There is no concept of group taxation for Qatar tax purposes.
Historically, transactions between related parties were expected to be undertaken on an arm’s length basis and in accordance with the Comparable Uncontrolled Price method or any other OECD acceptable pricing method. However, there was no specific requirement for filing TP documentation with the GTA. The Regulations have outlined specific transfer pricing requirements:
- The Comparable Uncontrolled Price (CUP) methodology is referred to as the primary methodology. In case the CUP method is not applicable, the taxpayer should lodge a request to the GTA for the application of a different transfer pricing methodology.
- A new requirement for performing a “Functional Analysis” describing a taxpayer’s position and economic role with related entities, identifying the functions performed, risks assumed, and the tangible and intangible assets owned and used.
- A new requirement to update the analysis supporting the arm’s length character of the intercompany transactions every three years.
- A new requirement of a transfer pricing declaration as part of the annual income tax return, of which the form and content should be specified by the GTA.
- Tax deductibility of interest on loans, paid to related parties shall be dependent on such loans being economically beneficial to taxpayers. On this basis, a “Commercial Purpose” test has been introduced. The loan amount and interest charge shall also not exceed three (3) times the equity of the Qatar tax paying entity and shall be documented in an intercompany agreement between the parties.
- A new requirement to prepare TP documentation (Local File and Master File) by the time of filing the tax return for the period during which the respective related party transaction(s) occurred or at any other date that the GTA may specify otherwise if the following conditions are met.
- The threshold (to be established by the GTA) on revenues or assets of the taxpayer is met;
- One of the related parties of the Qatari taxpayer is established outside of Qatar.
Any loan between related parties should be at arm’s length and interest expense should not exceed three (3) times the equity of the entity.
Controlled foreign companies (CFCs)
There are no CFC provisions in Qatar.