DOHA, 24 OCTOBER 2007

The Qatar Financial Centre (QFC) Authority has issued for consultation the tax rules and regulations covering the tax regime to be implemented from 1 May 2008 for businesses licensed with the QFC.

The consultation period extends from 24 October for 30 days. The new tax regime will create an internationally competitive fiscal environment for the conduct of business activities, promote the international reputation of the QFC and provide, in the long term, funding for the development and operation of the QFC.

The QFC Law, No 7 of 2005, established that there would be no taxation on businesses licensed by the Qatar Financial Centre for the first three years of the Centre's operation, ie from 1 May 2005 up to 30 April 2008.

Thereafter the QFC will levy a low tax rate on business profits of 10% with profits generally to be based on accounts, whether prepared under IFRS or other appropriate GAAP. Broadly, only local source business profits will be subject to tax.

In addition to the basic charging provisions the new tax regime will include specific regulations covering Islamic finance, insurance companies, transfer pricing, partnerships and reorganizations.

The detailed provisions of the QFC tax regime are included in the attached consultation paper.

The key features of the proposed tax regime are:

There will be only one category of taxable income.
To minimise the need for complex tax legislation dealing with different classes of profits or losses (for example rules for their determination and inter-relation) there will only be a single category of taxable income under the QFC tax regime.
There will be only one type of tax on the same income.
There will be no requirement for multiple layers of taxation in the QFC, so a single type of tax will suffice.
Taxable profits will be based on accounting profits.
Subject to a few specific tax adjustments, taxable income will be based on accounting profits, which is in accordance with widespread international practice.

Non-local source profits will not be taxed.
Broadly, taxable income will be limited to local source profits.
There will be a general restriction on deductibility of expenditure.
As in many tax regimes, there will be a general restriction on the deductibility of expenditure. Tax deductible expenditure will be limited to expenditure incurred for the purposes of activities giving rise to taxable income.
There will be flexibility in the use of tax losses.
Companies will be able to surrender losses between members of the same group, and there will be no restriction on the carryforward of tax losses to future years.
There will be no withholding taxes in the QFC
There will be no withholding taxes on the payment of interest, dividends and royalties by QFC firms
A tax ruling facility will be available
An advance ruling facility is being introduced which will allow firms to obtain certainty, either concerning the interpretation of specific areas of the law, or concerning a specific transaction.
Support for insurance businesses
The profits of both captive insurance companies and reinsurance companies will be exempt from taxation.
Collective Investment Schemes
Collective Investment Schemes and other investment funds established within the QFC will be exempt from tax.

Stuart Pearce, Chief Executive Officer and Director General of the QFC Authority, said “The adoption of a tax regime is a planned and transparent part of the development of the QFC. The regime we are proposing will give investing firms a high degree of certainty about their future tax. There are no hidden costs in operating from the QFC, and as firms we have already consulted with on these proposals have told us, a low tax rate based on international best practice principles is preferable to a tax haven as it is both predictable and – in the long term – more commercially efficient.”

A series of detailed questions and answers on the new tax regime are available on the QFCA website, at www.qfc.com.qa under ‘about the QFC’.

Media Contact:

Steve Martin
Head of Corporate Communications and Marketing
Tel +974 496 7755 Mob +974 583 1937 e-mail s.martin@qfc.com.qa

Notes to Editors:

Qatar Financial Centre
The Qatar Financial Centre (QFC) is a financial and business centre established by the Government of Qatar and located in Doha. It has been designed to attract international financial services institutions and major multi-national corporations and to encourage participation in the growing market for financial services in Qatar and elsewhere in the region. The QFC will operate to international standards and provide a first class legal and business infrastructure for those operating within the QFC. The QFC was created by Qatar Law No.(7) and has been open for business since 1 May 2005.

QFC Regulatory Authority
The QFC Regulatory Authority is an independent regulatory body established by Article 8 of the QFC Law. It regulates firms that conduct financial services in or from the QFC. It has a broad range of regulatory powers to authorize, supervise and, when necessary, discipline firms and individuals. The QFC Regulatory Authority regulates firms using principle-based legislation of international standard, modeled closely on that used in London and other major financial centers. The Regulatory Authority is currently receiving applications and granting authorisations.

QFC Authority
The QFC Authority is the commercial, administrative and legislative body responsible for driving the commercial strategy of the QFC and for developing relationships with the global corporate community and other key institutions both within and outside of Qatar.

The QFC Civil and Commercial Court and QFC Regulatory Tribunal
The QFC Civil and Commercial Court and QFC Regulatory Tribunal were launched in February 2007. The President of the Court is Lord Woolf, formerly Lord Chief Justice of England and Wales. The Court is modelled on the internationally respected Commercial Court in London. In the event of disputes in matters of law, it will be the final arbiter. The Regulatory Tribunal has been established to hear and decide upon appeals from decisions of the QFC Regulatory Authority and other QFC agencies. Its Chairman is William Blair, QC. Both the President and the Chairman are supported by Judges who have held the highest judicial offices in their own jurisdictions.