Legal guidance for investment in Qatar

The state of Qatar, a peninsula located in the Arabian Gulf, is known for being one of the world’s foremost exporters of natural gas. Its economy has grown from a dependence mainly on pearling – that is, the harvesting of pearls from molluscs – to a strength in the production and exportation of hydrocarbons and other resources.

Qatar National Vision 2030 (QNV 2030) was published by the General Secretariat for Development Planning in October 2008. QNV 2030 is organised around four pillars – human, social, environmental and economic – and targets the development of several sectors and the provision of a high standard of living by the year 2030.

In December 2010 FIFA announced that Qatar had submitted the winning bid to host the 2022 FIFA World Cup. The announcement opened the door to new projects and business opportunities, especially in the construction and infrastructure fields. Since the announcement investors have been keen on entering the Qatari market.

Qatar’s legislature, the Consultative Assembly, duly noticed the increasing interest among foreigners in doing business in the country and, accordingly, developed appropriate legal and procedural structures in several sectors, with a focus on increasing investment and corporate business.

Business Environment

Article 28 of Qatar’s permanent constitution stipulates, “The state shall guarantee freedom of economic enterprise on the basis of social justice and balanced cooperation between private and public activity in order to achieve socio-economic development, increase production, achieve public welfare, raise standards of living and provide job opportunities in accordance with the provisions of the law.”

Following the constitution’s ratification in 2004, and pursuant to Article 28, the state liberated the private sector to work hand-in-hand with the public sector in order to achieve the series of developments targeted by QNV 2030.

The freedom granted to economic enterprises is guaranteed under the umbrella of a sustainable and quickly evolving economic and legal climate. The country’s laws pave the way for investors to enter the Qatari market through several gates, as illustrated herein.

Due to the rapid implementation of a responsive strategy by the government, the impact of the blockade that resulted from the diplomatic rift between Qatar and several other countries in the region is fading.

This assessment is supported by the findings of IMF staff that visited Qatar in 2018, who wrote in their mission concluding statement, “While economic activity was affected [by the blockade], this has been mostly transitory, and new trade routes were quickly established. The banking system has also adjusted.”

Key Provisions

Foreign investors can launch their businesses in Qatar through several vehicles. The starting point of company incorporation is an understanding of the restrictions and provisions that govern foreign investment, as well as of the different types of companies permitted by the law.

Pursuant to Article 2 of Law No. 13 of 2000 on the Organisation of Foreign Capital Investment in Economic Activity (Foreign Investment Law), foreigners may invest in most sectors of the economy, provided that they partner with one or more Qatari entities, and under the stipulation that the local partner’s capital contribution not be less than 51%.

The same article also determines the sectors in which foreigners are prohibited from investing. These sectors comprise commercial agencies, real estate procurement, banking and insurance, although investments in banks and insurance firms may be exempted by the Council of Ministers.

While it had not been approved as of February 2019, is worth noting that a new investment law – Law No. 1 of 2019 – is expected to be promulgated soon. The new legislation includes provisions that will create more investment opportunities and incentives for foreigners to invest in several sectors.

Business Vehicles

Foreign investors can launch their businesses in Qatar in several forms, as provided for under applicable domestic laws.

Limited Liability Companies

The most common form of company in Qatar is the limited liability company (LLC), the establishment of which requires a minimum contribution of 51% of the company’s capital by one or more Qatari partners.

According to the Commercial Companies Law of 2015, a minimum capital investment is no longer required to incorporate an LLC. However, it is recommended that companies establish themselves with capital of QR30,000-40,000 ($8240-11,000), as Qatari banks still require a minimum deposit for opening a corporate bank account.

The process of incorporating an LLC is easy and fast. Commercial registration of an LLC can often be obtained within one to three business days, in the event that all documents have been prepared.

Foreign Companies

The Ministry of Commerce and Industry (MoCI) may permit foreign investors at its discretion to exceed the 49% limit on capital contribution and own up to 100% of a company. According to the Foreign Investment Law, permission to do so is limited to activities in the following sectors: agriculture; industry; health; education; tourism; the development and exploitation of natural resources; energy and mining projects, provided that they match the state’s development plan; and business consultancy, technical, IT, cultural, sports and entertainment services, aside from distribution services. The Council of Ministers reserves the right to add more sectors to the foregoing list.

The process of incorporating a 100% foreign-owned company starts with submission of required documents to the MoCI. To simplify the process, it is important for foreign companies to choose the names of their activities in accordance with the UN Statistics Division’s International Standard Industrial Classification of All Economic Activities.

It is worth noting that the MoCI, at the sole discretion of its minister, reserves the right to permit the incorporation of a 100% foreign-owned company.

Foreign Company Branches

The MoCI may, after consulting the relevant authorities, enable foreign companies to establish branches in Qatar, provided that such companies are bound by business contracts with the Qatari government. The registration term of the branch is linked to the duration of the foreign company’s contract with the government. Hence, once the government terminates such contract or in the case that its term expires, the branch shall be deregistered.

The process of establishing a branch starts by submitting an application to the MoCI. The contract with the Qatari government shall be submitted as well, in addition to the foreign company’s other identification documents.

Trade Representative Offices

According to the MoCI decision No. 142 of 2006, trade representative offices may be established in Qatar to manage the business of foreign companies. The process of establishing such office starts by submitting an application to the MoCI.

Subject to the provisions of the law, representative offices are only allowed to perform marketing and promotional activities. Selling products, providing services and entering into contracts cannot be undertaken through the representative office. All business transactions may only be made through the foreign company’s headquarters.

A trade representative office is an ideal solution for foreign investors looking to expand their business in Qatar while continuing to conduct their business transactions directly from their home country.

Qatar Financial Centre

The Qatar Financial Centre (QFC) operates in accordance with international best practices to encourage foreign investment. The QFC maintains its own legal, tax and regulatory frameworks that are based on these standards. Foreign investors intending to incorporate their companies within the QFC can choose not to apply the local law of the state of Qatar and instead observe the laws and regulations of the QFC.

Law No. 7 of 2005 – the QFC Law – established both the QFC and the Qatar International Court and Dispute Resolution Centre. Foreign investors may similarly elect to choose the jurisdiction of the QFC Civil and Commercial Court instead of that of the local courts of Qatar.

It is worth noting that the QFC Data Protection Directorate, which was established in anticipation of the enactment of the EU General Data Protection Regulation (GDPR) in May 2018, applies the GDPR to all organisations and businesses established in the QFC.

Foreign investors can establish branches of their foreign companies, LLCs and limited liability partnerships in the QFC by submitting an application at the QFC Companies Registration Office.

Free Zones & Special Economic Zones

Investors can also establish their companies without limitation in several different Qatari special economic zones (SEZs), as well as free zones like Qatar Science and Technology Park.

Operations are expected to begin in the first quarter of 2019 at two new SEZs administered by Manateq, Qatar’s state-owned economic zones company: Umm Alhoul, next to Hamad Port; and Ras Bufontas, adjacent to Hamad International Airport. Investors that establish activities at these sites will enjoy myriad benefits, including 100% ownership of their companies, direct access to Doha’s port and airport facilities, and independent regulations regarding employment. Furthermore, participating persons or companies will enjoy a renewable tax exemption for a period of up to 20 years.

Additional Entities

Foreign investors can also extend their business in Qatar by undertaking the appointing of a commercial agent, franchise or a distributor. They are similar to one another in nature and share some provisions under Law No. 8 of 2002 on the Organisation of Business of Commercial Agents, as well as supplementary provisions in Law No. 27 of 2006 Promulgating the Trading Regulation Law.

A commercial agent or an exclusive distributor shall be a Qatari national or a 100% Qatari-owned company. In order for foreign investors to extend their business in Qatar through a commercial agent, the commercial agency, franchise or exclusive distribution agreement shall be translated into Arabic and submitted to the MoCI. In addition, the foreign company shall submit its written consent for the commercial agent to use the foreign company’s name and trademark during the term of the commercial agency, franchise or exclusive distribution agreement.

Legal Support

Foreign investors are always advised to seek the help of legal professionals before, during and after doing business in Qatar.

Miscellaneous Notes

Qatari citizens deal with foreign businesspeople in English on a daily basis. Qatari citizens are also very proud of their language, cultural heritage and traditions, which explains their insistence that business paperwork shall be drafted in Arabic, or at least in Arabic and English.

Such practice is backed up and protected by national law: Article 1 of Qatar’s permanent constitution affirms that the official language of the state of Qatar is Arabic.

In addition, Article 68 of the Civil and Commercial Procedure Law of 1990 provides that “Arabic is the language of the court. The court shall hear parties or witnesses who do not speak or understand Arabic through an interpreter who, before performing their duties, shall take an oath to interpret with honesty and integrity.” However, in the event of a dispute, evidence, witnesses and pleadings shall be in Arabic. Accordingly, it is strongly advised to be backed up by an experienced local law firm capable of handling legal matters in Arabic, English and, when necessary, other languages.

The currency of the state of Qatar is the Qatari riyal. The Qatari riyal is pegged to the US dollar under the Royal Decree No. 34 of 2001 at a rate of $1:QR3.64. According to the IMF’s mission concluding statement from March 2018, “The peg to the US dollar continues to serve Qatar well, providing a clear and credible monetary anchor.” The fixed rate provides stability and represents a significant advantage for most investors.

According to Law No. 21 of 2009 (the Income Tax Law), a flat corporate income tax is levied at a rate of 10% on companies other than those owned exclusively by Qatari nationals.

In the Qatari business environment, the use of cheques is common and in most cases necessary. Cheques, as a payment instrument, enjoy significant protection under Qatari law. In the event that a cheque bounces, the cheque’s drawer shall be subject, upon a police complaint, to a travel ban, followed by a trial. Moreover, the beneficiary is entitled to file a lawsuit before the civil court to claim the value of the bounced cheque and additional compensation.

In summary, the state of Qatar is very keen to encourage foreign investors to do business in the country through the enactment of new laws, the simplification of investment procedures and the provision of various incentives to investors.