Qatar Enacts a Pillar Two Income Inclusion Rule and Domestic Minimum Tax

General

On March 27, 2025, Law No. 22 of 2024 amending certain provisions of Income Tax Law No. (24) of 2018 was published in Qatar’s Official Gazette. This implements the Pillar Two Income Inclusion Rule (IIR) and a Domestic Minimum Top- Up Tax (DMTT which is intended to be a Qualified Domestic Minimum Top-Up Tax) from January 1, 2025.

Article 1 of Law No. 22 of 2024 amends Article 34 of the Income Tax Law to provide that the application of the Income Tax Law is subject to the provisions of multilateral agreements, including agreements to implement BEPS provisions.

Article 2 of Law No. 22 of 2024 implements a new Article 23 Bis in the Income Tax Law to provide for the IIR and DMTT. The Under-Taxed Profits Rule (UTPR) is not included in the Law. 

Definitions

It includes a number of definitions which are based on the OECD Model Rules, including:

– Income Inclusion Rule – as defined in Article 2.1 of the OECD Model Rules

– Multinational Groups – as defined in Article 1.2 of the OECD Model Rules

– Constituent Entities – as defined in Article 1.3 of the OECD Model Rules

– Safe Harbours – measures implemented by the Inclusive Framework to simplify and reduce the administrative burdens on MNE groups for the application of the Pillar Two GloBE rules.

The DMTT is defined as a tax on the excess profits of domestic entities, in a manner consistent with the application of the Pillar Two GloBE rules and which raises the domestic tax liability on excess domestic profits to 15%. Article 23 Bis (2) further confirms that the DMTT applies to incorporated entities located in Qatar.

Application of OECD Model Rules and Guidance

Article 23 Bis (3) provides that the IIR and DMTT are to be applied and interpreted in a manner consistent with the OECD Model GloBE Rules, Commentary and Administrative Guidance, including the Safe Harbour Rules.

Any amendments to the Commentary, including those contained in the OECD Administrative Guidance will apply in Qatar unless a decision to exclude those amendments is issued by the Council of Ministers.

This therefore directly applies the OECD Model Rules, Commentary, Administrative Guidance and Safe Harbour Rules for domestic law, unless any amendments are specifically excluded.

The application of the IIR will therefore follow the OECDs approach – including the clarifications made in the OECD Administrative Guidance.

For the DMTT, the OECD approach should also apply, however, further details are likely to be required to establish Qatar’s approach to the application of the DMTT. Not least because whilst the mandatory deviations in the OECD Administrative Guidance for DMTTs (eg the pushdown restriction for CFCs etc) may apply due to the transposition of the OECD Administrative Guidance, the OECD Administrative Guidance also permits a number of optional deviations (eg the accounting standard to use for DMTT purposes).

This is not addressed in Law No. 22 of 2024. As such, the default position (eg using the accounting standard of the UPE in the consolidated accounts) would need to be used unless further detail was provided in Ministerial Decisions. Article 23 Bis (6) provides that the Tax Authority will issue the necessary circulars and guidelines to implement the provisions of Law No. 22 of 2024.

Administration

Article 23 Bis (6) provides that administrative obligations includes:

– Registration for the IIR and DMTT;

– Filing a GloBE Information Return (GIR) in accordance with Article 8.1.1 of the OECD Model Rules;

– Where a UPE, designated filing entity or designated local entity files the GIR on behalf of the constituent entity, a notification under Article 8.1.3 of the OECD Model Rules should be made to identify the identity of the filing entity and the jurisdiction in which it is located;

– Filing an IIR Tax Return;

– Filing a DMTT Tax Return.

However no further detail on the administrative rules is provided in Law No. 22 of 2024. Article 23 Bis (6) provides that further Circulars will be issued which are likely to address the specific deadlines and method of registration/filing.

Penalties

Article 23 Bis (7) provides for a number of penalties related to the application of the IIR and DMTT. This includes:

– Failure to file by the filing deadline – a financial penalty of 500 riyals for each day of delay, up to a maximum of 180,000 riyals;

– Failure to pay the top-up tax under the IIR or DMTT by the deadine – a penalty of 2% of the amount of tax due for each one month of delay (not exceeding the amount of tax due);

– Failure to register – a penalty of 20,000 riyals.

Article 4 of Law No. 22 of 2024 provides for the OECDs transitional penalty relief regime.

It applies for fiscal years beginning on or before December 31, 2026 but not after June 30, 2028, and provides that during this period, no penalties should apply relating to the above breaches where an MNE has taken “reasonable measures” to ensure the correct application of the GloBE Rules.

Note that Article 3 of Law No. 22 of 2024 provides for additional penalties that are outside the transitional penalty relief regime. This includes penalties for failure to keep accurate records, failure provide documents when requested and the provision of incomplete or in accurate information.