KUWAIT Law and Practice Contributed by: Sam Habbas, Luis Cunha, Hisham Al-Quraan and Mustafa Sayed, ASAR – Al Ruwayeh & Partners
applicable deduction allowed may be greater or lower within the range provided. It is also worth bearing in mind that certain changes may be made to this under the MNE Tax Law. 5.7 Anti-Evasion Rules See 5.6 Transfer Pricing regarding the scrutini - sation of related party transactions. Where there are reasonable grounds to believe that a taxpay - er will not comply with its tax obligations, Article 35 of the executive regulations to the Tax Law empowers the DIT to make preliminary attach - ments (and potentially seek to dispose of the assets) and to ban the relevant management of the taxpayer from travelling. The following may also be of possible relevance. • See 5.2 Taxes Applicable to Businesses in relation to the 5% tax retention required to be made from payments being made to counter - parties. • Under Executive Rule No 57, the authorities can institute precautionary attachments when the Tax Department becomes aware that the taxpayer intends to: (a) leave the country forever; (b) cease its activity; or (c) dispose of its assets with the aim of evading the tax due. • Under Article 36 of the executive regulations to the Tax Law, if the final and payable taxes and penalties are not paid on the required date, the Tax Administration may approach the courts to attach the property of the tax - payer (including such assets of the taxpayer as may be in the possession of a third party). With respect to penalties, Article 34 of the executive regulations to the Tax Law provides that a penalty of 1% per month (calculated on the taxes due) shall be imposed for failing to submit a tax return as from when the tax return was meant to be filed, and a further
1% per month (calculated on the taxes due) for failing to actually pay taxes as from when the tax was due to be paid. • Under Article 44 of the executive regulations to the Tax Law, the Tax Administration may cancel any agreement or procedure that has the intention of tax avoidance. Significantly, the MNE Tax Law also includes new rules regarding tax avoidance/evasion. The following is of particular importance. • Unlike previous tax legislation in Kuwait, the MNE Tax Law includes a provision which expressly seeks to combat manipulative structures which are aimed at reducing tax liability. In this regard, it is provided that an agreement/transaction shall be disregarded where its principal purpose or one of its principal purposes is to reduce, defer or be exempt from tax. • Without prejudice to any stricter penalty, a person can be subject to imprisonment for up to three years and/or a fine of up to three times the tax liability in relation to tax eva - sion by committing or contributing to forgery, fabrication, concealment or destruction of records. The MNE Tax Law also includes provisions for, amongst other things, precautionary attach - ments, administrative penalties (for late filing and payment of taxes) and increased penalties for repeat offences. 5.8 Tariffs The tariffs (customs duties) are regulated under the Unified Customs Law (enacted in Kuwait by Law No 10 of 2003) and the Kuwaiti regula - tions issued under the Unified Customs Law by Decree 200 of 2003. The General Administra - tion of Customs (GAC) is the government entity
444 CHAMBERS.COM
Powered by FlippingBook