SETTING UP IN QATAR

1

CONTENTS 1.

Foreign investment restrictions

2.

Choosing the most appropriate business medium Company Branch office Commercial Agency Representative Office

3.

Company structures Limited Liability Company Article 68 Company Single shareholder company

4.

Commercial registration and other formalities Facilitator Company formation Branch formation

5.

Import and Export

5.1 5.2 5.3 5.4 5.5

Customs duties and procedures Documentation Requirements Duty Exemptions Personal effects and restrictions Exports

6.

Staff

7.1 7.2 7.3 7.4

‘Qatarisation‘ Contract of employment End of service Residence and work permits

7.

Real Estates

8.

Free Zones

9.1 9.2 9.3

General Free Trade Zones Qatar Science & Technology Park Qatar Financial Centre

9.

Intellectual property

10.1 10.2

Trademarks Copyrights

2

10.3 10.4

Patents Design Rights

10.

Stock Exchange

11.

Laws

12.

Legal Environment

13.

Social and Business Customs

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Qatar is one of the smaller Gulf states in terms of population and geographical area, but boasts the third largest gas reserves in the world, and has had one of the fastest growing economies in the world in recent years. This abundance of natural resources coupled with recent legal liberalisation, economic diversification and a burgeoning economy means that there are many opportunities for investment in Qatar. Foreign investors are welcomed and various incentives are available to attract foreign capital including tax breaks and exemptions from customs duty. Foreign investors can transfer their investments and profits can be repatriated as can proceeds of sale and capital on liquidation. Qatar is very much a market where local knowledge is key. Below are some key points to consider when doing business in Qatar. 1.

Foreign investment restrictions a)

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

b)

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.

c)

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

d)

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

e)

Foreign capital is guaranteed against expropriation (although the state may acquire assets for public benefit on a nondiscriminatory basis, provided the full economic value of the asset is paid for the asset).

f)

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

g)

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

h)

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

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2.

Choosing the most appropriate business medium

2.1

Company

2.2

2.3

2.4

a)

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

b)

Various exemptions are available to attract foreign capital.

c)

In almost all cases a Qatari partner will be required.

Branch office a)

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

b)

Authorised by the Ministry of Business and Commerce where the project “facilitates the performance of a public service or utility”.

c)

No need for a Qatari partner.

d)

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

e)

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

f)

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

Commercial Agency a)

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

b)

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

c)

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

d)

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

Representative Office a)

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

b)

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

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c)

3.

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 branch authorised to do business in Qatar.

Company structures The two forms of vehicle most likely to be of interest to foreign investors are Limited Liability Companies (LLCs) and so-called Article 68 Companies. (Other possible legal entities under Qatari law are the Simple Partnership, the Joint Partnership and the Qatari Shareholding Company (QSC) but foreign participation in these bodies is restricted). If the foreign investor is permitted to own 100% of the company (by the Ministry of Business and Commerce as a result of investing in certain specified sectors) the single shareholder company can be used as the vehicle for such investment.

3.1

3.2

Limited Liability Company a)

Minimum capital of QR 200,000.

b)

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

c)

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

d)

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

e)

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

f)

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

g)

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

Article 68 Company a)

Formed by an investor, which may be foreign, with the Government or the companies which the Government holds shares in their share capital provided they get the Council of Ministers' approval.

b)

The foreign investor’s share of the company is a matter for negotiation but can be greater than 51%.

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3.3

c)

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

d)

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

Single shareholder company a)

Minimum capital of QR200,000.

b)

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

c)

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

4.

Commercial registration and other formalities

4.1

Using a “facilitator” or “government liaison officer” or “public relations officer” Virtually all companies use a “facilitator” or “government liaison officer” or “public relations officer” to carry out all the necessary registration formalities. Such a facilitator will also be invaluable for obtaining residence permits, driving licences and telephone, power and water connections etc. A facilitator will know all the ins and outs of the relevant procedures and requirements and will help minimise any frustrations which might otherwise be experienced when setting up. Consequently, the steps set out below are only a brief high level guide to what is required.

4.2

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

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

b)

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

c)

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

d)

A lease contract for the office of the company.

e)

Chamber of Commerce Registration.

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

4.3

a)

Municipal licence.

b)

Signage licence.

c)

Employer’s Immigration Department identity card.

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

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

b)

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

c)

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

d)

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

e)

Chamber of Commerce Registration.

f)

A lease contract for the office of the company.

Once the branch has been approved and the Commercial Registration issued the following licences must also be obtained: a)

Municipal licence.

b)

Signage licence.

c)

Employer’s Immigration Department identity card.

If applicable, the company/branch will also need to be entered in the Importers’ Register and/or Contractors’ Register. 5.

Import and Export

5.1

Customs duties and procedures

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The import of goods into Qatar is regulated by the Qatar Customs Law No. 40 of 2002 which implemented the regulations of the GCC Customs Union. In general, a person wishing to import goods into Qatar for sale, must be registered in an Importers Register and be approved by the Qatar Chamber of Commerce. The majority of goods can be imported through a registered importer with the payment of a standard rate of customs duty of 5% of CIF invoice value. 5.2

Documentation Requirements To release imports, the following documents are required: a) certificate of origin; b) invoice and shipping document; c) full description of goods; d) health and quality certificate, if applicable In addition to customs duty, legalisation fees are payable on import documentation.

5.3

Duty Exemptions The GCC States have approved a list of some 417 exempted goods, and have also approved new regulations providing for customs duty exemptions for imports for industrial projects. Exemptions from customs duty can be obtained for the import of equipment relating to a particular project as can exemptions from customs duty for the import of primary or semi-manufactured materials where they are not available locally.

5.4

Personal effects and restrictions Once a foreign employee is resident in Qatar there is normally no difficulty in importing personal effects free of customs duty. The import and sale of alcohol and pork products are prohibited.

5.5

Exports No duties are levied on exports.

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6.

Staff

6.1

‘Qatarisation’ A “Qatarisation” initiative is in place which aims to increase the number of Qatari nationals in the public sector workforce. The Labour Law introduces Qatarisation initiatives for private sector entities. The employment of Qatari nationals is one of the criteria taken into account when tax exemptions are granted.

6.2

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

6.3

End of service Employers should be aware of the requirement to pay end of service benefits to employees.

6.4

Residence and work permits Companies will need to obtain residence and work permits for their expatriate staff. A Labour Department Committee has been established to supervise applications for bringing in foreign workers. All expatriate employees must be sponsored by their employer who is responsible for them while they are in Qatar.

7.

Real Estate a)

Ownership of land by foreigners is restricted.

b)

Land for projects can be given to foreign investors on long term leases for periods of up to 50 years which may be renewed.

c)

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

8.

Free Zones

8.1

General Free Trade Zones In September 2005, Qatar enacted a new law for the establishment of Free Zones in the State aimed at sustaining and diversifying the economy. Companies setting up in the free zones will operate and trade without a local sponsor or service agent, and will enjoy a 100% foreign ownership and many other benefits.

8.2

Qatar Science & Technology Park

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The Qatar Science & Technology Park has a special free zone status and is a centre of research and commercial excellence for scientific development and regionally produced intellectual property for both Qatari and international partners. The park promotes the research and commercialization of technology projects. 8.3

Qatar Financial Centre (“QFC”) The QFC had a free zone status, and was established pursuant to Law No. 7 of 2005. The QFC attracts international financial institutions and multinational corporations to establish businesses in international banking, financial services, insurance, corporate head office functions and related services. The QFC is organized into two authorities, a commercial authority and a regulator – the QFC Authority and the QFC Regulatory Authority respectively. Both the bodies are independent of each other and from the Government of Qatar. The QFC permits Regulated activities primarily related to financial, insurance, brokerage and fund management services; and Unregulated activities such as ship broking, agents and classification services. The QFC has its own rules and regulations; the entities registered within the QFC will operate and trade without a local sponsor or service agent, will enjoy a 100% foreign ownership, and will be governed by the QFC rules and regulations.

9.

Intellectual Property Traditionally, intellectual property rights were not as well protected in Qatar as foreign investors were used to, however trademark and copyright laws were enacted in 2002 , the design law in 2005 and a new patent law in 2006.

9.1

9.2

Trademark Law No. 9 of 2002 a)

Trademarks can be registered at the Trademark Office.

b)

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

c)

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

d)

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

e)

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

Copyright Law No. 7 of 2002

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9.3

a)

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

b)

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

c)

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

d)

Protection lasts for during the life of the author and for 50 years after his death.

Patent Decree Law No. 30 of 2006 a) Qatari patent law of 2006 provides for registration of inventions and foreign patents at the Qatar Patent Office. b) A GCC patent can be obtained by filing at the Patent Office in Riyadh, Saudi Arabia. c) Protection lasts for 20 years.

9.4

Design Rights Law No. 6 of 2005 a) Inventive designs or industrial models can be registered under the Trademark Law. b) Protection lasts for 10 years.

10.

Stock Exchange The Doha Securities Market (“DSM”) commenced operations in May 1997, listing the shares of Qatari public shareholding companies. Foreign investors are allowed to invest directly in shares subject to a ceiling of 25% (more than 25% needs the Council of Ministers’ approval) of the issued share capital of companies quoted on the market. The stock exchange will also trade in bonds and treasury instruments. The market has witnessed spectacular growth in the last couple of years.

11.

Laws Principal laws relating to business activities in Qatar Subject Matter

Law No.

Year

Banking

4

1970

12

Chamber of Commerce

11

1990

Civil Law

16

1971

Commercial agencies

8

2002

Commercial companies

5

2002

Commercial registration system

11

1962

Copy Right

7

2002

Customs

40 & 41

2002

Design Rights

6

2005

Doha Securities Market

14

1995

Engineering Professions

11

2001

Entry and Residence of Foreigners

3

1963

Foreign Capital Investment Law

13

2000

Free Investment zones

34

2005

GCC Economic Agreement

6

1983

Income tax

11

1993

Industry

19

1995

Insurance companies and agents

1

1966

Labour

14

2004

Leasing of Premises and Buildings

4

2008

Maritime

15

1980

Mutual Funds

25

2002

Patent Decree Law

30

2006

13

12.

Pensions

24

2002

Public Debt

18

2002

Public Finance Policy

2

1962

Public tenders

8

1976

Qatar Central Bank

15

1993

Real Estate Registration

14

1964

Social Security

38

1995

Specifications & measurements system

4

1990

Sponsorship and Exit of foreigners

3

1984

Trademark

9

2002

Combating Trade Concealment

25

2004

Ownership of the Real Estate by foreigners

17

2004

Qatar Financial Centre

7

2005

Legal Environment The Judiciary is independent, in both its religious and civil branches, exercising the authority vested in it by the country’s constitution. The parties to an international contract are free to choose the law and jurisdiction which will govern that contract. (If they do not choose an applicable law, the contract will be governed by the Qatari Civil Code.) The parties may also agree in writing to refer disputes to arbitration.

13.

Social and Business Customs Qatar is a Muslim state, and the heritage of Islam is deeply rooted in the Qatari character. Islamic customs govern the general way of life; care must be taken to respect this, particularly in such matters as the dress code, and the observance of the times of prayer and the fasting month of Ramadan, when food and drink may only be consumed between sunset and sunrise. The importation and consumption of alcohol is strictly regulated. However, liquor permits may be obtained by foreign employees in certain circumstances and the major hotels are allowed to serve alcohol in restaurants and selected bars.

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