By: Mohamed Fouad – Managing Associate
Omar Qouteshat – Senior Associate
Decree-Law No. 1 of 2024 (“Amending Law”) was recently issued, amending some provisions of Decree-Law No. 10 of 1974 regarding the establishment of QatarEnergy (“QatarEnergy Establishment Law”). The amendments were mainly related to tax and tax exemptions specific to QatarEnergy, amending Article 27 of the QatarEnergy Establishment Law, as well as introducing Articles 21 bis and 27 bis/1.
The amendment to Article 27 of the QatarEnergy Establishment Law was introduced to remove QatarEnergy and its subsidiaries from the scope of tax and fee laws. This was achieved by deleting the opening sentence of Article 27, which previously stated that “the established tax and fee laws shall apply to the Corporation and its subsidiaries.” With this amendment, the application of the provisions of the Income Tax Law issued by Law No. 24 of 2018 and its amendments (“Income Tax Law”) to QatarEnergy and its subsidiaries was cancelled, and QatarEnergy became subject to the Income Tax Law within the limits of what is stated in Articles 21 bis and 27 bis/1 of the Amending Law, as explained below.
In line with the provisions of the Income Tax Law, which applied a tax rate of no less than 35% to petroleum operations and petrochemical industries, Article 21 bis imposed a 35% tax on QatarEnergy’s net taxable income for each fiscal year.
This new article also specified the mechanism for calculating taxable income by adding the taxes paid by QatarEnergy under development and production sharing agreements for the development and production of hydrocarbons in a specific area, with the deduction of dividends that are recognised as income in QatarEnergy’s audited independent financial statements for that fiscal year. Accordingly, when calculating taxable profits, any losses incurred by QatarEnergy during the previous five fiscal years are taken into account.
Article 27 bis/1 specifies the legal texts in the Income Tax Law to which QatarEnergy is subject, taking into account the provisions regulating the registration of taxpayers with the General Tax Authority, the submission of tax returns, and the payment of the specified tax, in addition to the provisions related to the confidentiality of information, procedures for issuing tax assessments, the rights of objection and grievance, and the recovery of taxes and penalties collected unjustly, in addition to imposing penalties for non-compliance or fraud, and subjecting taxpayers to tax in the event of concluding transactions aimed at avoiding paying tax, in addition to the obligations to provide transfer pricing information and the application of global rules to combat tax base erosion.
