- It’s centrally located making it easy for shipping of goods.
- Low fuel costs hence low costs of production involved.
- Amendment of Law No. 13 of 2000 to Law No. 1 of 2010; ownership of 100% stake in companies for non-Qatar persons.
- Low tax policies and tax incentives.
- Adequate labor.
- Numerous exemptions and incentives for exchanges, imports and exports.
- Free trade region at Doha port.
Qatar is an Arab state that is located in Western Asia. It lies between the Persian Gulf and Saudi Arabia. It was monarchy ruled by the Al Thani family since mid-19th century. It was one of the poorest Persian Gulf states, but this transformed when it discovered enormous oil, and natural gas and now it’s ranked one of the wealthiest countries in the world. Its citizens’ population is outsized by the foreign workers as they are about 250,000 people. It has recreated itself to be an attractive business hub. This is mainly due to the oil reserves it has and the numerous opportunities that are available within the country.
Qatar provides a favorable environment for investment not only to the non-Qataris but also for the Qatar natives. The tremendous wealth that has accumulated in Qatar makes it one, if not the wealthiest country in the world. Some percentage of the country’s wealth can be attributed to the business operations carried out within the country by all its inhabitants, foreigners and natives. However, most the country’s wealth comes from its natural resources.
Qatar heavily depends on the oil and gas for its economic development and growth. This, therefore, forces the country to carry out regular reforms in their policies and laws in order to adjust the country’s economy whenever world prices for these natural resources decline. This favors not only private sector but also assists in enhancing economic diversification and liberalization. Qatar has numerous successful industries such as the steel, iron and cement manufacturing industries. The country has gone a milestone in ensuring its economy stands still by sign numerous economic agreements with other states so as to strengthen relations.
Qatar laws also play a big role in enhancing business prosperity for the country’s natives. Providing foreign attraction already forms one of the structures that provide a favorable environment for its citizens. Tax incentives and land protection from the foreigners are just but a few of the inducements offered to the natives.
Investment law for foreigners
Investment by foreigners was governed by Law No. 13 of year 2000. This law is meant to control the investment ability and restrictions (if any) on the non-Qatari investors. It clearly outlines that non-Qatari investors can only hold a maximum of 49% of capital as the remaining 51% was for the Qatar citizens. They were also not allowed to venture in certain sectors like the Insurance, commercial Agencies, Real Estate and Banking activities. The law made exceptions in regards to the amount foreign investors were allowed to invest in sectors such as real estate investments. Government approved real estate projects can only obtain leased land for a period not exceeding 50 years. This law also restricted investment by a citizen of the country venturing in a fully owned entity by another Qatar citizen. Exceptions to the 49% ownership rule were present only at the consent and approval by the Minister of Business and Trade though only if it lied in either of the following sectors: agriculture, industry, health, tourism, education, cultural, sports and entertainment, distribution services, development and exploitation of natural resources, business of technical and information consultancy and energy or mining.
Projects that optimally utilize the country’s raw materials, those set up for exporting product, introducing new products or coming up with new technologies were given preference over the others. These projects were permitted for the foreigner to own up to 70% of the company. In 2004, Law No. 25 was enacted, and it outlined rules relating to fighting illegal practices that are carried out by the foreigners. It prohibited for non-Qataris from carrying out any commercial or professional business activities that have not been permitted by law of the country. It also made it illegal for a Qatari citizen to assist a non-Qatari in carrying out such businesses. Imprisonment, confiscation of the cash generated by the business and fines were set as the penalties that will be faced if the law was violated. Revocation of business permit/licenses and closure of the premises where the business is taking place may also be exercised. A foreign company has to launch its legal presence in the country through several ways i.e. incorporating the business under Commercial Companies Law No. 5 of 2002 or through Article 3 of Foreign Investment Law. In order to start a foreign branch, investors had to initiate presence under the Ministerial Resolution No. 142 of 2006. The firm should also incorporate their Financial and Technology Zones.
Law No. 13 of 2000 was amended to Law No. 1 of 2010 which has given the non-Qatari investors the power to own a business entity wholly i.e. they are not restricted to the 49 % rule, but they can have 100% stake on a business venture or investment. This is related to the consultative and technical work services, information and technology, as well as distribution sectors. The law continues to offer more incentives to foreign investments, for example, the withholding tax of 7% has been reduced to 5% on some payments made by expatriates as well as a reduction in the foreign-owned business to 10% from 35%. The only excluded companies from this reduction of business tax are the ones dealing with gas and oil sectors as they will continue to pay a rate of 35%. The Banking sector, Commercial Agencies, Real Estate and Insurance sectors are restricted to be controlled exclusively by the Qatari citizens though there are exceptional cases where non-Qatari’s can be granted control over these by the country’s Council of Ministers. This was a move targeting local economy uplift after it had performed poorly in 2008 and 2009. For the exemption to be offered, certain conditions had to be met by the foreigner i.e. he/she must apply to the Investment Promotional Department at Ministry of Finance for special approval to own 100%, and the business is expected to be a new, creative and innovative to the extent that it will be able to create employment opportunities in Qatar.
The Law in previous years had been amended twice, Decree No. 31 in 2004 and Decree No. 2 in 2005 in an effort to favor and increase foreign investment in the country. This amendment in 2010 with Law No. 1 of 2010 was unexpected though the economy wasn’t performing well. Privileges and incentives provided by the law in general to encourage foreigners to invest are many. They make Qatar a foreign investment hub. They include: The freedom to import funds, shift profit and assets, stable rate of exchanging of money and an exemption from income tax of up to 10 years, importing equipment and machinery at duty-free charges etc.
Qatar offers foreigners some general advantages. This evidenced by the fact that investments laws have been favorable in creating positive externalities that come out as general benefits that the foreign investments enjoy. For example, the state is strategically positioned and, therefore, offers an attractive investment destination. It is surrounded by large oil producing countries whom the business can easily engage with in terms of business. Saudi Arabia has strict rules regarding foreign investments which dictate that any country that carries out trade in Saudi Arabia, has to be a Saudi partner, and it has to obtain the relevant authorization from Saudi authorities. This rule is a challenge to countries that aim to carry out random trade activities within Saudi Arabia. However, the rule also makes Qatar a better place to start a business if one’s ventures are targeting Saudi Arabia. Since Qatar is located at the Persian Gulf, it makes transportation of goods in and out of the city easy via shipping services. This has made it develop to a transshipment center. Goods are shipped through the harbor of Qatar without taxes being charged on them.
Factors such as having massive oils mines and natural gas, in Qatar, enables firms that highly depend on these as sources of energy to enjoy reduced energy costs. Fuel in Qatar is cheap, thereby, helping to reduce costs of production. This makes companies located within the country to enjoy economies of scales as they save a lot and channel their funds to expansion of the business. Labor is adequately available since there is a high influx of foreign workers coming from different countries in search of job opportunities. About 1 million people of Qatar’s estimated population of 1.6 million people is made up of immigrants who go to the country to search for employment.
Investment in the industrial sector has been considered in the policies developed in Qatar so as to enable smooth expansion and growth of industries within the country. These policies make the sector attractive to foreign investments. Law No. 19 of 1995 facilitates licensing and granting incentives to industries. Exemptions from custom duty on machinery, equipment and raw materials are offered, capital and money remittance is free, electricity and water is provided at subsidized rates and loans are easily accessible from its bank i.e. the Qatar Industrial Development Bank.
Foreign investors are, however, guided and restricted by law in order to conserve the environment in whatever ventures they undertake. Public health and security are aspects that the government of Qatar is entitled to offer to its citizens, and foreign investors are urged not go against or result to anything that deviates from these policies.
Exporting requires a contract with distributors to sell products in the Qatar market through a filing a notification in accordance to the Civil and Commercial Law. In order for one to imports, on the other, hand, one has to have an import license. This principal-agent relationship between the companies and Qatar firms with foreigners has to be governed hence the Ministry of Commerce and Economy has to be informed about such relationships. Importations of goods that are banned by the Islamic law are discouraged. These include pork and pork products, certain pharmaceutical goods, tobacco and alcoholic drinks. Though such beverages have been allowed, they are heavily taxed. Import duties follow the GATT principles and a 4% ad Valorem tax is charged on most goods except; alcohol beverages, 50% and steel, 20%.
Taxation policies are favorable to the non-Qatar as the corporation tax is not charged on the first QR 70,000. It has a non-progressive tax system which has a 50% rate as the maximum. Other encouraging tax policies include the fact that the country has engaged in several tax treaties with different countries which they have frequently trade with. There exist no trade treaties between Qatar and United States, therefore, double taxation can occur. This makes the US traders highly depend on agents.
Investment law for citizens
The citizens in Qatar have benefited as a result of the effort being put by the government in amending the foreign investment law. As stated earlier, Qatari natives are fewer than 250,000 and the population in Qatar is mostly made up of foreign workers. The government under the Law No. 1 of 2010 has opened doors for more foreign investments which create more employment opportunities for the natives. This makes the Qataris’ living standards improved from the fact that most, if not all, are employed.
Manufacturing organizations owned by the citizens’ just like the case of foreigners, are able to have reduced costs of production due to the massive oil and natural gas deposits in the country. This enables companies to channel their revenues to other projects, thereby, enjoying economies of scale. The influx of foreign workers into Qatar offers the Qatar businesses with adequate labor and such laborers are normally paid low wage rates. This leads to increased production at reduced costs since the number of migrant searching for a job is very high and are willing to work at low wage rates. The improvement of relations with the foreigners provides incentives for the local/native citizens.
Qatar stands as one of the best foreign investment attraction place in the world. This is due to the involvement and engagement of the government in maintaining and formulating policies that are favorable for business. The government has gone a notch higher to create and establishing free trade zones at the port of Doha where they have identified as a busy shipping area. Other than this, the non-restrictions in exchanges like the transfer of foreign currency, profits relating to repatriation and importation of the non-restricted goods add up to the abundant incentives available.
The amendment of Law No. 13 of 2000 to Law No. 1 of 2010 has proven its commitment in helping the foreigners venture in investments freely without disruptions. It was unexpected, but it would truly help in the uplifting of the economic conditions. The ratio of natives to non-Qatari will continue to increase.
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