| Qatar | Mar 27, 2019
Al Sulaiti Law Firm provides a comprehensive introduction to doing business in Qatar and the most appropriate way to enter the Qatari market.
The State of Qatar, a peninsula located in the Arabian Gulf, is known for being one of the most important exporters of natural gas. Qatar’s economy has grown from an economy dependent mainly on pearls to a strong economy that excels in the production and export of oil and gas in addition to other resources.
Qatar has developed its national vision for 2030. The national vision targets the development of several sectors and the provision of a high standard of living by 2030. The National Vision is targeted at the development of four interconnected sectors: human, social, environmental, and economic.
On December 2, 2010, FIFA announced that Qatar would host the 2022 FIFA World Cup, after the FIFA Executive Committee voted in a secret ballot. The announcement opened the doors to new projects and consequently new business opportunities, especially in the construction and infrastructure fields. Since the announcement, investors have become keen to enter the Qatari market.
The Qatari legislature duly noticed the growing interest in doing business in Qatar and, accordingly, developed the legislative and procedural structure in several sectors while focusing on investment and corporate ones. Foreign investors looking to expand their business in Qatar will, through this article, learn about doing business in Qatar and the most appropriate way to enter the Qatari market.
The 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 socioeconomic development, increase in production, achieve public welfare, raise the standard of living, and provide job opportunities in accordance with the provision of the law.” In light of that article, the State of Qatar has liberated the private sector to work hand in hand with the public sector in order to achieve the development targets of the 2030 national vision.
Freedom granted to economic enterprises is guaranteed under the umbrella of a sustainable and rapidly growing economic and legal climate. The laws of the State of Qatar pave the way for investors to enter the Qatari market through several gates as illustrated herein.
Thanks to the wise and rapid strategies implemented by the government of Qatar, the impact of the blockade due to the diplomatic rift between Qatar and some countries in the region is fading. This fact is confirmed by the visit of the International Monetary Fund’s staff to Qatar in 2018 where it clearly stated, “While economic activity was affected, this has been mostly transitory, and new trade routes were quickly established. The banking system has also adjusted.”
Foreign investors can launch their business in Qatar through several vehicles. As a well-experienced law firm in this field, we will shed light on the different options available to investors. The starting point of incorporating a company is to understand the restrictions and provisions that govern foreign investment beside the different types of companies.
Pursuant to Article 2 of the Law No. 13 of 2000 regarding the Regulation of the Investment of Foreign Capital in the Economic Activity, foreign investors may invest in all sectors of the national economy, provided that they partner with one or more Qatari partners. The Qatari partner’s contribution to the company’s capital shall not be less than 51%. However, the third paragraph of Article 2 determines the sectors where foreign investors are prohibited from investing. It is the case of commercial agencies, real estate procurement, banking, and insurance. However, banks and insurance companies may be granted an exception by the Council of Ministers. It is worth noting that a new investment law No. 01 of 2019 is expected to be published soon. The new law incudes many promising provisions that shall allow more investment opportunities and incentives for foreign investors in several sectors.
Foreign investors can launch their business in several forms as provided for under the applicable laws in Qatar. However, we will focus on the most important business mediums.
• Limited liability companies
The most common form of companies in Qatar is the limited liability company that requires a minimum contribution of 51% of the company’s capital by one or more Qatari partners. According to the new commercial companies law that came into force on July 7, 2015, a minimum capital is no longer required to incorporate a limited liability company. However, we recommend our clients to start with a minimum capital of QAR30,000-40,000 because Qatari banks require a minimum amount for opening a corporate bank account. The process of incorporating a limited liability company is easy and fast. In our experience, the commercial registration of a limited liability company can be obtained within one to three business days in case all the required documents are ready.
• Foreign companies
The Minister of Commerce and Industry may permit foreign investors to increase their contribution to a company’s capital from 49% up to 100%. According the foreign investment law, the permission is limited to the following sectors: agricultural, industrial, health, educational, tourism, development and exploitation of natural resources, energy, mining and business consultancy, technical, information technology, cultural, sports, and entertainment services beside distribution services. It should be noted that the Council of Ministers reserves the right to add more sectors to the foregoing ones. The process of incorporating a 100% foreign-owned company starts by submitting the required documents to the Ministry of Commerce and Industry. To simplify the process of incorporation, it is important for foreign companies to choose the names of their activities in Qatar in line with the code of International Standard Industrial Classification of All Economic Activities. It is worth noting that the Minister of Commerce and Industry, in his sole discretion, reserves the right to permit the incorporation of a 100% foreign-owned company.
• Foreign company branch
The Minister of Commerce and Industry may, after consulting relevant authorities, allows foreign companies to establish foreign companies’ branches in Qatar provided that such companies are bound by business contracts with the government. The registration term of the branch is linked to the term of the foreign company’s contract with the government. Hence, once the government terminates such contract or in case its term expires, the branch shall be deregistered. The process of establishing a branch starts by applying for the establishment to the Ministry of Commerce and Industry. The contract with the Qatari government shall be submitted in addition to the foreign company’s identification documents.
• Trade representative office
According to the Minister of Commerce and Industry decision No. 142 of 2006, trade representative offices may be established in Qatar to manage the business of foreign companies. The process of establishing a representative office starts by applying for the establishment at the Ministry of Commerce and Industry. Subject to the provisions of the law, representative offices are allowed to perform marketing and promotional activities only. Selling products, providing services, and entering into contracts cannot be done through the representative office. All business transactions can be made through the foreign company’s headquarters only. A trade representation office is an ideal solution for foreign investors looking for expanding their business in Qatar while doing their business transactions directly from their home country.
• Qatar Financial Center and free zones
Qatar Financial Center (QFC) operates under international standards to encourage foreign investment. QFC has its own legal, tax, and regulatory frameworks that are based on international standards. Foreign investors intending to incorporate their companies within QFC can choose not to apply the local law of the State of Qatar and rather apply the laws and regulations of the QFC. Law 7 of 2005 regarding the establishment of the QFC has established a court called the QFC Civil and Commercial Court. Foreign investors may elect to choose the jurisdiction of the QFC Civil and Commercial Court instead of the local courts of Qatar. It is worth noting that QFC Data Protection Directorate applies the European General Data Protection Regulation (GDPR). The regulations apply all organizations and businesses established in the QFC. Foreign investors can establish branches of their foreign companies, limited liability companies, and limited liability partnerships in the QFC by applying to the QFC Companies Registration Office. On the other hand, investors can establish their companies without limitation in several free zones in Qatar, such as the Qatar Science & Technology Park. In 2019, new free zones will be operating: Umm Al Houl Free Zone next to Hamad International Port and Ras Abu Fontas next to Hamad International Airport. Investors will enjoy several advantages including 100% ownership of their companies, direct access to the airport and the port, as well as independent regulations for employment. Furthermore, and most importantly, persons or companies will enjoy a tax exemption for a period of 20 years subject to renewal.
• Commercial agency, franchise, and distribution
One of the ways foreign investors can extend their business in Qatar is by appointing a commercial agent, franchisee, or a distributor. A commercial agent, an exclusive franchisee or an exclusive distributor almost shares the same nature and some provisions under the law No. 8 of 2002 Regulating the Commercial Agents Practice beside the 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 Ministry of Commerce and Industry. Besides, 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.
Foreign investors are always advised to seek the help of professionals before, during and after doing business in Qatar. Al Sulaiti Law Firm provides comprehensive services for the corporate sector including choosing the best business medium for foreign investors, drafting the necessary documents of incorporation, carrying out incorporation procedures, mergers, acquisitions, liquidation, and representing foreign investors in litigations and arbitrations.
After tackling the available ways to do business in Qatar, we believe it is mandatory to be aware of the following notes.
• Qatari citizens deal with foreign businessmen in English on daily basis. Qatari citizens are very proud of their language, cultural heritage, and traditions. This explains their instance that business paperwork shall be drafted in Arabic or at least in Arabic and English.
Such instance is backed up and protected by the Qatari laws. For instance, 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 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 his duties, shall take an oath to interpret with honesty and integrity. That being said, 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 preferably other languages.
• The currency of the State of Qatar is the Qatari riyal. The Qatari riyal is pegged to the US dollar. According the International Monetary Fund, “The peg to the U.S. dollar continues to serve Qatar well, providing a clear and credible monetary anchor.” Pegging Qatar’s currency to the US dollar provides stability and represents a significant advantage for most investors.
• According to the tax law, an income tax rate of 10% is levied on companies other than those owned by Qatari nationals only.
• In a business environment, the use of checks is common and in most cases necessary. Checks, as a payment instrument, enjoy significate protection by the Qatari legislator. In the event a check bounces, the check’s drawer shall be subjected, upon a police complaint, to a trial preceded by a travel ban. Moreover, the beneficiary is entitled to file a lawsuit before the civil court to claim the value of a bouncing check in addition to compensation.
The State of Qatar is keen to encourage investors to do business in Qatar through enacting new laws, simplifying investment procedures, and providing investors with various incentives.