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  • Service: Tax
  • Type: Business and industry issue
  • Date: 10/18/2013

Qatar – Recovering tax under new refund system 

Under the old Qatar tax law, tax refunds such as relief under a double tax treaty were almost non-existent. But with the withholding tax (WHT) in place under Qatar’s new tax code (effective 1 January 2010) and the country’s a growing list of tax treaties, more foreign entities could benefit from the refund mechanism. To facilitate administration, the Public Revenue and Taxes Department (PRTD) has established a separate Refund Division.

Companies doing business in Qatar should be aware of some key advantages and issues regarding the new refund mechanism, which we discuss below.


Obtaining treaty relief


Amounts paid to non-resident entities are subject to final withholding at source where:


  • the activity does not relate to a permanent establishment (PE) in Qatar
  • the services are carried on either “wholly” or “partly” in Qatar.

Withholding tax applies at the rates of:


  • 5 percent on technical fees and royalties
  • 7 percent on interest, commissions, intermediary fees, board remunerations and other services wholly or partly performed in Qatar.

Under the new tax code, the provisions of relevant tax treaty prevail. If relief is available under a tax treaty between the country of residency and Qatar, WHT deducted can be reclaimed under the refund mechanism.


Scope


What can be claimed as a refund? Examples include:


  • withholding tax relief under the provisions of a tax treaty
  • unduly collected tax and financial penalties
  • any other amount of tax erroneously deducted or paid, such as amounts withheld:
    • in the absence of/late issuance of the tax card
    • on foreign-source income included in tax returns
    • on payments for services carried out wholly outside Qatar.

Who can benefit from the refund mechanism? Eligible taxpayers include:


  • non-resident entities that do not have a PE in Qatar and are entitled to treaty relief
  • entities that were unable to present a tax card (registration) at the time of payment but subsequently have a tax card
  • entities that have made clerical or computational mistakes in previously filed tax returns.

Administrative matters


Procedure – To claim a refund, you must submit an application with the PRTD clearly stating the basis of the claim. In case of withholding tax relief under a tax treaty, your application must be accompanied by a Tax Residency Certificate issued by the competent authority in the payee’s State of Residence and a certificate on the prescribed form issued by the service recipient.


Time limit – The right to claim a refund lapses after 5 years from the date it is established that the PRTD had no right to collect the tax and related financial penalties.


Documents – Required supporting documents include copies of contracts/agreements, tax returns filed, tax card, details of taxes paid, withholding tax statements and deduction certificates and Tax Residency Certificates.


Refund processing period – The PRTD is required to reply in respect of the application within 60 days from the date of submission of the application. Non-response of the part of the PRTD within the 60-day period shall be regarded as a refusal.


Appeals


Where the PRTD refuses the claim or fails to notify the taxpayer of its decision within the above-mentioned period, the taxpayer may then appeal to the Tax Appeal Committee.


Refunds arising from PE determinations


Where the duration of the contract/activities in Qatar exceeds six months, the PRTD generally concludes such presence constitutes a PE of the non-resident person in Qatar.


Accordingly, the non-resident would be required to register with the PRTD to obtain a tax card and submit annual corporate tax returns along with audited financial statements. In these cases, withholding tax amounts already deducted can be offset against the corporate tax liability or recovered through the refund mechanism.


Given the complexity of obtaining tax refunds in Qatar, non-residents are advised to seek assistance from local third-party advisers in:


  • processing refund applications and obtain refunds due
  • obtaining advance rulings to determine whether your proposed or existing activities constitute a PE in Qatar
  • navigating appeals procedures
  • filing tax registrations and tax returns, where required.
 

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