Effective January 1, 2025, Kuwait is implementing Decree-Law No. 157 of 2024 to align its tax system application on multinational enterparises with international standards. This legislation aims to address tax base erosion and profit shifting (BEPS) by ensuring that multinational enterprises (MNEs) contribute appropriately to the national economy.
Scope of Application
The law applies to multinational entities, including corporations, joint ventures, and foreign branches. Exemptions include government bodies, non-profit organizations, international entities, pension funds, and specific investment vehicles.
Compliance Obligations
Entities subject to the law must:
- Register: Businesses are required to register with the Kuwait Tax Administration within 120 days of the law's implementation.
- File Tax Returns: Tax returns must be submitted within 15 months of the end of the tax period.
Non-compliance may result in severe penalties, including fines and possible imprisonment.
Key Features of the New Tax Law
- Minimum Tax Rate: A minimum effective tax rate of 15% is established for profits exceeding 750,000,000 Euros yearly. A "top-up tax" will be imposed if an MNE’s global tax rate falls below this threshold.
- Global Income Taxation: The Income Inclusion Rule ensures a minimum tax on global profits, addressing discrepancies in global tax obligations.
- Expanded Definition of Permanent Establishments: The law broadens the definition of taxable permanent establishments to include various activities conducted by foreign entities in Kuwait.
- Exemptions and Simplified Compliance: Certain activities, such as international shipping, are exempt, and simplified compliance methods are available for qualifying businesses to alleviate administrative burdens.
For further information or to discuss how these changes may impact your business, please contact us. We would be glad to assist you.
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