Foreign investment in Qatar is governed by Law 13 of the Year 2000 on the Organization of Foreign Capital Investment in Economic Activity, as amended (the Foreign Investment Law). It allows non- Qatari investors to invest in all sectors of the Qatar economy, subject to the requirement that 51 percent of the share capital in the venture be held by a Qatari person, legal or natural. Foreign investment is generally not permitted in banking and insurance activities (unless by Ministerial Resolution or if such activities fall under an applicable Free Zone) nor commercial agency or real estate activities. There are, however, certain exceptions with respect to real estate which allow for the provision of land necessary for government approved investment projects. A concession is made when the foreign component of the ownership in the new venture is made up of a GCC national or wholly-owned GCC legal entity. In this case, the GCC national or legal entity may own up to 50 percent of the share capital in the new Qatar venture with a Qatari counterpart holding the remaining share capital. For the purpose of this law, a Qatari legal person is restricted to an entity owned wholly by a Qatari national. An exception to the foreign ownership rules may be granted to foreign companies or individuals who obtain a decision from the Minister of Business and Trade for carrying on business in Qatar as a 100 percent foreign-owned entity.
The exception may be granted provided that the field of business falls within one of the following sectors of the economy:
- Development and exploitation of natural resources;
- Businesses of technical and information consultancy;
- Cultural, sports and entertainment services;
- Distribution services; and
- Energy or mining, provided that such projects match the development plan of the State of Qatar.
Preference will be given to projects that may potentially achieve optimum utilization of local raw materials, industries set up for export of products, for introducing new products or employing new technologies, as well as projects aiming to localize worldwide leaders in industry or those who will train and qualify Qatari nationals. In August of 2004, Law No. 25 of 2004 on the Combat of Covering up Illegal Practices Carried out by Non-Qataris (commonly called the “Proxy Law” in Qatar) was enacted. The Proxy Law prohibits non-Qatari nationals from exercising “any commercial, economic or vocational business except in sectors where they are permitted to do so in accordance with applicable laws” and makes it unlawful for legal or natural Qatari persons to “cover up” the business activities of any non-Qatari person thus enabling the non-Qatari person to carry on “any commercial, economic or vocational business in violation of applicable laws.” “Covering up” is deemed to include any assistance afforded to the non-Qatari by the Qatari party by allowing the non-Qatari to unlawfully use the “name, license, commercial registration or otherwise” of the Qatari for the benefit of the non-Qatari, the Qatari or both. Heavy penalties may result from the breach of the Proxy Law including imprisonment and/or a fine in addition to the confiscation of any monies generated by the “covered up” business for third parties’ rights satisfaction. Penalties may also involve suspension or revocation of business licenses, commercial registration annulments and closing of business premises. To lawfully conduct business in Qatar on a regular basis, foreign investors are required to establish a legal presence in the State through one of the available options. Here we provide key information which prospective investors should be aware of when considering doing business in Qatar. These include the vehicles available to foreign investors and general legal considerations.
Establishing a Legal Presence in Qatar The available establishment vehicles may be classified as follows:
- Incorporating a local entity under the Commercial Companies Law No. 5 of the Year 2002 (Companies Law);
- Establishing a foreign branch in light of Article 3 of the Foreign Investment Law (Foreign Branch);
- Establishing a presence under Ministerial Resolution No. 142 of the Year 2006 regulating the establishment of representative trade offices (Representative Trade Office); and
- Incorporation in the Financial and Technology Zones (QFC and QSTP).
To get further details and key general legal consideration which prospective investors should be aware of when considering doing business in Qatar, please contact us at [email protected]