Compliantly Engage Contractors in Qatar

Any business hiring in Qatar should understand the legal landscape around engaging with individuals and companies operating in Qatar. Unlike in many other countries, there is relatively little meaningful legal distinction between an employee and an independent contractor per se. Instead, hiring abroad in Qatar looks closely at whether the individual is a citizen of Qatar or the Gulf Cooperation Council (GCC) countries, or a foreign national. All foreign nationals operating in Qatar must have either formed their own company (with part-ownership by a Qatari national being mandatory) or otherwise be under a sponsored work visa at all times.

It is important to work with a partner like Worksuite to ensure you understand the legal landscape in Qatar. This is critical to compliantly engaging workers in Qatar and thereby avoiding severe legal, financial, and other penalties. 

Qatari law does not legally distinguish between employees and independent contractors. Instead, the primary legal distinction is the citizenship status of the individual. Individuals who are citizens of Qatar or a GCC country only need a work permit to engage in work, whether as an employee or independent contractor. However, it is likely they will have already established or be a partner in a company. 

On the other hand, foreign nationals who have not formed a company will require visa sponsorship for all work undertaken in Qatar. This means there is no legal distinction between whether they work on a series of shorter-term contracts (each of which must be signed by the hiring company as the sponsor) or on a longer-term traditional ‘employment’ contract (which also requires sponsorship by the employer).

There are a large number of foreign nationals working in Qatar, the vast majority of whom work as employees under employment visas sponsored by their employer. It is highly unlikely that Qatari nationals, or nationals of other GCC countries, would be operating as independent contractors without having also established their own company. As such, a hiring company is likely to find itself engaging with either non-Qatari and non-GCC nationals as either independent contractors or companies, or otherwise Qatari/GCC nationals operating under their own company.

Hiring companies must note that it is illegal in Qatar for an individual to operate as an independent freelancer without both a sponsor and a work permit issued by the Ministry of Labor. This means that whenever a hiring company begins discussions with an independent contractor, it would be prudent to first obtain proof of their existing visa sponsorship.

Because independent freelancing (i.e., without a visa sponsor) is illegal in Qatar, the category of “independent contractor” does not exist in the same way as it does in many countries. Individuals are either under an employment contract (for which foreign nationals always require sponsorship) or are an owner or part-owner in a company.

There are effectively only two categories of independent contractors in Qatar: those who have not formed their own company (and therefore require sponsorship for every work contract) and those who have.

A. Self-employed (sponsored): This refers to individuals who work as independent contractors but have not formed their own company. These individuals still pay business tax as commercial entities (see above), but the hiring company will need to sponsor their visa for the duration of the contract.

B. Company: Independent contractors can also set up a company in Qatar. The most common legal business structure is the Limited Liability Company (LLC), which requires at least two shareholders and at least QAR 200,000 in share capital, 51% of which must be owned by a Qatari national. Other structures include the Joint Company, Equities Partnership Company, Particular Partnership Company, Shareholding Company, Limited Partnership Company, and Branch Office / Subsidiary. The latter can be completely foreign-owned.

There are two main engagement models for working with independent contractors in Qatar.

A. Direct engagement. This can involve hiring the contractor as an employee, or establishing a business-to-business contract.

• Employment contract. Under this model, the hiring company engages directly with the independent contractor and establishes an employment contract. The hiring company must sponsor the contractor’s work visa for the duration of the contract.
• Business-to-business contract. Under this model, the hiring company engages with the independent contractor via the company in which the contractor is an owner or partner. This results in the establishment of a business-to-business contract. The hiring company does not need to provide any visa sponsorship.

B. Third party. These firms come in two forms and both are specially designed to vet and engage freelancers compliantly as either contract employees or independent contractors on your behalf.

• Temp agency: Here, the hiring company engages with a staffing agency, which in turn supplies one of its own independent contractors to deliver the contracted services. The hiring company pays the staffing agency directly, in accordance with the terms of the contract. The contract is, therefore, between the hiring company and the staffing agency, while the agency pays the independent contractor through a separate contractual arrangement.
• Umbrella company: Some independent contractors may work under an umbrella company. In this case, the contractor is responsible for finding and fulfilling their work, but they are an employee of the umbrella company, which manages payroll and applies an administration fee on the independent contractor’s earnings. In Qatar, umbrella companies provide independent contractors with the added benefit of being able to work on multiple contracts under a single work permit.
• Hiring partner: The hiring company can also work with a hiring partner who helps them vet potential independent contractors, set up employment contracts or business-to-business contracts, onboard and manage contractors, and pay contractors. 

If engaging with an individual who has not formed their own company, the hiring company will need to establish an employment contract and pay the individual via payroll. If engaging with an individual in their capacity as owner of a company, the hiring company establishes a business-to-business contract and pays any invoices as per the terms of the contract. In general, all tax forms, payment forms, invoices, and other official business and contractual documentation must be in Arabic.

There is no personal income tax system in Qatar. Employees therefore pay no income tax, while companies (including individuals engaged in commercial activities) generally pay a flat rate of 10% of their profits as Corporate Income Tax (CIT). Qatari companies who pay non-resident entities are liable for an additional tax. There are no mandatory social security contributions in Qatar.