BDO Corporate Tax News

Earlier this year, Qatar took a significant step towards aligning its tax framework with international standards by enacting legislation (Law No. 22 of 2024) that implements Pillar Two measures into domestic law. Law No. 22 amends the 2018 income tax law to introduce key measures under the OECD/G20 Pillar Two initiative, including an income inclusion rule (IIR) and a domestic minimum top-up tax (DMTT). The DMTT is designed to be a qualified domestic minimum top-up tax under the OECD’s Global Anti-Base Erosion (GloBE) Model Rules.

Separately, the General Tax Authority (GTA) has extended the financial penalty exemption initiative through 31 December 2025. Originally launched on 1 March 2025 for a six-month period, the initiative offers eligible taxpayers a full (100%) exemption from monetary penalties in certain cases, providing additional time and incentive to regularise their tax affairs.

These developments reflect Qatar’s commitment to building a transparent, rules-based tax system that is in alignment with global standards and that supports both domestic businesses and multinational enterprises (MNEs).

Global Minimum Tax

With the enactment of Law No. 22 of 2024, Qatar has formally adopted the Pillar Two framework, requiring multinational enterprises operating in or from Qatar to comply with a global minimum effective tax rate of 15% for financial reporting purposes under IAS 12.

To implement the GloBE Model Rules, the new law contains two main provisions:

1. Income Inclusion Rule: The IIR requires a Qatari-based ultimate or intermediate parent company to pay a top-up tax on the income of low-taxed foreign constituent entities (CEs) within the same MNE group.
2. Domestic Minimum Top-up Tax: The DMTT ensures that Qatar can collect the top-up tax on locally earned profits, preventing the reallocation of such taxes to other jurisdictions.

Notably, the legislation does not include an Undertaxed Payment Rule.

The legislation applies for fiscal years starting on or after 1 January 2025 and targets MNE groups with consolidated annual revenues of EUR 750 million or more in at least two out of the last four fiscal years. The law overrides any conflicting domestic measures; as a result, entities licensed by the Qatar Financial Centre, Qatar Free Zone Authority, Qatar Media City and Qatar Science & Technology Park may fall within the scope of the Pillar Two rules.

Unless otherwise directed by the Council of Ministers, the law incorporates the OECD GloBE rules (including the safe harbours, ordering rules and transitional measures), as well as the administrative guidance. This approach enhances clarity, consistency and predictability for MNE groups operating across jurisdictions.

Financial Penalty Exemption

The GTA’s decision to extend the financial penalty exemption initiative through the end of 2025 underscores its commitment to improving compliance, boosting taxpayer confidence and supporting economic stability. The initiative covers financial penalties related to income tax and withholding tax for tax years 2014 through 2024, including:

• Late registration;
• Late filing of tax returns;
• Overdue tax payments;
• Errors in submitted returns; and
• Withholding tax omissions.

To qualify for a full penalty exemption, taxpayers must:

• Register on the Dhareeba portal and submit the exemption request by 31 December 2025;
• File all overdue income and withholding tax returns before submitting the exemption request;
• Settle all outstanding tax liabilities in full before submitting the exemption request;
• Confirm that penalties are not linked to intentional noncompliance or tax evasion;
• Acknowledge that the exemption applies only to monetary penalties—not to the underlying tax; and
• Verify that the penalties are reflected in the taxpayer's Dhareeba account.

Since its launch, the financial penalty exemption has received over 7,000 applications, resulting in more than QAR 1.6 billion in waived penalties. It has significantly improved compliance rates, reduced taxpayer grievances and fostered a more cooperative tax environment.

To take advantage of the extended penalty exemption period, taxpayers should act promptly and consider the following steps:

• Review their Dhareeba accounts for any outstanding obligations;
• Correct any errors and file missing returns;
• Settle all unpaid taxes in full;
• Submit the penalty exemption request before the deadline; and
• Maintain accurate records of all filings and payments.

Late submissions will not be accepted, so early action is essential.

BDO Insight

The introduction of the global minimum tax and the extension of the penalty relief initiative mark a pivotal evolution in Qatar's tax landscape. These measures reinforce Qatar’s alignment with the OECD Pillar Two framework and enhance its reputation as a cooperative and globally integrated tax jurisdiction. For businesses, the changes offer greater certainty and a more stable foundation for long-term planning.

Gavin Brown
BDO in Qatar