Income tax exemption a boost to soon-to-be launched ETF on QE

February 24, 2013 - 2:24:57 am

DOHA: The Cabinet decision to approve a draft law that exempting non-Qatari investors from the income tax would be a fillip to the Qatar Exchange’s soon-to-be launched equity-traded funds (ETF). 

One major element of decision is the securities listed on Qatar Exchange would be exempted from the income tax. This means that new products lined up by the QE, including the ETF, would be exempted. “Once you have more clarity on the decision, foreign investors will feel more comfortable and confident in Qatar’s financial market”, top market sources told The Peninsula.

Tax regime is a very important consideration for foreign investors, both within the region and across the borders, when investing in the stock market, he said.

Qatar is expected to launch ETF by the second half of this year and is working with a potential issuer for of a Shariah compliant ETF. It is also on track to introduce new investment instruments, Central Counterparty Clearing House (CCP), and eventually a derivatives market in the near future.

The Cabinet’s Wednesday decision was aimed at encouraging the foreign capital to invest in the Qatari market. The amendment of the existing tax law will exclude the share of the non-Qatari investors from the net profit of the company before assessing the income tax as well as exempt their profits share realized from the trading of all securities including investment funds listed on stock exchange.

According to the existing law, 10 percent of the net profit is being taxed largely from the foreign partnership companies. Different rates are being levied from Quasi government companies. 

“Government decision is an excellent move in the direction of attracting more foreign investment. The decision would lead to make Qatari capital market more vibrant,” said Gopal Balasubraminiam, Partner, KPMG Qatar.  

In fact, foreign investors in companies formed with the participation of government or Quasi governments are largely enjoying the tax benefits.  The decision to further cover private sector would definitely bolster the Qatari financial market, he said.

The Peninsula