Last modified: 16/09/2024 13:31

Corporate taxation

	Rate
Corporate income tax rate	15%
Branch tax rate	15%
Capital gains tax rate	15% as part of coroprate profits

Residence: Only foreign companies operating in the State of Kuwait are subject to income tax as per Income Tax Decree No. 3 of 1955 as amended by Law No. 2 of 2008, which virtually considers all activities to be subject to income tax in the State of Kuwait. Companies that are incorporated in GCC countries and fully owned by GCC citizens are not subject to income tax. In cases where a foreign company operates in the State of Kuwait through a joint venture or consortium partner as a shareholder in a limited liability company (WLL) or a closed shareholding company (KSC), then only the foreign company’s share of profits earned is subject to income tax. i.e. if they own 49% of the shares then only 49% of the profits are subject to tax on the foreign shareholder it is not a charge on the Kuwaiti registered company.

Basis: Flat rate on an actual profit basis or Flat rate on deemed profit basis

Taxable income: Company profits

Significant local taxes on income: KFAS – 1% of net profit Zakat – 1% of net profit for certain size of companies for listed entities an additional 2.5% is charged for NLST ( social services)

Alternative minimum tax: Not applicable

Taxation of dividends: 0

Capital gains: 15% Flat rate as part of corporate profits

Losses: Carry forward 100% for 3 years Losses can be carried forward for a maximum of three years; first year losses are carried forward to offset profits of the second year, the remaining losses are carried forward to offset profits of the third year. The balance loss cannot be carried forward beyond the third year

Foreign tax relief: if double tax treaty is in place with corresponding country – varies on a country by country basis

Participation exemption: none

Holding-company regime: none

Tax-based incentives: none

Group relief/fiscal unity: none

Small company/alternative tax regimes: no tax for 100% Kuwaiti nationals owned companies Foreign companies carrying on trade or business in the offshore area of the partitioned neutral zone under the control and administration of Saudi Arabia are only subject to tax in Kuwait on 50% of their taxable profit under the law

Corporate taxation: compliance

Tax year: Company can select but usually 1 January to 31 December requires tax department approval.

Consolidated returns: If a foreign entity conducts more than one activity in Kuwait, then it has to submit only one tax return that aggregates the income of all the activities carried out. Furthermore, if two affiliates companies are involved in similar lines of business or work on the same project, their taxable results may be aggregated.

Filing and payment: The tax declaration of each taxable period must be submitted within 3.5 months of the end of the taxable period. Taxes have to be paid in four equal installments ▪ 1st installment – within 3.5 months of the year end ▪ 2nd installment – within 5.5 months of the year end ▪ 3rd installment – within 8.5 months of the year end ▪ 4th installment – within 11.5 months of the year end

Penalties: Any delay in submission of the tax declaration is subject to tax penalties at the rate of 1% of the assessed tax for each 30days’ delay or part thereof. Additionally, a penalty is charged for any delay in payment of tax, at the rate of 1% of the assessed tax for each 30 days’ delay or part thereof.

Rulings: Not applicable

Taxation of individuals

	Rate
	Federal Income Tax
Item 1	0
Item 2	0
Item 3	0

Residence: There is no personal income tax in Kuwait, so the domestic law does not provide any definition of tax residence for individuals. However, the tax treaties signed by Kuwait provide for residence rules for individuals. Obviously, these rules are irrelevant for foreign employees working in Kuwait, since, as mentioned, there is no personal income tax in Kuwait. Thus, these rules may apply to Kuwaiti citizens who have a work assignment in one of the signatory countries.

Basis: nil

Taxable income: nil

Capital gains: nil

Deductions and allowances: nil

Foreign tax relief: nil

Taxation of individuals: compliance

Tax year: not applicable

Filing and payment: not applicable

Penalties: not applicable

Rulings: not applicable

Withholding taxes

Type of Payment	Resident recipients		Non-residents recipients
	Company	Individual	Company	Individual
	Rate (%)	Rate (%)	Rate (%)	Rate (%)
On Invoice	0	0	5% on Invoice value held	0
Item 2	0	0	0	0
Item 3	0	0	0	0
Item 4	0	0	0	0

There are no withholding taxes in Kuwait . The above 5% rate is a retention tax held until the tax relating to the comany has been paid. it is realsed on presenation of certificate of payment from the tax department.

Branch remittance tax: nil

Anti-avoidance legislation

Transfer pricing: No transfer pricing law in Kuwait. Nevertheless, Kuwait Tax Law (Executive Rule No. 49) provides that intra-group transactions must be comparable to transactions between companies that are not legally or financially associated. The Kuwait Tax Authority has the right to examine such transactions to ensure that they are conducted on an arm’s length basis and not to obtain undue tax advantages.

Interest restriction: If registered through Kuwait Direct Investment Promotion Authority (KDIPA) it can grant licenses to foreign companies who fulfil the specified criteria to operate in Kuwait with 100% ownership and monitored tax credit. if not then 49% maximum

Controlled foreign companies: not applicable

Hybrid mismatches: not applicable

Disclosure requirements: not applicable

Exit taxes: not applicable

General anti-avoidance rule: not applicable

Digital services tax and Other significant anti-avoidance legislation: not applicable

Value-added tax/Goods and services tax

Type of tax: not applicable

Standard rate: not applicable

Reduced rates: not applicable

Registration: not applicable

Filing and payment: not applicable

Social security contributions

	Employer	Employee
	Rate (%)	Rate (%)
Band 1	11.5%	8%
Band 2	0	0
Band 3	0	0

The above only applies to Kuwaiti Nationals and is capped at KWD2,750 

Self-employed

not applicable

Other taxes

Capital duty: none

Immovable property taxes: none

Transfer tax: none

Stamp duty: none

Net wealth/worth tax: none

Inheritance/gift taxes: none

Other: none

Tax treaties

Kuwait has entered into tax treaties with several countries for the avoidance of double taxation