Executive summary

On 27 May 2018, Qatar's Ministry of Economy and Commerce (MEC) announced that a draft law that will allow foreign investors to own 100% of equity in all sectors is pending legislative approval. This is in accordance with the directives of His Highness the Emir Sheikh Tamin bin Hamad Al-Thani. The draft law is intended to: (i) attract foreign capital inflows; (ii) accelerate development in all economic and commercial activities; and (iii) achieve economic diversification in accordance with the Qatar National Vision 2030.

Detailed discussion

Current foreign investment rules

Law No. 13 of 2000 (Foreign Capital Investment Law) allows foreign investors to invest in all sectors up to a maximum of 49% in the equity of Qatari Limited Liability Companies. Notwithstanding this limitation, the Minister of the MEC may issue a Ministerial Resolution to allow foreign investors to own 100% of the equity in certain sectors such as manufacturing, health, education, tourism, development and the usage of natural resources and in power or mining, provided that these projects are consistent with the State development plan. Preference is given to projects that: (i) ensure the optimal use of locally available raw materials; (ii) manufacture products for export; (iii) manufacture a new product; (iv) use advanced technologies; (v) aim to transfer internationally recognized industry to Qatar; or (vi) develop national human resources.

Restrictions under the Foreign Capital Investment Law include:

• Investing in banking and insurance sectors except those permitted by the decision of the Council of Ministers
• Engaging in commercial agencies and trading in real estate
• Owning shares in excess of 25% of Qatari shareholding companies traded on the Qatar Exchange

Potential benefits of the new foreign investment rules

According to the announcement made by the MEC, the intention of the draft law is to replace Law No. 13 of 2000 which regulates the investment of non-Qatari Capital in the country's economic activity.

Changes and incentives provided by the draft law are:

• Foreign investors can own 100% of the shares of the Qatari Company.
• Foreign investors may own up to 49% of the share capital of Qatari-listed companies on the Qatar Exchange subject to approval of the MEC.
• Foreign investors can invest in banks and insurance companies through a decision of the Cabinet.
• Land may be allocated for establishment of the project.
• An exemption from income tax and customs duties is possible.
• Ownership may be transferred from one investor to another.
• The draft law provides that foreign investments are not subject to expropriation.

Impact

The MEC has stated that the revision to the existing laws is meant to attract foreign capital in all sectors of the national economy. The changes would also facilitate investor entry into the market and increase confidence in investment security.

The draft law is a positive development for Qatar, although the specific information regarding how the draft law will be implemented is not yet available. EY will continue to monitor developments closely as new information becomes available.

Businesses should closely monitor further developments and announcements on the draft law which may have significant implications from a company establishment and commercial perspective.

———————————————
CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Qatar), Doha

• Marcel Kerkvliet
  marcel.kerkvliet@qa.ey.com
• Paul Karamanoukian
  paul.karamanoukian@qa.ey.com
• Sherif Ismail
  sherif.ismail@qa.ey.com
• Fareed Patel
  fareed.patel@qa.ey.com
• Saman Fernando
  saman.fernando@qa.ey.com
• Richard Forbes
  richard.forbes@qa.ey.com

Ernst & Young LLP, Middle East Tax Desk, Houston

• Gareth Lewis
  gareth.lewis1@ey.com

———————————————
ATTACHMENT

PDF version of this Tax Alert