Qatar's Income Tax Law subjects royalties, interest, commissions, and fees for services wholly or partly performed in the state and paid to non-residents for activities not related to a permanent establishment of theirs in the state to a final withholding tax at source of 5% of the gross amount. The executive regulations require the withholding party to remit the withheld tax to the General Tax Authority before the 16th day of the month following the month in which the withholding took place.
What Is Subject to Withholding at Source?
The 5% withholding at source covers royalties, interest, commissions, and fees for services paid to non-residents, provided the services are wholly or partly performed inside the state and are not related to a permanent establishment of the beneficiary in the state. A service is considered wholly or partly performed in the state if any work necessary for its completion is carried out there, including data collection and site inspection, even if the service is delivered from outside the state or by a person other than the taxpayer.
Who Is Required to Withhold?
The law requires withholding at source by natural persons carrying out an activity in the state and by resident legal persons, including ministries, other government bodies, authorities and public institutions, and permanent establishments in the state belonging to non-residents. Withholding also applies to amounts paid to non-resident companies wholly or partially owned by Qatari nationals or nationals of the Gulf Cooperation Council states.
Exceptions From Withholding
Reinsurance, freight and ticket sales, and the sea transport of petroleum, its derivatives, and manufactured products derived from it are not considered services subject to withholding at source. Interest on deposits in banks and financial institutions located in the state, and interest on treasury bills and bonds issued by the state and by public authorities, institutions, and companies wholly or partially owned by the state, are also not subject to withholding.
Remittance Deadline: Before the 16th of the Following Month
The executive regulations provide that the withheld tax is remitted to the Authority on the form it prepares for this purpose, before the 16th day of the month following the month in which the withholding took place. The withholding party must issue a certificate to the beneficiary from whom the amount was withheld, on the form prepared by the Authority.
Penalty for Failing to Withhold or Late Remittance
Any person who fails to withhold the tax at source as required by the law is subject to a financial penalty equal to the amount of tax not withheld, in addition to paying the tax due itself. Any natural or juridical person who fails to remit the withheld tax amount by the specified deadlines is subject to a financial penalty of 2% of the tax due for each month of delay or part thereof, not exceeding the amount of the tax due itself.
Legal References
- Law No. (24) of 2018 Promulgating the Income Tax Law — Article 9/2
- Law No. (24) of 2018 Promulgating the Income Tax Law — Article 24/2
- Law No. (24) of 2018 Promulgating the Income Tax Law — Article 24/7
- Cabinet Decision No. (39) Issuing the Executive Regulations of the Income Tax Law promulgated by Law No. (24) of 2018 — Article 21
- Cabinet Decision No. (39) Issuing the Executive Regulations of the Income Tax Law promulgated by Law No. (24) of 2018 — Article 22/3
- Cabinet Decision No. (39) Issuing the Executive Regulations of the Income Tax Law promulgated by Law No. (24) of 2018 — Article 24
For questions about your specific situation, you can ask the Qatar Tax & Legislation Helper on Helpers, or consult a licensed chartered accountant.