What can Russian businesses expect from the richest country in the world?
The idea of doing business in Qatar may not have seemed like an obvious choice for Russian entrepreneurs at one point, but as the region’s largest investor in the Russian economy now, Qatar provides the same advantages as many of its Gulf neighbours. QRM finds out what Russian companies and foreign entrepreneurs can expect when they decide to expand into the pearl of the Persian Gulf.
What you need to know about Qatar…
Although considered to be underdeveloped just a century ago until the first oil field was discovered on its territory, Qatar today is one of the richest countries in the world, supplying one-third of the total volume of liquefied natural gas (LNG) to the globe. With a population of three million people, 300,000 of whom are local nationals, a Qatari can earn around $65,689 a year, or about 5 million rubles.
an average amount a Qatari can earn a year
will be spent on modernising infrastructure in the country for the FIFA World Cup
Qatar actively cooperates with several states. Being a small country with a very hot climate, many products have to be imported. On its own, the country grows only 10% of the agricultural products it needs, while the rest is transported from other countries, including Russia. Qatar also has joint projects with Russia in the field of healthcare, construction and infrastructure worth $9 billion — and this is far from the end of the list. In 2022, Qatar will host the FIFA World Cup and around $200 billion will be spent on modernising infrastructure in the country in comparison to Russia, which spent $11.6 billion.
In recent years, Qatar and Russia have developed close relations. For seven years, the trade turnover between the two countries has grown by 200% to $202 million. Moreover, $45 million of exports from Russia to Qatar — almost all of its volume — did not come from raw materials. Qatar is also one of the largest investors in Russia in the region: over the past five years, it has invested up to $14 billion in Russian projects.
Russians in Qatar
Qatar is interested in foreign investment and welcomes foreign business, including from Russia. For example, VTB has its own representative office, which has invested in the local bank CQUR Bank. Sberbank’s cybersecurity subsidiary, Bi.Zone, operates in Qatar, and there is a possibility that Sberbank’s developments could be used for cybersecurity for the upcoming World Cup 2022.
In addition, Russia’s Rosneft has also opened an office in Qatar: it has an International Research and Development Center (ICRD) in the Qatar Science and Technology Park (QSTP). The centre, together with the Qatar Foundation for Education, Science and Social Development, develops technologies that are used in oil production. In addition, Kaspersky Lab has a partnership in Qatar, and the Russian Miratorg also actively exports its meat to Qatar.
What does Qatar offer to foreign businesses?
Opening a legal entity in Qatar is not difficult. To register a business in Qatar, you will need five shareholders, an account in a Qatar bank, authorised capital, a local office and an auditor. Registration will take no more than a month.
A notable improvement: before any business in Qatar had to have a local shareholder holding with no less than 51% of stocks, but now foreigners can own a Qatari company independently. However, many foreigners still prefer to search for Qatari partners as it is difficult to quickly find necessary contacts without a local businessman.
The main advantage of doing business in Qatar is the extremely low taxes. Qatar is one of the leaders among the countries with the lowest tax burden in the world. Individuals in Qatar do not pay taxes at all, companies do it for them. To pay corporate tax, a business gives 10% of its total income per year. According to this tax, Qatar is in second place in the world, the lowest being in Montenegro.
The same rules apply for companies that are partially or fully owned by foreigners — except for oil businesses, for which the rate is higher in Qatar. All others will be able to benefit from the Qatari tax system.
There is no sales tax in Qatar, but all companies with representative offices open in the country must withhold a percentage of payments to non-residents: 5% of the number of fees, 7% from payment of commissions, brokerage and other services. In addition, the country has a 10% tax on interest (brokerage fees and commissions) and a 5% tax on royalties. But there is simply no VAT, property tax and dividend tax in Qatar. At the same time, there is an agreement on the abolition of double taxation between Russia and Qatar.
It is also profitable to develop a business in Qatar because of the low competition so far. For example, in neighbouring UAE, the market is oversaturated and highly competitive, and any new foreign company has to survive there in fierce competition. It is quite difficult to do this in a new region for yourself. But in Qatar, the market has not yet been divided between large players and it is much easier to find a niche here. Furthermore, the Qatari market can become a good window to the region: Russian businesses can open a representative office here, gain experience and gain expertise, and from there continue to expand to other countries of the Middle East and Africa.
How to start a business in Qatar
If you are considering opening a company in Qatar, here’s what you need to know:
For foreign business, Qatar has free economic zones and special licensing platforms. They provide various benefits to international businesses willing to invest in the country. The set of measures are similar to those proposed by the non-residents of Qatar’s neighbours, the United Arab Emirates, these include tax exemption (zero tax on profits and personal income), assistance with relocation, and relaxation of capital repatriation for those who want to export to another country Qatari earnings.
1. Qatar Free Zone
The first such zone is the Qatar Free Zone, a classic free trade zone, a territory where, by agreement between countries, customs duties, taxes and fees are cancelled. Mainly manufacturing companies are waiting here. Its advantages are as follows:
- 20 years of tax holidays and zero import duties.
- The possibility of capital repatriation: the withdrawal of money abroad, to the home jurisdiction.
- Investments from the Qatari fund, which will help develop expensive projects in the country.
- Well-developed infrastructure and the simplified tax regime for employees that the business will need to bring to the country.
- Good logistics: there is a port and an airport nearby, on the territory there are automated warehouses and IoT infrastructure.
To become a participant, you need to apply with a description of the company and a business plan for the Qatari project, and then each company will receive its manager who will help you through all the other procedures.
2. Qatar Financial Centre (QFC)
Another zone is the Qatar Financial Center (QFC), a licensing platform that registers companies in the sports, media and financial services industries. More than a thousand different companies have already been registered here. Here are the conditions offered:
- The possibility of 100% repatriation of business profits.
- 10% corporate income tax on income earned only within Qatar.
- The legal environment based on English law is a convenient system for business and guarantees compliance with contracts.
- Close interaction with “neighbouring” markets — Turkey, India, Oman and Kuwait.
You can also apply here online: you receive a license remotely, and it only takes three steps. A local appointed manager will help you understand the nuances.
3. Ministry of Trade and Industry (MOCI)
The third platform is the Ministry of Trade and Industry (MOCI), which regulates all business in Qatar in general. For foreigners, it also presents a whole set of benefits:
- Businesses are exempt from customs duties when importing the necessary machinery and equipment and when importing raw materials and materials needed for production.
- There is a preferential lease on the land for production for 50 years.
- It has a simplified procedure for investing foreign money in projects in Qatar.
To apply, the company will need to show a business plan and translate the main documents for the company into Arabic, but the request itself can also be sent electronically.
4. Qatar Science and Technology Park (QSTP)
The fourth platform is Qatar Science and Technology Park (QSTP), a technology park for research and development and innovative businesses. Here’s what it offers:
- Customs incentives and infrastructure subsidies.
- Qatari funds that are willing to invest in tech companies or co-invest in projects with private players.
- Rental discounts and assistance from a dedicated team of managers to help you find a team and promote your business in the Qatari market.
- A local data centre with hosting and cloud services, free Wi-Fi, powerful fibre-optic Internet and well-developed infrastructure.
To apply, you also need to substantiate the business plan. Potential candidates will be selected based on the goals of their projects, technical resources, team qualifications and availability of financial resources.
иллюстрации: Хадия Улумбекова