Kuwait is set to embark on a significant fiscal transformation with the proposed introduction of a 15% Corporate Income Tax starting in 2025. The Ministry of Finance’s draft Business Profits Tax Law outlines a roadmap targeting local and multinational corporations while excluding small enterprises with annual turnovers below 1.5 million Kuwaiti dinars.
This taxation plan will apply to profits earned post-January 1, 2025, with initial payments commencing in 2026. By 2027, the scope of taxation will expand to include more businesses. State-owned companies are exempt, but specific income from divided zones, such as the submerged divided zone, could face a higher 30% tax rate. Notably, multinational corporations with effective tax rates below the global minimum will be subject to a supplementary tax to ensure compliance with international tax norms.
The draft law also introduces a 5% withholding tax on certain payments to non-residents, including dividends, royalties, and technical services, unless linked to permanent establishments in Kuwait. Companies are required to register with the Tax Administration within 30 days of operation commencement and submit tax returns along with audited financial statements within six months of the fiscal year-end.
Key provisions include deductions for prior-period losses, salaries, and other specified expenses, while taxpayers must maintain financial records for a decade. Non-compliance could result in penalties of 1% per 30 days of delay. In cases of risk to tax recovery, asset seizures may be authorized by courts, though guarantees can mitigate such actions.
These reforms represent a strategic move to align Kuwait’s tax framework with global standards while ensuring fairness across business scales. By targeting larger corporations and facilitating transparency, Kuwait aims to enhance its fiscal resilience and economic competitiveness.
