Qatar

Taxable income is determined after deducting all expenditures, costs, and losses incurred to generate gross income. A deduction is usually available for expenses that are not considered to be 'capital' in nature and are incurred in generating Qatar-source revenue.

Depreciation

Depreciation should be calculated in accordance with rates specified by the Tax Law and ERs.

For certain assets, depreciation is calculated on the cost on a straight-line basis. The rates of depreciation are provided in the ERs. Under the ERs, more asset categories have been introduced with different permissible depreciation rates.

Goodwill

Depreciation for goodwill (or business reputation and the like) may not be deducted for tax purposes.

Interest expenses

Interest on loans used for the purpose of the taxpayer’s activity is tax deductible, except where the loan is between a Qatar branch and its head office or a party related to the head office. Other limitations may apply.

Bad debt

Bad debts approved by the GTA in accordance with the criteria set out in the Tax Law and ERs are deductible.

Charitable contributions

Donations, gift aid, and subscriptions to charitable, humanitarian, scientific, cultural, or sporting activities paid in Qatar to government authorities or public bodies are deductible, provided the value does not exceed 3% of the net profit in the year in which the deduction is claimed.

Fines and penalties

Fines and penalties for breaching the laws of the State are not deductible for Qatar tax purposes.

Taxes

Taxes provided for in the ERs (i.e. income tax paid by the taxpayer in the State and the taxes borne by the taxpayer outside the State, income tax paid by the taxpayer on behalf of a non-resident person in the State, and indirect taxes that are eligible for deduction or refund in accordance with the provisions of the Laws regulating them) are not deductible for tax purposes.

Other significant items

Other deductible expenditures include the following:

• Employee costs (including salaries, wages, gratuities, and other end of service benefits).
• Losses resulting from the sale of assets.
• Rents.
• Insurance premiums.

Net operating losses

Losses may be deducted from net income during the year. Under the Tax Law, losses can be carried forward for five years after the year in which they were incurred. Losses cannot be carried back.

Allocations of overhead costs to branches

The amended ERs have revised the expense deductibility criteria for a Qatari PE / branch. Going forward, a PE / branch will be allowed to deduct expenses incurred for the purposes of the PE's / branch's business. It is important to note that these deductible expenses shall be ’real expenses‘ related to the business of the PE or branch.

As an exception to the deductibility criteria mentioned above, certain items are specifically not deductible in case these are paid by a PE or a branch to its head office or any other related party (e.g. royalties, interest, commissions for specific services performed or for management).