Business faults Court decision over taxation – Cabinet urged to act

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KUWAIT CITY, May 24: The decision by the Court of Cassation to impose income tax on exclusive agents and distributors has angered many businessmen who said it will hurt the trend to turn Kuwait into a financial hub and attract foreign investors, reports Al-Rai daily.

Faisal Al Mutawa, Chairman of Ali Abdulwahab Al Mutawa Group and also Chairman of the Board of Bayan Investment Company said the ruling of the Cassation Court came as a surprise to the entire commercial sector. “It is known that foreign companies that have local agents are not subjected to pay income tax in accordance with the Ministerial Decision No. 387 which was issued on April 30, 2006 by the Council of Ministers, which exempts the distribution contract from the scope of the Income Tax Ordinance.

Al-Mutawa said the Council of Ministers and the Ministry of Finance in particular should deal with the court ruling to avoid significant disadvantages on all the commercial sectors, because Kuwait’s reputation and image will be damaged globally and many foreign companies operating in the local market will withdraw from the market, add to this the ruling will affect the vision of Kuwait 2035. “It is urgently required that the Council of Ministers address this problem, in order to avoid the damage that may result from such a ruling on all foreign companies,” Al-Mutawa said. Rabah Al-Rabah, Director-General of the Chamber of Commerce and Industry explained that Chamber’s interpretation of the issue of taxes that may be imposed the exclusive agents and distributors contradicts the interpretation of the Ministry of Finance and that “we have already submitted an opinion in this regard to the Ministry.”

Al-Rabah pointed out there is no country in the world that collects taxes from the exporting companies, except in specific cases involving commercial franchise otherwise this will simply lead to the loading of these additional amounts on the value of the total goods. Chamber Board member and Rapporteur of the Committee on Trade and Transport, Abdullah Al-Mulla said the state has lost its compass in the management of some of its economic affairs and this is reflected by some of the decisions and legal interpretations issued recently. Al-Mulla added the commercial complexities are growing locally, which confirms that the economic class is thinking of migrating from the local market to some foreign countries because of the facilities granted by these markets.

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