Introduction
Investment restrictions
Choosing the most appropriate business medium
Company structures
Commercial registration and other formalities
In keeping with the goals outlined in the National Vision 2030, Qatar has worked towards shifting its economic and developmental focus away from a reliance on oil and gas by promoting a policy of economic diversification – as evidenced by the internationally recognised brands of Qatar Airways and Al Jazeera, and its successful bid to host the 2022 FIFA World Cup. Recognising that the participation of non-Qatari investors is an integral part of the successful realisation of this policy, Qatar continues to implement new legislation aimed at liberalising the business environment for such investors and introducing incentives and exemptions that supplement the country's already considerable investment appeal. As Qatar's economy has evolved in line with these goals, non-Qatari investors have increasingly acknowledged the need for experienced local advisers who can stay abreast of legislative developments and advise on the potential impact that such developments may have on their businesses. What follows is an overview of the matters with which a non-Qatari investor will need to be familiar when doing business in Qatar.
Non-Qatari investors may invest in Qatar only in accordance with the Foreign Investment Law (13/2000), as amended.
Non-Qatari investors may invest in all parts of the national economy (other than those set out below) with a Qatari partner which must own at least 51% of any enterprise.
Non-Qatari 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.
The minister of business and trade may permit non-Qatari investors to own up to 100% of an enterprise in the following business sectors:
- agriculture;
- industry;
- health;
- education;
- tourism;
- natural resources, energy or mining;
- consultancy and technical services;
- information technology;
- culture;
- sport;
- recreation and entertainment; and
- distribution.
However, such permission is not granted frequently.
Foreign capital is guaranteed against expropriation (although the state may acquire assets for public benefit on a non-discriminatory basis, provided that the full economic value is paid for the asset).
A non-Qatari company which is performing a specific contract in Qatar may register a contracting entity or branch office if the project facilitates the performance of a public service or utility.
A non-Qatari company operating in Qatar under a Qatari government concession to extract, exploit or manage the state's natural resources is exempt from the Foreign Investment Law. In practice, this covers all major oil companies.
A company formed between a non-Qatari entity and the government or a governmental entity (ie, an Article 68 company) will be subject to special rules.
Choosing the most appropriate business medium
Company
A non-Qatari investor seeking to undertake business in Qatar in the long term will usually apply to register a company with the Ministry of Business and Trade; various exemptions (including tax exemptions) are available to attract non-Qatari investment. In almost all cases, a Qatari partner will be required for the establishment of a company. The company will be subject to Qatar corporate income tax, unless it is granted a special exemption.
Branch office
Branch offices may be registered where a non-Qatari company is performing a specific contract in Qatar. There is no requirement to have a Qatari partner. The subject matter of the contract must facilitate the performance of a public service or utility, which the Ministry of Business and Trade currently defines as having a contract with the government or a quasi-governmental entity. Branch authorisation is at the discretion of the minister. The branch is entitled to perform only the specific contract for which it is registered, and registration will be given only for the duration of the contract. The branch will be subject to Qatar corporate income tax, unless it is granted a special exemption.
A special regime applies to branches of non-Qatari engineering consultancy firms.
Commercial agency
In the case of a commercial agency, the non-Qatari company does not establish a presence in Qatar (nor has it any physical presence in Qatar – for example, any employees operating in the country). Instead, a 100% Qatari entity or individual agent is appointed to market and sell goods within Qatar; any provision of services by that Qatari entity or individual agent should be ancillary to such marketing and selling.
Exclusive agencies must be registered and are governed by Qatari agency law (comprised of the Code of Commerce and Law (8/2005)). Under a registered agency, commission (up to 5%) is payable on all sales of the products within the territory, even if the sales are not a result of the agent's activities. It is difficult to terminate a registered agency. Compensation is payable upon termination of the agency, including upon the expiry of a fixed-term agency.
Representative office
A Qatari representative office is, in fact, a marketing platform or 'shop window', which can be used only to:
- promote a non-Qatari company in Qatar; and
- try to introduce a non-Qatari company to Qatari companies and projects.
Any business must be carried out by:
- a non-Qatari entity, where the contract can be performed substantially outside Qatar; or
- a company or branch registered with the Ministry of Business and Trade and authorised to do business in Qatar.
The two forms of vehicle most likely to be of interest to non-Qatari investors are limited liability companies (LLCs) and so-called 'Article 68 companies'. Other possible legal entities under Qatari law are limited partnerships, particular partnerships, holding companies, single-owner companies and Qatari shareholding companies, although non-Qatari participation is restricted.
If the non-Qatari investor is permitted to own 100% of the company (by the Ministry of Business and Trade as a result of investing in certain specified sectors), a single-shareholder company can be used as the vehicle for such investment.
A legal framework has also been enacted for the establishment of free zones, and non-Qatari investors specialised in research and development or financial services may consider setting up in the Qatar Science & Technology Park or the Qatar Financial Centre, respectively.
Limited liability company
An LLC must have a minimum capital of QR200,000.
It must have at least 51% Qatari ownership, unless a Ministry of Business and Trade exemption has been obtained.
The parties' profit shares need not necessarily reflect their shareholdings – for example, the Ministry of Business and Trade will currently approve articles of association where the non-Qatari partner receives up to 97% of distributable profits (and is consequently liable for 97% of any losses).
Ten percent of each financial year's net profits must be kept within the LLC until the cumulative reserve stands at 50% of the share capital.
It may not raise capital by public subscription and may not issue freely transferable shares or bonds.
Shares may be transferred only after they have first been offered to the other shareholders by way of pre-emption, unless such rights are waived.
It may not carry out banking or insurance business or provide investment services to third parties.
Article 68 company
An Article 68 company is formed between an investor, which may be non-Qatari, and the government or a company in which the government holds shares.
The non-Qatari investor's share of the company is a matter for negotiation, but can be greater than 51% (subject to Council of Ministers' approval).
The corporate structure is of a "Qatari Shareholding Company with Government Participation".
It falls outside the Foreign Investment Law and, to a certain extent, the Commercial Companies Law.
Single-shareholder company or single-owner company
A single-shareholder company and a single-owner company has a minimum capital of QR200,000 and is subject to the laws relating to LLCs – unless any provisions are contradicted by the new single-shareholder company's legal and regulatory provisions.
The Ministry of Business and Trade has indicated that it will prioritise applications for 100% LLCs or single-shareholder companies where the single shareholder is non-Qatari if:
- the share capital of the company is in excess of the minimum; and
- the company's activities will add value in terms of employment, training and technology to the Qatar market.
Commercial registration and other formalities
Government liaison officer
Qatari companies should appoint a government liaison officer or a facilitator to carry out all of the necessary registration formalities associated with establishment. The steps set out in the following sections are a brief overview of what is required. Such a facilitator will also be invaluable for obtaining residence permits, driving licences and telephone, power and water connections.
Company formation
In order to incorporate a company and obtain a commercial registration, the following documentation is required:
- articles of association in Arabic, which must be approved by the Ministry of Business and Trade;
- notarised, legalised and authenticated copies of the non-Qatari company's constitutional documents;
- notarised, legalised and authenticated directors' minutes and power of attorney from the non-Qatari company to its incorporation representative in Qatar;
- a letter from a bank indicating the deposit of share capital (in full) at that bank; and
- a Qatar Chamber of Commerce Registration.
Once the company has been incorporated and the commercial registration issued, the share capital can be released to the company's general manager (or directors) for the purposes of running the company. Then, the following licences must be obtained:
- a trade licence and signage licence issued by the appropriate Qatar municipality; (a lease contract for the office of the company will be required, among other things); and
- an employer's Immigration Department identity card issued by the Immigration Department.
Branch office
In order to register a branch and obtain a commercial registration, the following documentation is required:
- authorisation from the minister of business and trade to register a branch office;
- notarised, legalised and authenticated copies of the non-Qatari company's constitutional documents;
- notarised, legalised and authenticated power of attorney from the non-Qatari company to the manager of the branch;
- a copy of the contract on which the branch registration will be based; and
- a Qatar Chamber of Commerce Registration.
Once the branch office has been approved and the commercial registration issued, the following licences must also be obtained:
- a trade licence and signage licence issued by the appropriate Qatar municipality (a lease contract for the office of the company will be required, among other things); and
- an employer's Immigration Department identity card issued by the Immigration Department.
For further information on this topic please contact Jason Majid or David Salt at Clyde & Co by telephone (+974 4496 7434) or by fax (+974 4496 7412) or by email ([email protected] or [email protected]).