalso vital to have a well-briefed individual from your organisation on the ground when setting up towork alongside a facilitator and/or local partner.

13

Simmons & Simmons

If you would like any further information please contact

Andrew WingfieldT +974 409 6720E andrew.wingfield@simmons-simmons.com

Stuart CavetT +974 409 6740E stuart.cavet@simmons-simmons.com

Samer EidoT +974 409 6730E samer.eido@simmons-simmons.com

14

This document is for general guidance only. It does not containdefinitive advice and specific advice should always be obtained.

elexica.com is the award winning online legal resource of Simmons & Simmons© Simmons & Simmons 2009. All rights reserved, and all moral rights are asserted and reserved.This document is for general guidance only. It does not contain definitive advice.SIMMONS & SIMMONS and S&S are registered trade marks of Simmons & Simmons.

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