Extension in the income tax filing deadline for the FY 2020:
24 MARCH 2021
As per the circular No: 1 and 2 of 2021 of the General Tax Authority (GTA) issued on 24th March 2021, the key implications of both circulars are as follows:
With effect from the year ended 31 December 2020, all companies fully owned by Qatari/GCC nationals are required to file income tax returns regardless of their income or capital (Circular No: 2)
The deadline for filing the income tax returns for the taxable year 2020 has been extended for 2 (two) months for foreign companies and 4 (four) months for companies fully owned by Qatari/GCC nationals. (Circular No:1)
Please find below a summary of the deadline for filing income tax returns for all entities according to the circular 1 and 2 of 2021 issued on 24 March 2021:
It is pertinent to note that failure to comply with filing of tax return on or before the deadline applicable for each category may result in penalties of QR 500 per day up to a maximum of QR 180,000 as the case may be.
The above is only a summary of the current update and is based on the information currently available in the public domain which we are subject to change. The above tax updates have been written in general terms and does not constitute any form of advice or recommendation by Al Ansari Auditors and thereby cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we highly recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this material.
Qatar Corporate Tax Filing 2020
Tax Alert | 17 February 2021
In September 2020 the General Tax Authority (The GTA) introduced the new online tax portal “Dhareeba” which enables all registered taxpayers to submit their annual corporate income tax returns as well as various other declarations and reports electronically.Tax Filing Deadline
First of all, we would like to draw your attention that no general extension has been granted by the GTA as of today. Therefore, the tax filing deadline for the companies with 31 December 2020 as year end will be 30 April 2021.
Specific request for an extension
We would like to draw your attention to Article 30 of the executive regulations of the Income Tax Law No 24 of 2018, which states that the GTA may grant an extension for the deadline to file tax returns for a period of up to four months. Extension applications for the returns that have a submission deadline on April 30, 2021 must be submitted to the GTA before February 28, 2021.
Taxpayers should be noted here that to obtain an extension of the period for submitting tax returns the taxpayer must provide proper backups to the GTA that proves the reasons that made him unable to file income tax return by the deadline set on April 30, 2021. And the mentioned request should be submitted 60 days prior to the original tax return submission deadline. Based on the above, we recommend submitting extension requests with proof of support for the application as soon as possible.
We, Ansari Auditors will be pleased to assist your business with requests to extend the deadline and ensure that the requests are submitted in the right way and in a timely manner.
Al Ansari Auditors appointment of Dhareeba tax portal
We also ask relevant taxpayers to ensure that Ansari Auditors is appointed as their tax representative on the Dhareeba tax portal so that we can ensure that there is no technical error that may be the reason for not submitting tax returns on time. This will also assist us in timely submitting of the tax return on Dhareeba portal in this regard, please find attached the manual explaining the steps which need to be taken to complete the appointment.
How can Ansari Auditors help you?
In this respect, Ansari Auditors Qatar can help to be ready to comply with requirements of corporate income tax compliance by reviewing Dhareeba profile of your business and supporting in the following
- Communication with GTA
- Submission for an extension application
- Providing required documentation requested by the GTA
- Checking Dhareeba profile of your business for assurance purposes
- Support in submission of corporate income tax return
If you have any questions or would like to discuss this further please contact us
- Ansari Auditors
- 44430696, 66794079
Transfer Price Reporting
Feb 2 2021
On February 2, 2021, the GTA verbally confirmed that a Transfer Pricing Form will be required for taxpayers with either total value of assets or total revenues in excess of 10 million QAR for the financial years beginning January 1, 2020 onwards. The Transfer Pricing Form should be submitted alongside a taxpayer’s income tax returns on the Qatar Online Tax Portal, namely Dhareeba.
The Transfer Pricing Form will require information on the details and nature of the taxpayer’s intra-group transactions, including the OECD method applied by the taxpayer to determine that the transactions were conducted on an arm’s-length basis. In addition to the above information, the Transfer Pricing Form will also require taxpayers to provide additional transfer pricing related information. Furthermore, the GTA has verbally communicated that taxpayers should also prepare and maintain transfer pricing documentation to support their related party transactions.
With the income tax return submission deadline fast approaching, it is critical that taxpayers proactively assess the transfer pricing positions for their Qatari entities and assess their readiness for the transfer pricing compliance requirements by opting for a robust and compliant transfer pricing approach.
Key Considerations for taxpayers
The introduction of the Transfer Pricing Form is a major development for Qatari entities with related party transactions and requires careful assessment of the transfer pricing policies in place. Below, we have highlighted some of the key considerations that taxpayers should assess as they begin to prepare the income tax returns for financial year 2020:
- Consider whether you have undertaken an intra-group mapping exercise to identify and delineate your related party transactions – with reference to the Qatari transfer pricing regulations;
- Consider whether you have assessed the most appropriate transfer pricing methodology to apply in respect of the related party transaction(s);
- Consider whether your current transfer pricing policy is consistent and appropriate from both a Qatari transfer pricing and OECD perspectives;
- Consider whether you have prepared the necessary transfer pricing documentation (Master File & Local Files) to support the disclosures in the Transfer Pricing Form; and
- Consider the need for any transfer pricing adjustments to ensure that your intra-group transactions are conducted on an arm’s-length basis from a Qatari perspective.
We highly recommend all taxpayers to proactively assess the transfer pricing positions and policies for their Qatar based entities, in order to ensure appropriate disclosures are made as part of the Transfer Pricing Form. The new Transfer pricing Form compliance requirement also creates a momentum for taxpayers to assess their readiness for the wider transfer pricing compliance exercise, including Local File, Master File and Country by Country Reporting preparation and submission.
IMPORTANT UPDATE— QATAR INCOME TAX FILING REQUIREMENT
Released on 02 March 2020
In accordance with Article 69 of Cabinet Resolution No 39 of 2019 on executive regulation of Income Tax Law, all Companies are required to close the books of accounts as on 31st December of every calendar year starting from December 2019. The new accounting period for all companies will be from 1st January to 31st December of every year.
The interval period in between will be treated as an independent accounting period and tax return has to be filed accordingly.
For example, in the case of a company:
1. If the current accounting period ends in any month between January 2020 to June 2020, books of account should be closed on 31st December 2019 and the income tax return along with audited financial statements should be submitted to GTA.
2. If the current accounting period ends in any month between July 2020 to December 2020, books of accounts should be closed on 31st December 2020 and the income tax return along with audited financial statements should be submitted to GTA.
Failure to submit a tax return before the deadline of 4 months from the end of the accounting period will invite a penalty of OAR 500 per day and up to OAR 180.000 per year.
For more details please call us
The new Executive Regulations (ER) to Law No. 24 of 2018 ( Issued on11 December 2019)
The new Executive Regulations (ER) to Law No. 24 of 2018 were issued by way of the Decision No. 39 of 2019 of the Council of Ministers and published in the Official Gazette on 11 December 2019. The new Executive Regulations repeal and replace the old Executive Regulations.
The new ER’s contain a number of substantive changes, with the determination of Taxable Income, withholding tax application, exemption of Qatar/GCC natural persons, subsidiary of listed entities and Transfer Pricing.
The effective date of the new Executive Regulations will be the day after the issuance of ER in the Official Gazette, i.e. 12 December 2019
Permanente Establishment (“PE”)
The new ER’s provides further clarity on the constitution of a PE as follows:
- A building site, or a construction, installation or assembly project which lasts longer than six months, including the supervisory activities relating thereto (project PE)
- A non-resident provides services (including consultancy services) in Qatar through employees or other personnel for a period or periods aggregating more than 183 days in a twelve months period (Service PE).
The new ER also brings in the risk of attribution of income or revenue earned in Qatar to an existing PE, where the activities are similar in nature. The definition of taxable income is now widened, especially for a non-resident. It is also noted that the general principles of OECD have been taken into consideration while determining the scope and definition of taxable income.
One of the major change that the new ER’s have brought in is the shift from the principle of “place of performance of services” to the principle of “usage, consumption or utilization” to test taxability of payments made to non-residents. The services are now subject to WHT if they are consumed, used, or utilized in Qatar even if they are rendered outside the State of Qatar.
The new ER stipulates that the amounts payable to non-residents (whether related parties or not) shall consider as effectively paid after the elapse of a maximum period of 12 months from the due date of the payments (with the exception of amounts owned by ministries, other government agencies and public foundations). The new ER further provides detailed guidelines on the WHT refund process.
Exemption to wholly-owned Qatari companies
The new ER has prescribed for the test of residency of Qatari nationals while determining the exempt status of wholly-owned Qatari Companies.
We understand this residency test could be relevant for wholly GCC Companies and such companies being potentially taxable when the GCC nationals/shareholders are not resident in Qatar. This could have a huge impact on many entities claiming exemption on the basis that these are wholly owned by GCC nationals.
Taxation on shareholding of listed companies
As per the new ER’s, subsidiaries and companies owned by listed companies shall now be taxable to the extent of non-Qatari shareholding in the listed entities. Please note that the listed company which is listed on Qatar stock exchange will continue to remain exempt.
The practical aspects of determining the said taxable shareholdings are to be tested.
The new ER has brought in detailed Transfer Pricing (TP) regulations. The regulations require
- Entities to determine the price of related party transactions in accordance with the arm’s length principle and to evaluate those at the time of the transaction, and in any case no later than the time of submitting the annual tax return.
- Entities to perform a detailed functional analysis at the time of preparation of the tax returns. A search for comparable transactions/operations can be conducted once in three years, however, it is expected that the financial data of the comparable operations be updated annually.
- Submission of transfer pricing declaration with the annual tax return, if the number of total revenues or assets meet or exceed the thresholds determined by the GTA.
Master file and local file filing requirements have also been introduced. These requirements shall be effective for the tax year beginning on or after the effective date determined by the GTA. The master file and local file requirements shall be applicable to entities meeting or exceeding the total revenues or assets thresholds determined by the GTA for this purpose.
The GTA may send out a specific questionnaire to be filled out and request for relevant information and supporting documentation for the purpose of conducting transfer pricing audits. It onus shall be on the taxpayer to prove that transactions with associated enterprises meet the arm’s length principle.
The above-mentioned requirements shall also apply to transactions between any entity residing in the state and another entity not associated, if
- One of the two entities benefits from a preferential tax system
- The other entity resides in one of the non-cooperating countries or territories. The state or territory is considered as non-cooperative if no agreement that permits the exchange of information for tax purposes has been signed with the State of Qatar
Thin capitalization provision
The new Executive Regulations have introduced thin capitalization provisions whereby interest on the loans, to related parties, are restricted to the extent of amount loans that do not exceed three times the ownership rights. The ER also requires that the loan must be necessary for the purpose of taxpayer’s business.
Provisions for doubtful debts for Banks and financial institutions:
As per the new ER, the provision for doubtful debts for Banking and financial institutions shall be determined based on the limits and instruction issued by QCB only. The earlier cap of 10% of net income has been removed.
The new ER’s have abolished the written down value (WDV) method, and now depreciation is to be computed in the straight-line method (SLM) based on detailed new prescribed rates for the various asset. More clarification of the GTA will be required on transitioning from WDV method to SLM and determining the opening value of each asset based on previous tax returns.
Notification of change in the entity
Changes in the entity which lead to a reduction of tax liability will be effective from the date of notification and not the date of actual change. Thus delay in the notification will lead to delay in availing the benefit of change.
- Income tax return and capital gains tax return shall be deemed to be self-assessed
- The new ER specify the requirements of filing the tax return for capital gains
Process of audit and examination
- Submission of details and document will have to be made within 20 days
- The GTA will notify taxpayers at least 15 days prior to initiating a tax audit or examination. Further, the GTA will also notify the taxpayers of the results of the tax examination before issuing the assessments.
Tax Exemption – Interest and dividend
The new ER states that interest paid by the bank to non-resident natural persons and capital gains earned by non-resident natural persons is not covered under exemptions. However, the methodology to recover the tax and compliance requirements are not specified therein.
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Qatar enacts new income tax law ( Issued on 13 December 2018)
On 13 December 2018, His Highness Tamim Bin Hamad Al Thani, the Emir of Qatar, issued Law No. (24) of 2018 to promulgate a new income tax law. The new law replaces Law No. (21) of 2009 and is effective from 13 December 2018.
The new law retains most features and provisions of the previous law. Qatar will continue to apply a territorial tax system with a standard corporate income tax rate of 10%. The profits of companies that are wholly owned by the Gulf Cooperation Council (GCC) nationals, and the share of corporate profits attributable to GCC nationals who are resident in Qatar, will remain exempt from tax.
The main changes introduced in the new law are:
- A flat tax rate of 35% will now also apply to agreements relating to petrochemical industries. Previously, the 35% rate applied only to petroleum operations.
- Taxpayers may seek approval for an exemption or preferential tax rate for projects based on criteria related to the nature of a project or its location. The Ministry of Finance may grant exemptions for up to five years. The Council of Ministers may approve exemptions for longer periods, or approve a preferential tax rate.
- The 7% withholding tax rate has been removed, and a single withholding tax rate of 5% will now apply to payments made to non-residents for royalties and services that are performed in Qatar without a permanent establishment.
- Gains resulting from the revaluation of assets that are used as an in-kind contribution to the capital of another resident stockholding company will be exempt, provided the shares of that company are not sold for five years.
- The exemption from tax for profits attributable to non-Qatari stockholders in companies and investment funds listed on the Qatar Stock Exchange, as well as gains arising from trading the shares or units of such companies or funds, has been moved from a special law into the Income Tax Law.
- The penalties for non-compliance relating to filing the annual tax return, settling tax liabilities, reporting contracts, and registering as a taxpayer, have been increased significantly, and are as follows:
- Late filing of tax return: QAR500 per day up to a maximum of QAR180,000
- Late payment of tax or withholding tax: 2% per month, up to a maximum of 100% of the amount of tax due
- Failure to register for tax: QAR20,000
- Failure by the tax-exempt entity to file a tax return: QAR10,000
- Failure to maintain proper records: QAR30,000
- Failure to file audited financial statements: QAR30,000
- Failure to report contractor information: QAR10,000
- Failure to deduct withholding tax: 100% of the withholding tax
- Failure to provide information related to the international exchange of information: QAR 500,000.
- The Head of the General Tax Authority, established under Decree No. 77 of 2018, will have the authority to relieve taxpayers from penalties up to a maximum of QAR500,000. Previously the limit was QAR50,000.
- Taxpayers enjoying tax exemptions will be required to submit their annual corporate tax return showing the amount of income that would have been taxable without the exemption, and the amount of tax-exempt.