Kuwait: Targets Harmful Goods With New Tax Law

Arab Times, 15 January 2025: The Finance Ministry is preparing a selective taxation law aimed at commodities detrimental to human health, with expected annual revenues of KD 200 million (USD 648.3 million).

It was revealed that a significant step in Kuwait’s tax reform is the introduction of corporate income taxes.

This includes Kuwait Decree-Law No. 6/2024 for the Exchange of Information for Tax Purposes and Kuwait Decree No. 157/2024 for taxation on multinational entities.

Kuwait joined the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) on November 15, 2023, which includes 140 countries and jurisdictions.

Since then, efforts have been made to combat international tax evasion and promote transparency in taxation.

Key reforms include treaties on double taxation, combating financial evasion, and agreements for investment protection, alongside ratifying international taxation cooperation treaties.

Entities subject to Kuwait Decree No. 157/2024 are exempt from certain levies, such as those for workers under Kuwait Law No. 19/2000 and alms under Kuwait Law No. 46/2006.

Companies contributing to the Kuwait Institute for Scientific Research will continue their payments, as no exemptions are mentioned in the decree.

Exemptions from the multinational taxation law include some government entities, non-profits, international agencies, and pension and investment funds.

Projected revenues from fees on multinational entities are estimated at KD 250 million (USD 810.6 million) annually, with enforcement set for the 2027-2028 period.

Approximately 300 groups, including 20 Kuwaiti and 25 Gulf groups, will be subject to this tax, with the remainder being foreign entities operating in Kuwait.

This tax enforcement aligns with Kuwait Vision 2035, aiming for a diversified and sustainable economy.

The proceeds will help diversify non-oil revenues and prevent financial outflows to other countries, enhancing Kuwait’s role in international cooperation for fair taxation practices.

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Kuwait: Implements New Regulations to Enhance Employee Management and Data Accuracy

Arab Times, 13 January 2025: The Health Ministry has announced the implementation of updated regulations aimed at improving the management of employees working under the “wage-for-work” system.

This initiative is part of a broader effort to enhance organisational efficiency and update the ministry’s employee database.

The new regulations require all sectors to submit detailed information about authorised personnel who can approve worker lists.

This data, which includes the employee’s name, civil ID number, job title, and official email address, is crucial for ensuring accurate data entry through the electronic form.

Additionally, the regulations mandate the submission of a complete employee data sheet after data entry.

This sheet must be signed and sealed by the employee’s direct manager and department head before being sent via the Injaz program to the office of the Assistant Undersecretary for Administrative Affairs.

The updated rules also stipulate that any internal or external employee transfers will only be allowed following an official decision from the Assistant Undersecretary for Administrative Affairs, contingent upon obtaining the necessary legal and administrative approvals.

Furthermore, all transfer decisions made in 2024, including those already approved, must be reviewed.

This review process will enable the ministry to address deficits and surpluses effectively.

These measures are designed to enhance work systems, ensure a fair distribution of employees based on actual needs, and increase transparency and data accuracy.

The Health Ministry has called on all relevant departments to fully cooperate to ensure the success of these updated procedures and achieve the desired outcomes.

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Kuwait: Considers Introducing VAT

Gulf News, 12 January 2025: Kuwait is weighing the introduction of VAT as GCC nations continue to reform their tax frameworks to diversify revenue sources and align with global standards.

The VAT adoption follows similar measures by other GCC countries, including Saudi Arabia and Bahrain, which have increased their VAT rates to 15% and 10%, respectively.

Qatar and Kuwait are expected to introduce VAT soon, further diversifying income beyond oil revenues.

VAT was introduced across the UAE since 2018 at a standard rate of 5%.

The introduction of VAT represents a pivotal step in the region’s economic transformation, providing governments with additional revenue to reinvest in infrastructure, public services, and sustainable development.

These efforts align with broader global trends as GCC nations modernise their economies and reduce dependence on hydrocarbons.

In addition to VAT, GCC countries are implementing the OECD-endorsed global minimum corporate tax rate of 15%, targeting multinational corporations with revenues exceeding €750 million.

This measure is designed to curb tax avoidance and ensure fair contributions from companies operating in historically low-tax jurisdictions, such as Dubai and Manama.

The UAE has already introduced a 9% corporate tax for businesses with profits above AED 375,000, while maintaining exemptions for small and medium enterprises and tax-free zones to retain its competitive edge.

Kuwait, along with other GCC nations, has implemented the 15% profit tax rate, and Bahrain is set to align with global tax regulations by 2025.

Saudi Arabia and Oman have joined the OECD framework, signaling a unified approach to corporate taxation.

Qatar, maintaining a 10% corporate tax, has indicated plans for future reforms.

Despite these changes, the GCC remains attractive for businesses, owing to its no-income-tax policy.

While Oman has considered a personal income tax for high earners, most GCC nations remain committed to a tax-free income environment.

To enhance compliance and efficiency, the region is embracing digital tax initiatives.

Saudi Arabia and the UAE have introduced e-invoicing systems to reduce fraud and streamline operations for businesses, showcasing their commitment to modernising tax systems.

These reforms aim to strengthen economic resilience, attract investment, and support job creation, positioning the GCC as a hub for sustainable growth and innovation.

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Kuwait: Central Bank Enforces New Security Measures on Bank Card Transactions

Arab Times, 5 January 2025: The Central Bank of Kuwait has issued a directive to local banks to impose financial limits on bank cards and payment operations.

This move aims to enhance security and regulatory controls.

The directive emphasises the need for banks to manage transactions conducted through websites, especially those not requiring a one-time password (OTP), by setting conservative daily limits on both the total value and number of such transactions.

Banks are instructed to create a mechanism, accessible through branches or electronic banking services, allowing customers to adjust their bank card payment limits.

This system should be personalised to each customer’s profile, with notifications for any changes made.

Additionally, banks must seek approval from the Central Bank for these adjustments.

The Central Bank’s directive is part of its ongoing efforts to bolster regulatory controls, improve internal systems, and enhance security measures for all bank cards, including ATM, credit, and prepaid cards.

Banks are required to implement stringent controls on payment operations to ensure security.

Furthermore, the Central Bank stresses the importance of complying with regulations for electronic money payments.

This includes developing policies and systems to detect and address fraud, with mechanisms for reporting fraudulent activities to relevant authorities.

Banks must provide continuous updates on fraud cases as specified by the Central Bank.

Compliance with these instructions is mandatory, and banks are required to submit a detailed timeline for implementing these new requirements.

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Kuwait: Introduces Comprehensive Foreign Residency Law

Arab Times, 12 December 2024: A senior official from the Kuwaiti Interior Ministry has announced the introduction of a new foreign residency law designed to align with current developments and address longstanding gaps.

The previous law, in place for over six decades, had seen only minimal changes.

The new law aims to rectify shortcomings in the older legislation while ensuring justice for expatriate workers and cracking down on residency traders through stricter penalties.

The law establishes clear guidelines for the rights and obligations of both workers and employers.

Set to be implemented within six months of its publication in the Official Gazette, the new residency law comprises 36 articles across seven chapters, incorporating significant amendments to benefit both citizens and residents.

Kuwait has taken steps to comply with international standards, particularly regarding human trafficking, by introducing provisions that reflect global laws and practices.

A key feature of the new law is the extension of residency durations for certain categories.

For instance, children of Kuwaiti women are granted a 10-year residency with the option of renewal, exempting them from fees unless they acquire Kuwaiti citizenship.

Additionally, the law allows foreigners to obtain regular residency in Kuwait for up to five years and includes incentives for foreign investors, such as granting real estate owners a ten-year residency.

Investors are eligible for a 15-year residency to encourage economic activity, while the family visit visa duration has been extended to three months.

The law outlines fees related to residency permits, renewals, and all types of entry visas, subject to decisions by the ] Interior Ministry.

A committee has been formed to ensure these fees align with residents’ incomes and services provided.

Concerns were expressed over disparities in visa fees between Kuwait and other countries, highlighting that Kuwaiti citizens pay significant amounts to enter certain countries while citizens of those nations pay nothing to enter Kuwait.

Severe penalties are imposed on those who exploit residency regulations, including trading in visas or employing foreigners unlawfully.

The law prohibits employers or recruiters from misusing visas, delaying payments without justification, or employing workers for purposes other than those specified in their contracts.

Foreigners are also prohibited from working for others without the appropriate permissions.

Shelter or employment of individuals without valid residency is strictly forbidden.

Violators, including companies facilitating illegal recruitment, face harsh penalties.

Companies found guilty of human trafficking or misusing foreign labor may lose their licenses, and responsible officials could face imprisonment and fines, with penalties doubling for public employees or repeat offenders.

The law also penalises individuals who obtain work permits in exchange for money or other benefits.

The Interior Ministry retains the authority to deport foreigners, even those with valid residency permits, if they lack a legitimate source of income, violate the terms of their residency, or pose a threat to public interest, security, or morals.

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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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Kuwait: Moves Toward Strengthening Digital Commerce with New Law

Arab Times, 4 December 2024: The Ministry of Commerce and Industry is set to unveil a draft Digital Commerce Law aimed at creating a robust regulatory framework for the digital commerce sector in Kuwait.

This initiative marks a pivotal move towards regulating digital commerce, striking a balance between facilitating commercial activities and safeguarding consumer rights, while nurturing the growth of the digital economy.

The proposed law seeks to enhance transparency, protect consumer rights, and regulate interactions between merchants, consumers, and government bodies.
It takes into account technological advancements and anticipates future challenges.

The draft will be presented at a press conference, after which legal experts, business owners, and company representatives will have until early January to provide feedback before it is reviewed and approved by the Council of Ministers.

Key aspects of the law include definitions of terms such as e-commerce, merchant, practitioner, consumer, and sensitive data.

It applies to all commercial activities conducted electronically or digitally for the purpose of offering products and services.

The law also outlines procedures for registering businesses in commercial and practitioners’ registers, promoting transparency.

Merchants must register their online stores in the commercial register, while a separate register will be established for practitioners not listed in the commercial register.

The Digital Commerce Law also regulates various professions and specifies approved workplaces, ensuring legal clarity and compliance.

A significant focus is on consumer rights protection, requiring service providers to disclose their identity, terms and conditions, and accurate product or service information.

Consumers will have the right to withdraw from contracts within 14 days, with exceptions for non-returnable items.

The law mandates transparent mechanisms for handling consumer complaints and ensures compensation for delayed deliveries or contract breaches.

Guidelines for electronic advertising are set to regulate promotional offers and prevent misleading advertisements or unauthorised use of logos and trademarks.

Promotional offers are allowed without prior approval if clear conditions are met, but discount campaigns will need prior approval from the Ministry to ensure consumer protection.

The law addresses digital documentation and signatures, setting standards for secure document storage and requiring service providers to obtain licences for digital signatures to ensure authenticity and prevent tampering.

It establishes clear responsibilities in cases of misuse.

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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Kuwait:  Leads the Way in Disability Rights Legislation and Empowerment Initiatives

Arab Times, 3 December 2024: Kuwait has emerged as a pioneer in enacting legislation to protect the rights of individuals with disabilities.

The country has established specialised schools and provides comprehensive care, acknowledging both the rights and potential of this community.

During a recent regional consultative session for the Middle East and North Africa, organised under the theme “Women and Disability,” the importance of local, regional, and international collaboration was emphasised to support individuals with disabilities.

The session has highlighted Kuwait’s welcoming environment, which has facilitated discussions among experts from various countries on disability-related issues.

The role of civil society in raising awareness and addressing barriers to implementing legal frameworks was also underscored.

Kuwait’s initiatives to integrate people with disabilities into society aim to ensure they can lead fulfilling lives and access their rights without discrimination.

The United Nations Special Rapporteur on the Rights of Persons with Disabilities commended Kuwait for its leadership on the international stage.

The session served as a platform for governments, civil society, and regional organisations to discuss challenges, share best practices, and collaborate on solutions.

It focused on raising awareness about the Convention on the Rights of Persons with Disabilities and addressing barriers to full inclusion in the MENA region.

The need for enhanced regional cooperation among governments, civil society, and international stakeholders was emphasised, along with a call for NGOs and human rights defenders to advocate for the rights of women with disabilities.

A field study presented during the session examined the impact of Kuwaiti legislation in empowering women with disabilities, highlighting the country’s commitment to gender equality and justice as enshrined in its constitution and international agreements.

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Kuwait: To End Conversion of Sick Leave to Regular Leave or Cash

Arab Times, 3 December 2024: Kuwait’s government is considering a policy shift on replacing unused sick leave with regular leave, aiming to promote fairness and reduce financial costs.

The proposed change would prevent employees from converting unused sick leave into regular (annual) leave or receiving financial compensation for unused days.

Sick leave would only be used for rest and recovery.

The potential suspension of the replacement policy is reportedly intended to curtail financial costs and encourage employees to use sick leave when necessary, rather than hoarding it for cash benefits.

Advocates argue this approach promotes better health and aligns with labour regulations, ensuring fairness for employees who genuinely need sick leave.

Critics, however, warn that stopping the replacement policy could demotivate employees who rely on it as a supplemental income source.

Some suggest that government agencies educate staff on the reasons for such a decision and explore alternative incentives to maintain morale.

While supporters emphasise that the policy fosters justice by ensuring equal treatment of all employees, detractors stress that removing this option could negatively impact employees’ income and financial stability.

They argue that sick leave, being a legitimate entitlement issued by government agencies, should remain a right that benefits employees fairly.

The debate highlights the need for a balanced approach, potentially regulating replacement policies to address both financial concerns and employee satisfaction.

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