Foreign investment and economic performance in Qatar
The small, Middle-Eastern state of Qatar punches above its weight economically, thanks in large part to the country’s massive oil wealth, smart use of sovereign investment funds and a relatively small population amongst which to spread its wealth. As a result, the 2022 World Cup hosts enjoy the third-highest GDP per capita in the world, calculated at US$93,714 by the World Bank in 2013. Natural resources exploitation accounted for 36% of the Qatari economy in the most recent quarter for which records are available (3Q14), down from a peak of 44% in 2011. Every other sector of the Qatari economy has gained share in that time, save for agriculture, which has consistently been the smallest part of the country’s economic output. However, mining remains overwhelmingly the #1 source of income for the country, at nearly three times the size of the finance, insurance, real estate and business services industries, which form Qatar’s second-largest business sector. Despite oil’s dominance over the economy, investors continue to bring money into the country in search of growth from the spending power that Qataris have inherited from their shared mineral wealth. Doha, the capital, is one of the region’s largest financial hubs after Dubai and Abu Dhabi, and Qatar Airlines has built a strong aviation business using Doha airport as a hub. Emulating Emirates’ success in the UAE, Qatar Airlines has helped to increase the profile and accessibility of the country as a whole.
Investing in Qatar
Qatar, like many of its GCC neighbours, imposes low taxes on most forms of income, preferring to make the lion’s share of its revenue from taxing oil-related income at 35%. Other businesses pay corporation tax at a rate of only 10%, while no VAT and no personal income tax or capital gains tax make doing business even more attractive. If your business is considering establishing a subsidiary in Qatar, then you will be pleased to know that there is no withholding tax on dividends from Qatari companies. However, again in line with its neighbours, Qatar’s approach to foreign investment is somewhat protectionist, requiring at least 51% local ownership for companies. The problems with this are exacerbated by a law requiring a minimum annual payment to the Qatari partner of at least US$40,000, several times the going rate in the UAE or Saudi Arabia. The basic form of company in Qatar is known as “WLL”, which stands for “With Limited Liability” – this is the equivalent of an LLC or private limited company in most jurisdictions. Fortunately, there are several ways of sidestepping the local ownership requirements: professional services companies can enjoy 100% foreign ownership so long as a Qatari service agent is engaged. Free zones like the Qatari International Financial Center also permit full foreign ownership, and these more relaxed regulations have done a lot to ensure that finance, insurance, real estate and business services are the second-highest grossing sector in the country. Building and construction firms have benefitted from project-based exemptions from local ownership rules to carry out government contracts, mostly relating to infrastructure and the 2022 World Cup. Other sectors have greater involvement by Qataris, but have not benefitted to as great an extent from foreign investment, leaving them smaller than the more liberalized industries.
- Qatari economic data: http://www.qsa.gov.qa/eng/index.htm
- Doing business in Qatar: http://www.healyconsultants.com/qatar-company-registration/
- Qatar International Financial Center: http://www.healyconsultants.com/qatar-company-registration/international-financial-center/
- Qatar compared with other Middle Eastern countries: http://www.healyconsultants.com/middle-east-incorporation/middle-east-country-comparisons/