The General Tax Authority has started issuing a large number of presumptive tax assessments in Qatar to taxpayers resulting in significant tax exposures.

Issuing of presumptive tax assessments by the General Tax Authority (“GTA”)

According to the Income Tax Law No. 24 of 2018 and its Executive Regulations (“Income Tax Law”), the GTA is authorized to carry out tax audits and on-site inspections at taxpayers’ business premises to examine their tax filings, operations, IT systems, databases, accounting records, and financial data. The GTA is also empowered to issue presumptive tax assessments if taxpayers fail to file returns or provide necessary documents within the specified deadlines as per the Income Tax Law.

The Income Tax Law specifies that presumptive tax assessments should be based on the evidence and reasonable assumptions available to the GTA (such as the taxpayer's account data, business activities, and information from similar cases).

Recently, the GTA has been issuing numerous presumptive tax assessments due to the following reasons:

• Failure to respond to GTA's inquiries (e.g. information/documents) during the tax audit process within the given timeframe (ranging from three (3) to twenty (20) days).

• Failure to submit tax returns by the deadline.

• Auditor's opinion in the financial statements accompanying the tax return is not unqualified (e.g. qualified, adverse, or disclaimer).

Impact on taxpayers

Practically, the GTA issues presumptive tax assessments by:

• Applying a predetermined profit rate to the total revenue reported in the tax return for a specific year – typically ranging from 20% to 30%, depending on the taxpayer's activities.

• Rejecting expenses that were under inquiry by the GTA when the taxpayer failed to respond within the deadline.

Consequently, presumptive tax assessments can significantly alter the declared taxable income/losses, leading to substantial additional taxes and penalties for taxpayers.

It has been observed that presumptive tax assessments usually lack detailed explanations for the basis of assessment, requiring taxpayers to engage in a lengthy dispute resolution process to address them.

Preparation for GTA's tax audit

If information is not readily available during tax audits, taxpayers may face substantial risks as the GTA can issue presumptive tax assessments, resulting in additional taxes and penalties.

Given the recent surge in presumptive tax assessments, it is advisable for all taxpayers to prepare well in advance for tax audits, considering their complexity and the short timelines set by the GTA.

For tax audit purposes, taxpayers must:

• Provide all relevant records and explanations to the GTA for the audited tax period.

• Permit access and assist the GTA in inspecting the software, systems, and information tools used for financial data recording and tax preparation.

• Allow access and support the GTA in examining the data required for using these software, systems, and information tools, processes, and databases for transaction processing, billing, revenues, receipts, assets, and inventory.

How can we help?

With our expertise and track record in similar situations, PwC is well-suited to assist you in evaluating your readiness for a tax audit by the GTA. Our services include analyzing your tax return information, identifying potential audit areas, examining supporting documents, pinpointing gaps, and evaluating your current compliance procedures with GTA's audit standards. If any deficiencies are identified, we can offer recommendations to enhance your processes and enable you to respond effectively to future GTA inquiries, thus minimizing the likelihood of facing significant tax assessments and penalties.

Contact Us Today

Ajmal Maliyekkal

Partner

+97433112324, +97433626649

info@fecqa.com

Federal Experts Consultancy L.L.C