The consultation period extends from 24 October for 30 days. The new tax regime will create an internationally competitive fiscal environment for the conduct of business activities, promote the international reputation of the QFC and provide, in the long term, funding for the development and operation of the QFC.
The QFC Law, No 7 of 2005, established that there would be no taxation on businesses licensed by the Qatar Financial Centre for the first three years of the Centre’s operation, ie from 1 May 2005 up to 30 April 2008.
Thereafter the QFC will levy a low tax rate on business profits of 10% with profits generally to be based on accounts, whether prepared under IFRS or other appropriate GAAP. Broadly, only local source business profits will be subject to tax.
In addition to the basic charging provisions the new tax regime will include specific regulations covering Islamic finance, insurance companies, transfer pricing, partnerships and reorganizations.
The detailed provisions of the QFC tax regime are included in the attached consultation paper.
The key features of the proposed tax regime are:
There will be only one category of taxable income.
To minimise the need for complex tax legislation dealing with different classes of profits or losses (for example rules for their determination and inter-relation) there will only be a single category of taxable income under the QFC tax regime.
There will be only one type of tax on the same income.
There will be no requirement for multiple layers of taxation in the QFC, so a single type of tax will suffice.
Taxable profits will be based on accounting profits.
Subject to a few specific tax adjustments, taxable income will be based on accounting profits, which is in accordance with widespread international practice.
Non-local source profits will not be taxed.
Broadly, taxable income will be limited to local source profits.
There will be a general restriction on deductibility of expenditure.
As in many tax regimes, there will be a general restriction on the deductibility of expenditure. Tax deductible expenditure will be limited to expenditure incurred for the purposes of activities giving rise to taxable income.
There will be flexibility in the use of tax losses
Companies will be able to surrender losses between members of the same group, and there will be no restriction on the carryforward of tax losses to future years.
There will be no withholding taxes in the QFC
There will be no withholding taxes on the payment of interest, dividends and royalties by QFC firms
A tax ruling facility will be available
An advance ruling facility is being introduced which will allow firms to obtain certainty, either concerning the interpretation of specific areas of the law, or concerning a specific transaction.
Support for insurance businesses
The profits of both captive insurance companies and reinsurance companies will be exempt from taxation.
Collective Investment Schemes
Collective Investment Schemes and other investment funds established within the QFC will be exempt from tax.
Stuart Pearce, Chief Executive Officer and Director General of the QFC Authority, said “The adoption of a tax regime is a planned and transparent part of the development of the QFC. The regime we are proposing will give investing firms a high degree of certainty about their future tax. There are no hidden costs in operating from the QFC, and as firms we have already consulted with on these proposals have told us, a low tax rate based on international best practice principles is preferable to a tax haven as it is both predictable and – in the long term – more commercially efficient.”
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