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Possibilities for Foreign Investors in Qatar

Guiding Principle

Qatar is one of the most successful countries in the Gulf Cooperation Council (GCC). The population is growing and is estimated at more than 2 million as of 2013. The most important sector is still oil and gas but Qatar likewise enforced the development of other sectors like infrastructure, healthcare and education to diversify its economy.

Since the FIFA decided that Qatar would host the World Champion Chip in 2022, Qatar gained a lot of popularity. Although this decision was discussed controversially in the media because of the work conditions of laborers at the same time it was pushing the development of the infrastructure which will affect also other sectors to make Qatar more and more interesting for foreign investors. The big projects are the new Airport, a new harbor, the metro, and several sport arenas.

It is important to note that foreign direct investment is promoted and foreign entities are welcomed in Qatar to help to grow the economy. In most cases, a local Qatari partner is required.

I. The governing laws for companies and foreign investors

The Qatari Commercial Company Law i.e. Law No. 5/ 2002 (the “Companies Law”) outlines the general rules about the different possibilities to establish legal entities in Qatar. It is complemented by Law No. 13 of 2000 law regulating the investment of foreign capital (“Foreign Investment Law”) in such cases where a foreign investor intends to establish a company.

II. The Different Types of Business Vehicles

A. Presence in Qatar

To conduct business in Qatar, foreign investors are required to establish a legal presence within Qatar. The foreign investor should choose one of the following options.

  1. Incorporating a local entity under the Companies Law;
  2. Obtaining a license for a branch or representative office;
  3. Incorporating or registering in the Qatar Science and Technology Park (“QSTP”);
  4. Incorporating or registering with the Qatar Financial Centre Authority (“QFC”);
  5. Entering into a commercial agency relationship.

B. Types of Companies

As a general requirement, entities that wish to be locally incorporated must obtain Commercial Registration from the Ministry of Economy and Commerce. In addition, certain entities require authorization from the relevant Ministry or Governmental body which has the jurisdiction over the type of business activities to be conducted. The Companies Law provides for the following types of legal entity:

  • General Partnership (At least 2 person; no minimum of capital is required; Qatari ownership 51 % )
  • Limited Partnership Company (At least 2 Partners; no minimum capital; partners with joint and several liability and partners with limited liability; Qatari ownership 51 %)
  • Limited Partnership with shares (At least 1 general Partners and at least 4 limited partners; 1.000.000 QR as capital; Qatari ownership 51 %)
  • Joint Stock Company (public and private) (At least 5 partner; minimum capital: mot less then 10.000.000 QR in case of a public joint stock company and not less then 2.000.000 QR in case of a private stock company; 75 % Qatari owner ship)
  • Limited Liability Company (2 to 50 people; not less then 200.000 QR as capital; 51 % Qatari owner ship)
  • Unincorporated joint venture (At least 2 person; no minimum capital is required; liability depend the agreement given that there is not a separate entity founded third parties have the right of action against the partners directly; 51 % capital must be contributed by the Qatari partner)
  • Single Person Company (Only 100 % Qatari not relevant for foreign investors )
  • Holding Company (Not less then QR 10.000.000 capital)

C. Limited Liability Company (LLC)

A limited liability company (LLC) is the most commonly used legal vehicle for setting up in Qatar as a foreign investor; It is also common to call the company with limited liability a “WLL” which is exactly the same. The Foreign Investment Law places two main restrictions on foreign investors who wish to establish under the Companies Law: limitations on the percentage of foreign ownership and the types of business in which the foreigners can invest. In general, by Qatari law, the LLC must have at least a 51% Qatari ownership. The parties’ share of the profit does not necessarily have to reflect their shareholdings. |This can be outlined in the Articles of Association (AoA) directly. The Ministry will approve a share of profit up to 2% / 98 %.  All entities incorporated in Qatar, shall be established under the Companies Law.

Percentage of ownership: Article 2(1) of the Foreign Investment Law restricts foreign ownership to a maximum of 49 percent of a company’s capital. However, Article 2(2) provides that foreign investors can own up to 100 percent of the capital if:

  • the entity operates in the agriculture, industry, healthcare, education, tourism, exploitation and development of natural resources, and energy or mining sectors; and
  • the project contributes to Qatar’s development plans. Although the Minister of Business and Trade is officially responsible for giving authorization under Article 2(2), the determination of the percentage of foreign ownership is generally left to the Minister covering the relevant sector. For example, if the investment is in the energy or mining sectors, the Minister of Energy and Industry will determine the percentage of foreign ownership.
  • Law No. (1)  of 2010 amended the Foreign Investment Law regulating, now also a 100% ownership also in the following sectors possible: Consultancy services, Information Technology, Services related to sports, culture and entertainment, Distribution services.

Foreign companies wishing to invest in sectors not specifically mentioned in Article 2(2) can be permitted 100 percent ownership on a case-by-case basis, upon approval by the Minister of Business and Trade.

The Qatari partner: The Qatari partner can be in the form of an individual Qatari or a 100% fully owned Qatari company. He is not obliged to contribute financial or practical help to run the company, and as the 51% shareholder, has the power to terminate the businesses operations without consultation there should be a trustful relationship between the parties. Foreign investors have the possibility to preserve the control over the LLC by inserting protective provision in the Articles of Association, for example to preserve the right to appoint all the general managers/ or directors and to determine special voting quota to protect the foreign investors.

There is an obligation to appoint one director for immigration related issues; this role used to be carried out by the Qatari partner and will simplify the visa issues for employees and the other directors or managers.

Share capital: LLCs have the ability to apply for most activities on their Commercial Registration. A minimum share capital of QAR 200,000 must be provided. This is to be deposited into a bank account until the Commercial Registration has been approved, at which time, the deposited amount can be used as working capital for the day-to-day operations of the company.

Each year the company has to increase the reserves by 10% of the net profits until the reserve stands at 50% of the share capital this amount must be kept within a company.

Corporation tax of 10% is levied on the company’s net profit and the company is required to be audited by locally registered auditors.

Trade name: It is not allowed to carry the word “Qatar” in the trade name; it is reserved for governmental entities.

The need for office space: It is required by Qatari law that all companies have a 12 month lease on office space in order to obtain their trade license. Due to the high price of office space in Doha, this is often one of the largest costs for companies establishing in Qatar.

Legalization of Documents in Germany:  Documents which have to be legalized in Germany have to be attested also by the Bundesverwaltungsamt[1].

D.  Branch Office

A foreign company which is performing a specific contract in Qatar may set up a branch office, it “facilitates the performance of a public service or utility,” normally this means that a foreign company has a contract with a governmental entity. The branch must be authorized by the Ministry of Economy and Commerce. In this case, there is no need for a Qatari partner and the foreign party can own 100% of the business. However, a branch office is only entitled to perform the specific contract for which it is registered. A branch will be taxable unless it is granted a special exemption.

E. Representative Trade Office

A representative office can be used to promote a foreign company in Qatar and introduce its products to Qatari companies as a non-trading entity. The Trade Representative Office is allowed to perform in the following manner:

  • Contact clients to inform them about its foreign establishment and companies that represents their services and production in order to widen its distribution circle.
  • Contact exporters and the sellers of materials and semi-manufactured material needed by the authorities it represents and removes barriers that obstruct the arrival of these materials to the authorities quickly.
  • Inform the authorities that it represents about any complaints pertaining to the products or difficulties related to the distribution of the products.

The Trade Representative Office is forbidden to do the following:

  • Export, import or sell except what it imports of the commercial samples of goods that are manufactured by the company or establishment that it represents for the sake of promotion.
  • Promote any other products and/or services that are not manufactured or presented by the company or establishment that it represents.
  • Make contact directly with consumers.

There is no need for a Qatari partner and the foreign party can own 100% of the business.

F.  Free Zones in Qatar

1. The Qatar Science and Technology Park (QSTP)

The QSTP is a free zone in Qatar. The QSTP allows foreign investors to establish a technology-based company in Qatar. It is possible for the foreign investor to posses 100% of the company. QSTP-licensed entities are not taxed.

Companies with a license issued by QSTP are allowed to trade directly in Qatar without a local agent. Other benefits are the easy establishment of a company or branch, 100 percent foreign ownership, No taxes, Duty-free import and export, unrestricted repatriation of capital and profits.

In order to incorporate or register in QSTP, the majority of an entity’s activities must contribute to the advancement of technology and applicants must submit a description of their business and research plans to the QSTP, which will assess whether it fits the technology-based criteria.

A free zone for mixed-industry small and medium businesses is being developed near the New Doha International Airport and also other Free Zones were planed.

2. Qatar Financial Centre Authority QFC

The Qatar Financial Centre Law with the objective of attracting international financial service providers established the QFC in 2005. It is not a free zone, which is physically located in a certain area, but they issue particular licenses with the same free zone benefits.

The capital of firms licensed under the QFC can be fully owned by foreign entities. Full repatriation of profits and capital is expressly permitted for all types of QFC entities (a company or partnership, or by registering a branch of a non-QFC entity). Permitted activities fall into two categories:

  • regulated activities: undertaken by financial firms (such as investment and retail banks, insurance companies, brokerage offices
  • non-regulated activities: in support of financial firms (such as services provided by accounting, audit and law firms).

[1]http://www.bva.bund.de/DE/Organisation/Abteilungen/Abteilung_II/
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April, 2014 Francesco Jorno
Meyer-Reumann & Partners, Dubai Office
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