Kuwait: Proposes 15% Corporate Tax in Fiscal Reforms

Gulf Insider, 9 December 2024: Kuwait is set to implement a Corporate Income Tax as part of comprehensive fiscal reforms, with the Ministry of Finance proposing a 15 percent tax on corporate profits starting in 2025.

Outlined in the draft Business Profits Tax Law, the plan targets both local and multinational companies, exempting smaller enterprises with annual turnovers below 1.5 million Kuwaiti dinars.

The tax will apply to profits earned from 1 January 2025, with a broader rollout to additional businesses by 2027.

Initial advance tax payments are scheduled to begin in 2026.

State-owned companies will be exempt, while certain income from divided zones, including the submerged divided zone, will incur a higher tax rate of 30 percent, reduced for those who have already paid 50% of taxes to Saudi Arabia.

A supplementary tax is proposed for multinational corporations with effective tax rates below the minimum 15%, ensuring adherence to international tax standards.

Additionally, a 5% withholding tax will apply to specific payments to non-residents, such as dividends, royalties, rent, technical services, and insurance premiums, unless linked to permanent establishments in Kuwait.

Companies must register with the Tax Administration within 30 days of commencing operations.

Tax returns, along with audited financial statements, must be filed within six months of the tax year’s end.

The draft law also mandates quarterly advance tax payments based on estimated earnings, with overpayments eligible for refunds upon filing the final return.

The proposed tax system allows deductions for prior-period losses, salaries, depreciation, and contributions to the Kuwait Foundation for the Advancement of Sciences, subject to specific limits.

Businesses are required to retain financial records for ten years to fulfil reporting obligations.

Taxpayers can challenge assessments through an objection and appeal process, with disputes potentially escalated to a Tax Grievances Committee or competent courts.

Penalties for failing to meet filing or payment deadlines include a 1% charge for every 30 days of delay, applicable to missed tax declarations, withheld taxes, or delayed advance payments.

In cases where tax debts are at risk, the Tax Administration may seek court orders to seize assets, though taxpayers can avoid such measures by providing guarantees.

These reforms aim to modernise Kuwait’s fiscal framework, aligning with international tax standards while promoting transparency.

By targeting large corporations, small enterprises, and foreign entities, the proposed law seeks to balance revenue generation with equitable treatment of businesses across the economic spectrum.

Providers will be required to offer electronic payment options compatible with local banking systems, ensuring secure transactions.

The use of advanced technologies, such as distributed ledger systems and smart contracts, is permitted to enhance consumer experience, provided they are transparent and subject to oversight.

In terms of intellectual property, the law prohibits unauthorised use of protected content, holding providers accountable for violations.

Mechanisms will be established to address complaints, including fines and blocking infringing stores.

Cybersecurity provisions require service providers to implement stringent data protection measures, such as encryption and regular system updates, and to report security breaches within 72 hours.

Providers will be liable for any resulting damages.

The Ministry will oversee e-commerce activities and issue necessary regulations.

Two committees will be formed: the Violations Control Committee and the Dispute Settlement Committee, with the authority to issue warnings, impose fines, and temporarily close non-compliant stores.

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