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The Foreign Investment Law: the first law in Qatar in 2019

  • Qatar
  • Corporate

09-01-2019

In a very positive legislative move, H.H Sheikh Tamim bin Hamad Al Thani, Emir of the State of Qatar, issued Law no. (1) of 2019 regulating the Investment of Non-Qatari Capital in the Economic Activity (the “New Law”) on 7 January 2019 repealing Law No. 13 of 2000 (the “Repealed Law”) and introducing significant changes to the previous model regulating foreign investment in the aim to grow the country's investment environment and further encourage foreign direct investment.

Below is a summary of some of the key aspects of the New Law:

  • the New Law allows foreign investments up to 100 percent ownership in all economic sectors subject to the specific legislations regarding commercial activities carried out by Non Qataris and as determined by the executive regulations of the New Law.
  • certain activities remain excluded namely banking and insurance (unless exempted by a Council of Ministers’ decision), commercial agencies and other sectors as decided by the Council of Ministers.
  • foreign ownership in listed companies on Qatar Exchange has been increased to a maximum of 49 percent, subject to the approval of the Ministry of Commerce and Industry (the “Ministry”) on the percentage set out in the articles and memorandum of those listed companies. This percentage can be increased subject to the approval of the Council of Ministers upon recommendation of the Minister of Commerce and Industry (the “Minister”).
  • foreign investors are required to apply to the Competent Department at the Ministry (the “CDMCI”) for an approval to exceed the threshold of 49% share capital ownership in companies by filing a form to be issued by the CDMCI along with the appropriate documentation determined by the CDMCI and the settlement of a fee. The CDMCI has 15 days to approve or refuse the application and notify the concerned party. The absence of response following the period shall be deemed to be an implicit refusal. The decision can be challenged by submitting a grievance before the Minister within 15 days of being made aware of the decision or the lapse of the stipulated period. The Minister will have 30 days to decide and his decision would be deemed final.
  • the New Law provides that the executive regulations (to be issued at a later stage) will determine the mechanism related to the above application.
  • the New Law lists the conditions for the establishment of branches of foreign companies carrying out contracts with governmental and semi-governmental entities. These do not differ from the ones currently applicable but a noticeable difference concerns the need to issue a commercial registration for such branches following the award of the project and prior to the execution of the qualifying contract. These principles may be amended by a Council of Ministers’ decision following the Minister’s recommendation.
  • most of the incentives previously granted under the Repealed Law remain the same, with a few changes such as:
    o lands can now be allocated to foreign investors through rent or usufruct (with the clear mention of the 25 years’ maximum term removed);
    o foreign investors may be exempted from income tax in accordance with the provisions of the Tax Law; and
    o compensation payable for expropriation, which can only be made for public interest and in a non-discriminatory manner, needs to be “fair and appropriate” as opposed to it being paid promptly and appropriately in accordance with the Repealed Law.
  • except for labour disputes, foreign investors have the right to refer their disputes to arbitration or alternative dispute resolution processes .
  • incentives and exemptions granted to companies before the enactment of the New Law will remain unaffected.
  • violations by foreign investors of the New Law need to be remedied within a period not exceeding 3 months from the date of notification by the CDMCI who has the right to cancel the registration of the company or branch if such violation is not remedied in time.
  • fines for violation of the New Law are now set at a maximum of QAR 50,000.
  • exemption from custom duties on machinery and equipment necessary for a project and exemption from custom duties on raw and semi-manufactured materials necessary for production in the industry sector and that are unavailable in the local markets remain unchanged. Provisions governing transfers and repatriation of funds from and into the State of Qatar remain unchanged.
  • the New Law does not apply to the following entities:
    o companies and individuals who are assigned to extract or manage natural resources under concession or special contract, to the extent the provisions of such does not contradict the provisions of the New Law;
    o companies set up by the government and public institutions or in which they participate and companies in which the government participates in partnership with foreign investors in a percentage of no less than 51 percent in accordance with the Commercial Companies Law; and
    o corporate or natural persons licensed by Qatar Petroleum to carry out any petroleum activities or which aim to invest in the oil and gas and petrochemical sector.

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