GTL Summary:

Cabinet Decision No. 39 of 2019, Article 7, outlines the taxation of foreign enterprises operating through a permanent establishment in Qatar. Profits are taxable if attributable to the establishment, including similar sales or activities within the state. It emphasizes the 'separate enterprise' principle for profit attribution. While general administrative expenses are deductible, the article prohibits deducting royalties, fees, or interest paid to a head office, except for banking enterprises. This article ensures that the tax treatment of permanent establishments remains consistent with international standards and arm's length principles.

Document Type: ERS - Executive Regulations
Law: Income Tax Law 24 of 2018
Decision Number: executive-regulations-39-article-7
Year: 2019
Country: 🇶🇦 Qatar
Official Name: Article 7
Last updated at: 2026-02-23 12:13:40 UTC

SECTION 2 - TAX CALCULATION

Chapter 1 - Taxable Income

Article 7
[3]

  1. [Subject to the provisions of tax agreements, if a foreign enterprise conducts activities in the state through a permanent establishment located therein, the profits of the enterprise are taxable in the state, but only on the part attributable to the following:

    1. The mentioned permanent establishment.

    2. Sales in the state of goods or merchandise of the same or similar type as those sold through that permanent establishment.

    3. Other activities conducted in the state of the same or similar type as the activities conducted through that permanent establishment.

  2. Subject to Clause (3) of this Article, if a foreign enterprise conducts activities in the state through a permanent establishment located therein, the profits attributable to that permanent establishment are those expected to be earned if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing independently with the enterprise of which it is a permanent establishment.

  3. When determining the profits of the permanent establishment, expenses incurred for the purposes of the permanent establishment's activities, including executive and general administrative expenses incurred, whether in the state or elsewhere, are deductible. However, amounts paid by the permanent establishment (other than the actual reimbursement of expenses) to the headquarters or any of its other offices as royalties, fees, or similar payments for the use of patents or other rights, or as commissions for specific services rendered or for management, or as interest on funds loaned to the permanent establishment are not deductible, except in the case of a banking enterprise. Conversely, when determining the profits of a permanent establishment, amounts charged by the permanent establishment (other than the actual reimbursement of expenses) to the headquarters or any of its other offices as royalties, fees, or similar payments for the use of patents or other rights, or as commissions for specific services rendered or for management, or as interest on funds loaned to the headquarters or any of its other offices are not taken into account, except in the case of a banking enterprise.

  4. For the purposes of this Article, the profits attributable to the permanent establishment are determined in the same manner year after year unless there is a justified and acceptable reason for a deviation.][G15]

Footnotes

[3]Amended by Cabinet Decision 2023/3

GTL Notes

[G15]This paragraph was amended, vide Amending Law No. 11 of 2022 and and Cabinet Resolution No. 3 of 2023. Prior to its amendment, the text in brackets read as follows:
"1- Subject to the provisions of the Tax Agreements, the share of the permanent establishment shall be deducted from the administrative and general expenses of the center or headquarters outside the State under the following limits:
(a) (1%) of the gross income of the permanent establishment in relation to banks and insurance companies.
(b) (3%) of the gross income of the permanent establishment in other cases.
The aforementioned shall be conducted after deducting the following :
- The value of contracting and subcontracting Agreements
- The cost of work performed abroad.
- The value of external supplies related to the activity of the permanent establishment.
- The value of the amounts paid for reinsurance premiums.
Amounts paid by the permanent establishment to the headquarters or to its other branches, other than actual expenses in the form of royalties, fees or other similar payments, shall not be deducted for the use of patents or other rights or for services rendered to the permanent establishment."

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