Kuwait to Introduce 15% Corporate Tax in 2025 as Part of Fiscal Reforms

Kuwait’s Ministry of Finance has proposed a 15% corporate income tax on profits as part of a comprehensive fiscal reform plan, set to take effect in 2025. The initiative, detailed in the draft Business Profits Tax Law, aims to target both local and multinational businesses, while exempting smaller enterprises with annual turnovers under 1.5 million Kuwaiti dinars.

Key Provisions of the Proposed Law

1.  Tax Implementation Timeline
   • The tax will apply to corporate profits earned from January 1, 2025.
   • Advance tax payments will begin in 2026, with broader implementation extending to additional businesses by 2027.
2. Exemptions and Special Rates
   • State-owned enterprises will be exempt.
   • Income from certain divided zones, including submerged zones, may face a 30% tax rate, reduced for taxpayers who have already paid 50% of taxes to Saudi Arabia.
3. Supplementary Tax for Multinationals
   • Multinational corporations operating with effective tax rates below 15% will be subject to a supplementary tax, ensuring compliance with international tax standards.
   • A 5% withholding tax will apply to payments made to non-residents for dividends, royalties, rents, technical services, and insurance premiums unless linked to a permanent establishment in Kuwait.
4. Taxpayer Obligations
   • Companies must register with the Tax Administration within 30 days of starting operations.
   • Tax returns, supported by audited financial statements, must be submitted within six months of the tax year’s end.
   • Quarterly advance tax payments based on estimated profits will be required, with refunds for overpayments issued upon filing the final return.
5. Permitted Deductions
   • Businesses can claim deductions for prior-period losses, salaries, depreciation, and contributions to the Kuwait Foundation for the Advancement of Sciences, subject to specific limits.
   • Companies must retain financial records for 10 years to comply with reporting requirements.
6. Penalties and Dispute Resolution
   • Late filings or payments will incur a penalty of 1% for every 30 days of delay.
   • The Tax Administration may seek court orders to seize assets for unpaid tax debts unless taxpayers provide guarantees.
   • Disputes can be escalated to a Tax Grievances Committee or competent courts if unresolved.

Balancing Reform and Fairness

The proposed reforms aim to modernize Kuwait’s fiscal system, enhance transparency, and align with international tax practices. The introduction of corporate taxation represents a significant shift, with mechanisms designed to balance revenue generation and equitable treatment of businesses.

By targeting large corporations while exempting smaller enterprises, Kuwait seeks to foster economic growth while ensuring compliance with global tax standards. The reforms also encourage accountability through robust reporting requirements and a clear appeals process, marking a pivotal step in the nation’s fiscal modernization journey.

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