TaxSavvyQA

Economic substance and the 15 percent penalty

We are a Qatar holding company with no staff. Are there new substance rules?

The situation

Law No. 11 of 2022 added economic substance and beneficial ownership rules, with a penalty of 15 percent of net income where substance tests are not met.

The law

  • Law No. 11 of 2022 amending Law No. 24 of 2018: Adds economic substance, beneficial ownership and digital economy rules; 15 percent of net income penalty where substance tests fail

What it means for you

A holding company that only owns shares may still need to show adequate substance for its activity, such as decision making in Qatar. The detailed tests sit in the Executive Regulations. If the tests apply and are failed, a penalty equal to 15 percent of net income can follow, which on QAR 2,000,000 net income is QAR 300,000.

What to do

  1. Map which of your activities fall under substance rules.
  2. Document board meetings and decisions held in Qatar.
  3. Keep beneficial ownership records current.
  4. Review the latest Executive Regulations before filing.

We can do this for youAnnual corporate income tax return on Dhareeba for a foreign owned company or branch: QAR 6,500

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