The government is imposing a 15% tax on all companies operating in Kuwait and Kuwait companies in various markets.
The Ministry of Finance in Kuwait is under pressure as discussions to introduce corporate income tax starting in 2025, with a more comprehensive application opening to more companies in 2027.
The draft of the Business Profit Tax Law states that the government is leading to imposing a 15 per cent income tax on all companies operating in Kuwait and Kuwait companies running in various markets.
However, companies with an annual turnover of not more than one and a half million dinars during the tax period are free from corporate tax.
Initial advance tax payments would start in 2026. Companies that are 100% owned by the government would not have to pay the tax, while some income from the divided zone, including the submerged divided zone, will have a higher tax rate of 30 per cent, reduced for taxpayers who have already paid 50 per cent of taxes to Saudi Arabia.
To comply with international tax standards, multinational companies (MNCs) will get effective tax rates lower than a minimum of 15 percent.
Plus, a 5 percent withholding tax is imposed on certain payments to nonresidents, such as dividends, royalties, rent movable and immovable assets, technical services, and insurance premiums, unless they are associated with permanent establishments in Kuwait.
The proposed law specified that the tax deductor is obligated to withhold and submit the tax and is responsible for remitting it to the tax administrator.
Income generated from multiple sources would be included under this framework.
For example, sports or artistic activities, rent from properties in Kuwait, dividends from shares, and capital gains.
Businesses must register with the Tax Administration within 30 days of starting their business to comply with these regulations.
They must submit their audited financial statements with tax returns within six months after the end of the tax year.
The proposed legislation also requires the company to submit its quarterly advance tax payments based on estimated income, with any excess payments that are eligible for refunds while submitting the final return.
The proposed tax system allows deductions for previous period losses carried over, like salaries, depreciations, and contributions to the Kuwait Foundation for the Advancement of Sciences, but it is subject to certain limits.
However, losses must not be more than 75 percent of the taxable income for the present tax year.
Businesses must provide financial records for the past 10 years to fulfill the reporting obligations. The taxpayers have the right to challenge the assessment through the objection and appeal process.
Any tax objections can be filed with proper documents within 60 days of receiving the tax assessment.
If the objection is denied, taxpayers may appeal to the Tax Grievances Committee or appropriate courts, which have to respond to these grievances within 90 days.
A special team for Tax Grievances, formed by individuals appointed by the minister, will manage these disputes.
The committee will include members from the Tax Administration, tax experts, and other representatives such as advisors from the Fatwa and Legislation Department.
Taxpayers who fail to meet the filing or payment deadlines will pay a penalty of 1 percent for every 30 days of delay.
They pay these penalties during missed tax declarations, withheld taxes, or overdue advance payments. In situations where the tax liabilities are at risk, the tax administration may seize the taxpayer assets under court orders, though they can avoid such situations by providing guarantees.
The reforms are intended to modernize Kuwait’s fiscal system to align with international tax standards while promoting transparency.
These proposed reforms are aimed at large companies, small businesses, and foreign organizations to seek a balanced revenue generation with fair and equitable treatment for companies across the economic landscape.