Qatar
Samir Kantaria Partner, Head of Employment & Incentives
Katrina Wilson Senior Counsel
Qatar’s Nationalisation in the Private Sector Law was published in Qatar’s Official Gazette in October 2024. It applies to the private sector in Qatar and will be effective from mid-April 2025. It is unclear whether or not it will be applicable to those entities registered by Qatar’s so-called ‘free zones’, such as Qatar Financial Centre, Qatar Science & Technology Park and/or Qatar Free Zones Authority.
Qatar’s National Vision 2030
Qatar is shifting its labour landscape within the private sector, to encourage a nationalised workforce to participate more in the non-government sector. This new Law aligns with the objectives set out in Qatar’s National Vision 2030, particularly, within the pillar of human development. Specifically, it aims to foster sustainable growth and nurture local talent.
The introduction of this Law marks a significant development in Qatar’s path towards its goals by more fully utilising national competencies in the private sector whilst also attracting foreign skilled talent.
The Law applies to:
Private Establishments;
Commercial Companies (both private and state wholly/partly owned);
Private Institutions of Public Benefit, Sports Institutions, Associations and the like.
It will not apply to certain private companies in the energy sector. Additionally, it is contemplated that entities may be added to or removed from the above list by the Council of Ministers from time to time.
The Law will:
give priority in employment and training to Qatari Nationals and the children of Qatari mothers;
preserve certain job roles for Qatari Nationals/children of Qatari mothers;
require those Nationals looking for work register on the Job Seekers’ List maintained by the Ministry of Labour (“MoL”);
provide for benefits, privileges and incentives to those entities and individuals covered by the Nationalisation Plan;
require relevant employing entities to notify the MoL of available jobs, provide relevant data after any recruitment pursuant to this Law, and every six months provide data on both its Qatari and non-Qatari employees;
require the use of a template contract for nationalised roles.
Penalties for noncompliance include being given an initial grace period to rectify, suspension of the entity’s transactions at the MoL (block on visas) for up to 3 months, to fines of between QAR 10,000 to QAR 100,000 for non-compliance. Additionally, a fine of up to QAR one million and/or imprisonment of up to 3 years can be imposed for any fraudulent (i) claim of compliance with the Law or (ii) obtaining of benefits, privileges or incentives.
Qatar is shifting its labour landscape within the private sector, to encourage a nationalised workforce to participate more in the non-government sector. This new Law aligns with the objectives set out in Qatar’s National Vision 2030, particularly within the pillar of human development.
What to do
Most of the obligations – save for the reporting requirements – will require further secondary legislation to provide for the specifics of implementation.
In preparation for the Law coming into force in April 2025, the MoL very helpfully gave private sector companies some guidance during a seminar held in November 2024. The eight priority sectors for Nationalisation in the private sector were announced as manufacturing, logistics, tourism, IT, finance, education, agriculture and healthcare. Companies in those sectors, and whose employees are governed by State of Qatar’s Labour Law, are already being required to comply with certain existing provisions of the Labour Law that had previously largely been disregarded (such as the Qatarisation provisions, and the requirement on certain companies to have each of their Employee Handbook and Penalties/Disciplinary Policy approved by the MoL), and to register on the relevant MoL Portals regarding vacancies.
QFC licensed entities – whose employees are governed by the QFC Employment Regulations (and not Qatar’s Labour Law) – will need to wait and see.
Hani Al Naddaf Partner, Head of Dispute Resolution - Qatar
Maysa SleimanAssociate
In recent years, the imposition of a 35% income tax on companies operating within Qatar's oil and gas sector has ignited significant legal debate. This tax rate, substantially higher than the standard corporate tax rate of 10%, has raised critical questions regarding its scope and application. The General Tax Authority (GTA) has adopted a broad interpretation, extending the tax not only to companies directly engaged in petroleum activities but also to service providers offering maintenance, engineering, information technology, and other ancillary services to oil and gas companies. This expansive approach has faced considerable pushback, as it potentially stifles investment and innovation in supporting industries. However, a recent ruling by the Qatar Court of Cassation has provided much-needed clarity which will benefit ancillary service providers in Qatar's oil and gas sector.
Income Tax for Oil and Gas Companies in Qatar
The legislative framework for Qatar's income tax regime is outlined in Law No. 24 of 2018 on Income Tax ("Tax Law"). Article 9 of the Tax Law stipulates a general corporate tax rate of 10%, with an exception for the oil and gas sector, where the rate is set at a minimum of 35%. This higher tax rate applies to agreements and activities related to petrochemical industries and petroleum operations, as defined under Law No. 3 of 2007, the Law on the Exploitation of Natural Resources ("Natural Resources Law").
Under Article 1 of Law No. 3 of 2007, petroleum operations are broadly defined to include exploration, prospecting, field development, drilling, well completion and repair, petroleum production, treatment, storage, transportation, loading, and shipping. This definition also encompasses the construction and operation of supporting facilities such as energy, water, housing, and other essential infrastructure, as well as administrative and complementary activities necessary to achieve these objectives. While comprehensive, this definition has been the source of interpretative challenges.
New Trends in Tax Judgments: Defining the Scope of Petroleum Operations
A recent judgment by the Qatar Court of Cassation offers clarity regarding the interpretation of Qatari tax law in the context of petroleum operations. Al Tamimi & Company in Qatar recently won a significant case before the Court of Cassation, which defined the scope of petroleum operations for tax purposes. The case involved a dispute between a renowned maintenance service provider for oil wells and the GTA, which sought to impose the 35% income tax on the company, arguing that its activities fell within the ambit of petroleum operations. The court's decision to narrow the scope of what constitutes "petroleum operations" suggests a new trend towards a more precise interpretation of tax laws, ensuring alignment with legislative intent and preventing arbitrary or overly broad applications by the GTA.
Looking ahead to 2025, this ruling is expected to have a significant impact on the oil and gas sector in Qatar. By narrowing the scope of petroleum operations and limiting the application of the 35% tax rate, the ruling will create more certainty and stability for companies providing ancillary services to the industry.
Lessons for Taxpayers and Litigators
This landmark judgment establishes an important precedent for future tax disputes involving the oil and gas sector in Qatar. For companies operating in supporting industries, this ruling provides a clear framework to challenge unjustified tax liabilities. It reinforces the principle that ancillary services, no matter how integral to the petroleum industry, should not automatically trigger the higher tax rate unless they meet the specific legal definition of petroleum operations.
Moreover, the judgment safeguards the investment climate in Qatar by ensuring that companies offering valuable services to the oil and gas sector are not unduly burdened with excessive tax rates. It emphasizes the importance of judicial oversight in maintaining the balance between tax authority enforcement and taxpayer rights.
The Future of Tax in Qatar
Looking ahead to 2025, this ruling is expected to have a significant impact on the oil and gas sector in Qatar. By narrowing the scope of petroleum operations and limiting the application of the 35% tax rate, the ruling will create more certainty and stability for companies providing ancillary services to the industry. Furthermore, the ruling will also benefit companies directly engaged in petroleum operations, as they will be able to rely on a clear and consistent legal definition of their activities and avoid potential disputes with the GTA over their tax obligations. The ruling will foster a more transparent and fair tax regime, where the tax rate is commensurate with the nature and value of the activities performed.
Conclusion
The recent decision by the Qatar Court of Cassation marks a fundamental shift in the interpretation of Qatar's income tax laws concerning the oil and gas sector. By clarifying the scope of petroleum operations and aligning tax provisions with legislative intent, the judgment not only resolves a contentious legal issue but also sets a precedent for future cases. This landmark development will influence future tax disputes and the interpretation of the law in this area, ensuring a more equitable and predictable tax environment for all stakeholders involved.
