Company Structures in Qatar: Branch Office vs Limited Liability Company

Company Structures in Qatar: Branch Office vs Limited Liability Company

- Connor Hayes

Choosing the right location and company structure in Qatar is dictated by the activities a business wishes to carry out, who its target customers are, and if they have a government or quasi government contract.

It is important to understand the terminology, as countries in the Gulf Cooperation Council (GCC) have different company structures. Often they are similar, but not the same.

In Qatar, the term ‘Branch Office’, refers to an office set up by a foreign company, 100% foreign owned and created to service a government or quasi government contract. A ‘Foreign Branch’ in Qatar, only exists for very limited activities, primarily architecture and engineering This entity is 100% foreign owned but is not linked to obtaining a government contract.

In the UAE, for example, the concept of a ‘Branch Office’ to service a government contract does not exist but there, you can create a ‘Foreign Branch’, 100% foreign owned, for most activities except trading.

If your activities, products, services and target customers dictate that you must establish a mainland entity, then as a foreign company you have two options: to set up as a Limited Liability Company (LLC) or as a Branch Office (unless involved in architecture or engineering, as above).

What are the main differences between an LLC and a Branch Office?

  • A Branch Office is owned 100% by the Foreign Mother Company
  • An LLC must have a Qatari National (individual or corporate) as the majority (51%) shareholder. This means that the foreign investor(s) may hold no more than 49% of the shares in the company. In limited circumstances it may be possible to hold higher than 49%, subject to the approval of the Minister of Economy and Industry.
  • An LLC can perform a variety of activities and can service government contracts, a Branch Office can only service the contract it was established to perform.
  • A Branch Office is a direct extension of the mother company and as such, has no separate legal standing. This means the mother company bears full legal, financial and technical liability for the Branch Office
  • An LLC is a separate legal personality, which limits the exposure of the mother company. If a foreign company establishes a new LLC in Qatar, then the new LLC’s liability is separate from the mother company. Shareholder liability in an LLC is, in most cases, limited to the value of their subscription to the share capital.
  • An approval from the Minister of Economy and Industry is required before the Branch can officially register.
  • A Branch Office’s life span is only as long as the contract it is established to service.

What dictates if my company can be a Branch Office or an LLC in Qatar?

As a general rule this is dictated by a government or quasi government contract. There are some activities in which either company structure is acceptable. Below are some of the main categories and the related rules:

Activity

Limited Liability Company

Branch OFFICE

Trading

Must be an LLC

Cannot be a Branch Office

Industrial Activities / Manufacturing

Must be an LLC

Cannot be a Branch Office

Importing

Must be an LLC

Cannot be a Branch Office

Installation / Maintenance / Repair

Can be either but note that should the company need to import spare parts for their work, then they must be an LLC.

Can be a Branch but cannot import parts. If the company can source the parts from the local market, then a Branch structure is fine

Contracting

Can take either form

Can take either form

ArchitectuRE/Engineering

Can take either form

Can take either form

Consult Venture Partner on the correct activity on the licence and the specific requirements

General Consultancy

Can take either form

Can take either form

ADMINISTRATIVE Consultancy

Can take either form

Can take either form

Can I convert a Branch Office into an LLC?

A Branch Office cannot be converted into an LLC. The commercial registration and trade licence would need to be cancelled and once this is done, you could open a new Limited Liability Company. The same company name could be used if the Branch Office has been closed correctly. For more details on this process please contact us.

What are the cost differences between a Branch Office and an LLC?

  • Government fees: The government fees for a Foreign Branch are generally higher than the government fees for an LLC. The Ministry of Commerce and Industry charge QAR30,000 per contract for a Branch Office and much higher fees for membership of the Qatar Chamber of Commerce and for the trade licence. With a Branch Office, there are no ‘local partner’ fees.

What are the tax differences between a Branch Office and an LLC?

  • A Branch will have to account for its profits to the mother company and its income may therefore be taxable under the laws of the local tax jurisdiction of the mother company.
  • The Qatar rate of Corporate tax is 10% of a company’s net profit .
  • We recommend that you seek professional advice on your tax position before committing to either structure. It is obligatory with either structure, to appoint a ‘Qatar authorised’ auditor within thirty days of obtaining a Commercial Registration in Qatar, normally auditors would provide tax advice.

How can Venture Partner Qatar help?

For assistance with queries on setting up an LLC or Branch Office in Qatar and for any other assistance in setting up a company in Qatar or entering the market, please contact a member of the team at Venture Partner Qatar by completing the contact form below or call us on +974 4478 8765.

Get in touch with Connor Hayes

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