The Gulf nation has one of the lowest tax rates in the world.
There are currently no plans to impose general income tax in Qatar, President of the General Tax Authority (GTA) Ahmed bin Issa Al Mohannadi has confirmed.
An income tax is a tax imposed by individuals or entities depending on their income or profit. It is calculated by multiplying the tax rate with taxable income.
Earlier last year, experts predicted to Doha News that the country would not welcome introducing a general tax to the public due to the nature of the region.
“General Income Tax in an expat-heavy country such as Qatar is unlikely,” Bhatti said. “This is because the tax-free income in Qatar and other Gulf states are seen as an incentive by expatriates looking to move to the region,” said Adnane Allouaji, analyst at The Economist Intelligence Unit, earlier this year.
Meanwhile, in an interview with the local Arabic newspaper Al-Sharq, the official revealed that the country’s value-added tax [VAT] is still under legislation.
The plan to introduce VAT in the Gulf region initially started in 2017, when the countries that make up the Gulf Cooperation Council, namely Qatar, Saudi Arabia, United Arab Emirates, Bahrain, Kuwait, Oman, signed a framework that would guide the implementation of the Value-added Tax.
Within a six-month period, Saudi Arabia and the UAE became the first of the batch to implement the move, while other GCC nations pushed their timelines further.
Read also: Qatar’s VAT tax: What does it mean for you?
However, with the then-blockade already affecting Qatar’s economy negatively, Doha could not at the time afford to see a further economic downturn with the addition of the VAT, according to Allouaji.
Back then, authorities set the date for 2021. However, until now, no announcements have yet been made to confirm the scheduled rollout.
Under the framework, there are three different rates of the VAT tax that can be implemented.
The first is the introductory rate of 5% – the lowest rate worldwide – to allow for the VAT to settle into the economy, though Saudi Arabia increased its rate to 15% in July 2020 on all goods.
Certain sectors such as healthcare and education will most likely have a zero VAT rate of tax – also known as the zero-rated tax. This means there should be no impact to consumers of these services.
Al Mohannadi, on the other hand, explained that the VAT tax is one of the most important tools for diversifying the country’s sources of income, which is why authorities issued Income Tax Law No. 24 of 2018 and Selective Tax Law No. 25 of 2018 regarding selective tax.
He highlighted that tax is a sum of money imposed by authorities on companies, and it is one of the main sources of public revenue.
The money is then redistributed between sectors and government services provided to individuals to achieve equality and economic stability in the country. This way, revenue can be used to allow Qatar to prosper while helping its economy and people, he noted.
To ensure stability, the tax rate needs to be compatible with the sector’s profitability and competitiveness.
The reason behind such an approach is that there are other factors of interest to the investor other than tax, such as business costs, production costs, labour, and other costs that affect the profitability of the economic sector.
But just like any other economic implications, there are some exemptions made.
However, those are considered by authorities as a kind of support development for other economic sectors with the aim of developing them and encouraging investments in them.
This also helps diversify the nation’s sources of income, which in turn helps the economy.
According to the official, all exemptions are granted after extensive review in which the exempted sectors may be able to achieve a feasible economic return. This could then allow the tax authority to impose or increase taxes according to the performance of each economic sector.
Meanwhile, other services may be exempt from tax, such as specific financial services. This could have an impact in terms of how financial institutions look to pass on the cost of VAT to consumers.
As of now, Qatar has two types of tax that are already implemented. First is the income tax, which is applied annually on the total income subject to the income of foreign shares in companies and non-company taxpayers.
The second is selective tax, which is applied to excise goods, such as soft drinks 50 percent, energy drinks 100 percent, tobacco of all kinds 100 percent, and goods of a special nature 100 percent.
Qatar has one of the lowest tax rates in the world— an effort authorities are keeping up to encourage investments in the country.