Kuwait takes new tax direction with ‘Business Profits Tax Law’

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KUWAIT CITY, Oct 25: The government is studying a proposal to issue tax legislation while abolishing the current tax laws which calls for comprehensive tax legislation under the name “Business Profits Tax Law” that imposes a tax estimated at 15 percent on the profits of all legal persons, including major international companies, while including articles that guarantee the exclusion of citizens and owners of small projects and will be applied in two stages.

The sources told Al-Rai that the first phase of tax implementation begins on January 1, 2025, and will be applicable to major international companies (multinationals) while the current tax laws continue to apply. The second phase begins January 1, 2026, and includes comprehensive application to all legal persons, with the abolition of current tax laws. Corporate tax is among 14 priorities that will be presented by the government to the Parliamentary Coordination Committee to the National Assembly session, scheduled to begin on October 31.

The sources explained that accordingly the major international corporate tax will be implemented on the globally specified date of January 1, 2025, with other Kuwaiti companies being given more time to prepare their systems and prepare before the comprehensive implementation on January 1, 2026. The sources revealed that the Council of Ministers is studying the formation of a higher committee to develop appropriate frameworks for policies related to the global minimum tax on companies, the draft law of which was submitted by the Organization for Economic Cooperation for Development (OECD), in addition to forming a work team in the tax administration to cooperate with the consultant in the tasks assigned to it.

According to the government recommendation in this regard, it is expected that the proposed Supreme Committee will include in its membership representatives from the Ministries of Finance, Justice, Commerce and Industry, the Kuwait Petroleum Corporation, in addition to the Kuwait Chamber of Commerce and Industry, the Kuwait Direct Investment Promotion Authority, and the Kuwait Banks Association.

A government memorandum submitted to the Council of Ministers reviewed the requirements necessary to implement the major international corporate tax, as it indicated that, in light of the recommendations issued at the meeting of the Coordinating Committee for Enhancing Non-Oil Revenues at the end of last September, the necessary requirements for implementation can be determined as follows: First: Joining the comprehensive framework of the project. Preventing the erosion of the BEPS tax base, as Kuwait expressed its desire to join the organization.

Second: Contracting with a consulting office to provide the following services — d comprehensive study on the second pillar; determining the rules, standards, and requirements related to tax application; preparing the necessary policies to implement the project in accordance with international best practices; preparing the draft law and training national cadres on the application It is known that the indicative list of major consulting offices includes Price Waterhouse (PWC), Deloitte, Ernst & The sources noted that the government’s moves in this regard include recommending the issuance of a tax procedures law, given that it includes all the procedural provisions that regulate the mechanism for implementing all types of taxes. It is a project currently under study, with the start of spreading tax awareness regarding the new tax three months after contracting with the consultant. In addition to providing an integrated automated system, noting that practice is being prepared regarding it through the tax administration development project.

The sources said that the Planning Committee in the Ministry of Finance is considering adopting the proposed organizational structure for the tax sector, while it is expected that employees will be trained and supported by some expertise from current consultants and specialists in the tax administration. The sources explained the difference between “first-stage” companies and “second-stage” entities by saying that the list of companies ready to begin applying the new tax on January 1, 2025, is about 15 multinational companies, including government entities operating in foreign markets, and all of them have annual revenues exceeding 750 million euros. As for the Kuwaiti companies, it is clear that what is meant is the companies that are financially prepared to enter the tax period in the next two years and must prepare their systems for the comprehensive implementation of a tax on them on January 1, 2026, as it is expected that the list of companies will be doubled in the second phase.

The sources indicated that the government’s move in this regard pushes for the adoption of comprehensive tax legislation in its accounting rules and systems, ensuring the inclusion of companies that meet the requirements of the OECD in the first stage, as well as companies eligible to join in the subsequent stage. The sources added that the tax structure prepared by the government will not be designed for specific companies currently, but rather a dynamic one that takes into account the entry of any company in the future once it meets the conditions.

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