KUWAIT Law and Practice Contributed by: Sam Habbas, Luis Cunha, Hisham Al-Quraan and Mustafa Sayed, ASAR – Al Ruwayeh & Partners
The Law’s core objective is to ensure that MNEs operating in Kuwait pay a minimum level of tax on their profits. MNEs with a global revenue of at least EUR750 million in at least two of the four tax periods pre - ceding the relevant tax period are subject to a minimum effective tax rate of 15%. If the effec - tive tax rate, calculated as adjusted covered taxes divided by net income, falls below 15%, a top-up tax is imposed. The MNE Tax Law cov - ers various entity types, including companies, joint ventures, and permanent establishments of foreign entities in Kuwait. However, govern - ment entities, non-profit organisations, interna - tional organisations, pension funds, investment funds, real estate investment vehicles, and certain entities directly owned by any of these excluded entities may be able to take advantage of exemptions under the Law. 5.3 Available Tax Credits/Incentives Given the restricted scope of taxes in Kuwait (relatively low flat tax rates, etc), there is limited scope for additional tax credits and incentives. It is of particular significance, however, that sev - eral tax credits are provided to parties operating under the FDIL. These tax credits are related to the commitments made to KDIPA and are set out below (with the figures given being the set per - centage/multiplier value for calculating annual benefits). • Technology transfer: specialised equipment cost – 20% of the value of the specialised equipment cost. • Creating job and training opportunities for Kuwaiti nationals: (a) total expenditure on salaries paid to Kuwaiti employees – five times the annual salaries paid to the Kuwaiti employees in
excess of the percentage covered under the applicable laws; and (b) total number of Kuwaiti employees – KWD36,000 for each Kuwaiti employee. • Expenditure on training of Kuwaiti employees – ten times the annual expenditure on training of Kuwaiti employees. • Utilisation of local resources: (a) rental of the local head office of the investment entity – equivalent to the value of the annual contracts with local suppli - ers; (b) contracts with local suppliers (especially including SMEs) for the provision of local products and services – equivalent to the value of the annual contracts with local suppliers; and (c) raw material and other material from local sources – double the annual value of inputs used from local sources. Article 8 of the executive regulations to the Tax Law is also significant, as it provides that the profits accrued by corporate bodies from trad - ing on the Kuwait Stock Exchange are exempt from taxation. 5.4 Tax Consolidation While there is no express rule restricting tax consolidation, the Tax Law provides that every taxpayer must file an income tax declaration (Articles 1 and 8 of the Tax Law) and this rule is applied in practice by the DIT. Certain changes may be made to this under the MNE Tax Law; in this regard, new regulations addressing issues under the MNE Tax Law and how it is applied are expected in 2025. 5.5 Thin Capitalisation Rules and Other Limitations The Tax Law does not expressly address thin capitalisation (where a company is primarily
442 CHAMBERS.COM
Powered by FlippingBook