U.S. Income Tax Return Preparation and Advice for American Citizen (Expatriates) Living in Qatar
At Taxes for Expats we have been preparing U.S. tax returns for U.S. Citizens and green card holders working in Qatar for over 8 years. Our clients hail from all parts of the country - Doha and Al Rayyan, Al Wakrah and Alkhor, Ras Laffan Industrial City (RLIC) and Mesaieed.
As a U.S. Citizen or green card holder you are legally required to file a U.S. tax return each year regardless of whether you already pay taxes in your residence country.
We offer professional tax services. That means we figure out the best and most optimal way to file your U.S. tax return and avail you of all possible exclusions and deductions. But just as importantly - avoid the errors that would allow IRS to disallow your return and levy fines & penalties on top. You can also do them yourself - not that we recommend it. For more information please see IRS.
The expatriate Foreign Earned Income Exclusion can only be claimed if you file your tax return on a timely basis. It is not automatic if you fail to file and can even be lost.
We have many clients living in Qatar and know how to integrate your U.S. taxes into the local income taxes you pay. Any Quatari income tax you already pay can be claimed as against the tax liability on your U.S. return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the calendar year as is standard in Qatar for U.S. tax purposes). You must, however, pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these form or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
We have helped hundreds of expats around the world catch up with their past U.S. taxes because they have failed to file U.S. tax returns for many years. This is, in fact, our specialty and we offer a 10% discount to clients to wish to file multiple tax returns at once and get in full compliance with the IRS.
Work with a recognized expert to help you prepare your American tax return. We can also provide tax planning and advice with other expatriate tax; we look forward to working with you.
Below we include information on the Quatari Tax System for the American Expatriates.
There are no personal taxes, social insurance or other statutory deductions from salaries and wages paid in Qatar. However, income arising from business activities (rent from property, consulting, etc) is taxable.
Qatar Corporate TaxThe new corporate tax rate in Qatar is a flat 10%.
Previously, Qatar's corporate tax regime consisted of a tax bracket system, under which the tax rate applying to a particular company was determined by the amount of taxable income it generated. The rates varied from 0 percent for companies earning less than QR100,000 (US$27,473) in a particular year, to 35% for companies generating more than QR5,000,000 (US$1,373,626) in the same period.
This system has now been substantially simplified. Qatar's new income tax law is aimed at encouraging foreign investment. As of 1 January companies will be taxed on their taxable profits at a flat rate of 10 percent, benefitting businesses with substantial interests and activities in Qatar. The flat rate regime will potentially reduce the tax cost of doing business in Qatar, as well as reducing the administrative burden on companies and increasing certainty regarding groups' taxation affairs.
The existing 2.5 percent additional social charge, the proceeds from which are applied towards cultural and sporting ends by a national social fund, continue to apply. However, as before, this will only be charged on the taxable profits of Qatari companies whose shares are listed in Qatar.
The new 10 percent general Qatari corporate tax rate matches the 10 percent tax rate levied on companies established in the Qatar Financial Centre in Doha. The rate goes into effect as of 1 January 2010.
The new tax law, which imposes a withholding tax on payments made in respect of technical remunerations (at a rate of 5%), as well as on certain interest, commission, brokerage, management, attendance and service fees paid to non-residents (all at a rate of 7%).
It is understood that the new tax law should not apply to entities established in the Qatar Financial Centre in Doha, and that such entities, being resident in Qatar, should not be considered nonresidents to whom the withholding tax obligations attach.
Businesses already operating in Qatar, as well as groups considering investment into Qatar, will need to consider carefully the impact of the new tax law on their current and future activities. It may be helpful to consider structuring solutions which could help to mitigate or eliminate particular tax issues created by the new rules.
There is no Sales Tax, no Estate Tax and no Gift Tax in Qatar.
Application for tax exemption of projects is evaluated by a Committee called "The Tax Exemption Committee".
When considering the exemption applications, the Tax Exemption Committee shall take into account that all or some of the following requirements are met according to the Committee's discretion:
1. The enterprise shall contribute to boosting industry, agriculture, trade, petroleum, mining, tourism, land reclamation, transports or any activities and projects needed by the country which are socially and economically beneficial, whether such projects are wholly or jointly owned by Qatari or foreign individuals, companies or firms.
2. The enterprise shall be in conformity with the targets of the economic development plan and approved by the competent government authorities.
3. The enterprise shall contribute to the development of the national economy, provided the following is taken into consideration:
- The commercial benefits
- The extent of integration with other enterprises
- The extent of the enterprise's dependence on the production inputs vailable in the country
- The extent of its impact on the balance of trade and the balance of payments.
4. The enterprise shall introduce modern technology.
5. The enterprise shall lead to the creation of employment opportunities for the citizens.
DETERMINATION OF TAXABLE INCOME
In the computation of taxable income, the accrual method of commercial accounting shall be applied. Chargeable persons wishing to use a different method shall obtain the approval of the Department in advance.
Every tax-payer shall prepare his accounts for an accounting period coinciding with the taxable year. The tax-payer may, after obtaining the approval of the Department, adopt a different date for the beginning and the end of his taxable year. The accounting period might be less or more than 12 months in the following cases:
1. If the tax-payer starts his activity after the beginning of the taxable year, provided the accounting period shall not be less than six months or more than 18 months. In either case, tax shall be computed on the basis of the actual period proportionate to the taxable year.
2. In cases of liquidation, the accounting period shall be determined by the length of time the liquidation takes.
3. In cases of cessation, assignment or sale, provided that the tax-payer shall file a declaration of the result of his activities within a period of four months from the date of cessation, assignment or sale. Every tax-payer shall keep records and documents pertaining to his activity for the five years following the last taxable year recorded in the register.
The taxable income shall be determined after deducting all expenditures and costs incurred in the realisation of the gross income, particularly the following:
2. Paid rents
3. Salaries, wages, gratuities and other end of service benefits including any deductions credited to the account of the gratuities on termination of the service or pensions for the saving funds and the like
4. Taxes and duties other than the income tax
5. Bad debts approved by the Department in accordance with the criteria set out by it in this respect
6. Expenses incurred for real estate maintenance and renovation, repair of machinery, tools and equipment and for the cost of spare parts
7. Losses resulting from the sale of assets
8. Assets depreciation
9. Premiums, donations, aids and subscriptions to charitable, humanitarian, scientific, cultural or sporting activities paid in Qatar to government authorities, public bodies or firms or to licensed bodies in the State of Qatar, provided that the value thereof does not exceed 5% of the taxable net profit for the same taxable year prior to making the deduction.
The following shall not be regarded as deductible expenditures and costs:
1. Personal, private and any other expenses which have no connection with the taxable activity
2. Fines for offences and delays due in accordance with the provisions of this law
3. Any expenditures or losses redeemable under an insurance policy, contract or claim for compensation
4. Exhaustion of land
5. Depreciations exceeding the original cost
6. A branch's share in the expenses of the headquarters or the main office which exceeds the rate determined by the Department out of the gross income of the branch.
Should the tax-payer sustain losses for any taxable year, he may deduct them from the taxable income, subject to the following conditions:
- No losses shall be carried for more than three years following the end of the taxable year during which the losses occur
- No losses resulting from a non-taxable source of income shall be deducted
DEDUCTION OF BAD DEBTS
The following requirements shall be taken, totally or partially, into consideration when
deducting bad debts from the taxable income:
1. The debt should have been due for at least 24 months.
2. The tax-payer should have demanded the payment of the debt by the debtor and the sponsors.
3. The settlement agreements should have culminated in failure to collect the debts.
4. The necessary legal procedures should have been met.
5. The tax-payer should prove the inability of the debtor and sponsors to pay the debt.
6. The tax-payer should have made adequate provisions to cover the value of the debt required to be written off, totally or partially.
DEPRECIATION OF ASSETS
The following rules shall be taken into consideration when computing the depreciation of assets:
Firstly: The cost of asset under depreciation - The cost of asset means all the expenses incurred by the tax-payer in order to acquire the asset and to prepare it to become usable.
Secondly: The method of depreciation - The fixed installment method shall be followed in determining the charge, of annual depreciation for the asset according to the rates stated in the following paragraph.
Thirdly: Depreciation rates - The depreciation is calculated as a result of use or ordinary damage arising from the use of asset or by lapse of time in accordance with the specific rates of the following table:
Buildings such as offices, houses, warehouses, hospitals and clubs 5%
Roads and bridges inside the establishment 5%
Storage tanks, pipelines and ports' ducks 5%
Furniture and office furniture 15%
Plants, machinery and any mechanical devices not mentioned below 15%
Cars and motorcycles 20%
Lorries ââ¤âÐ âÂ£Â¬ÑÐ²ÐÐ various sizes 20%
Drilling instruments 15%
General service machinery (including building and road tools, workshop
machinery and work machinery, etc.) 15%
Buildings and roads of service stations 5%
Machinery for servicing and lubrication of service machinery 15%
Trailers and carts 13%
Refinery machines and pipelines (inside the refinery) and small tanks 10%
Air conditioners 20%
Electrical equipment 20%
Computer equipment 33.33%
HEAD OFFICE CHARGES
Charges of a general or administrative nature raised by a head office on its Qatar branch are allowed as a deduction subject to a ceiling of 3% of turnover less sub-contract costs. In the case of banks, the limit is 1%. The allowable ceiling for insurance companies is set at 1%.
A directive issued by the Director of Income Tax in January 1993 requires all ministries, Government departments, public and semi-public establishment and other taxpayers to withhold final payments to subcontractors until such entities present a tax clearance certificate issued by the Income Tax Department.
Qatar VAT (Value Added Tax)There is no VAT in Qatar.
A low level of 5-7% VAT may be introduced after 2013.