The Qatar Financial Centre Authority (QFCA) has enacted a corporate tax regime that aims to diversify the government's sources of revenue and help the country to attract insurance and asset management companies.
The 10 per cent tax on corporate profits enacted yesterday only applies to money earned within Qatar and exemptions are available for certain kinds of insurance businesses and investment funds.
The QFCA is not levying personal income taxes under the new regime, which goes into effect retroactively starting last January. "In terms of the Gulf, the financial centres tend to have no taxes but the difference is - and this goes to the heart of what the QFC [Qatar Financial Centre] is about - it was designed to be an onshore regime," said Ian Anderson, the director of finance and tax at the QFCA. "There are no zones or limitations."
In contrast to the QFC, regulated firms in the Dubai International Financial Centre (DIFC) are exempt from tax for 50 years from the commercial hub's founding in 2004. But DIFC-registered companies are also restricted from doing business outside the financial free zone. Taxes would help the QFCA, Mr Anderson said, because they would give the Qatari government a new source of revenues to counterbalance its heavy reliance on energy exports.
Qatar is one of the world's largest natural gas producers and exporters. Having a tax system, he said, would also allow the QFCA to introduce tax breaks as incentives to attract desirable subsets of the financial services industry. The centre is trying to carve out a niche as a centre in the Gulf for reinsurance companies, captive insurers and investment management. Reinsurers are large companies that buy policies from insurers and directly bear their risk. Captive insurers are companies started by large businesses to provide in-house cover.
"It comes down to the type of firms we are trying to attract," Mr Anderson said. "We're not working to attract firms interested in the lowest tax. We're interested in those that want to do business in Qatar." The QFC has been planning corporate taxes since 2007 but it has taken three years to consult with businesses and lay the administrative groundwork to start the levy, he said.
