Kuwait to implement 15% tax on multinationals by 2025

• The minimum local supplemental tax will apply to multinational companies with consolidated global revenues of €750 million or more in at least two of the four financial years preceding the financial year in which the system is implemented.

The Council of Ministers has approved a draft decree-law introducing a fifteen percent tax on multinational entities operating across multiple countries or jurisdictions, aligning with international tax standards.

According to The National, the law aims to curb tax evasion and prevent revenue loss to other nations. Implementation in Kuwait is set to begin on January 1, 2025, as reported by Al Rai newspaper.

Commenting on the issuance of the law, Anderson CEO Anoraj Chaturvedi stated that Kuwait’s imposition of a 15% tax on multinational companies might prompt some to restructure their operations and form local partnerships.

He added, “The tax may affect employment, particularly among expatriates, and while it will diversify government revenues, companies may face higher costs and competitive challenges. In response, multinational companies will need to carefully evaluate their strategies and balance the tax implications against the benefits of operating in Kuwait.”

The minimum local supplemental tax will apply to multinational companies with consolidated global revenues of €750 million or more in at least two of the four financial years preceding the financial year in which the system is implemented.

Last year, the Organisation for Economic Co-operation and Development (OECD) predicted that the global minimum tax on multinational companies would generate approximately $220 billion annually, representing nine percent of global corporate income tax revenues. More than 140 countries have joined the reform program, which was announced in October 2021.

According to Aron Leslie John, senior market analyst at Century Financial, the Gulf region is gradually transitioning from a tax-free haven to a low-tax zone, with countries like the UAE and Kuwait introducing new tax measures.

He noted that the International Monetary Fund (IMF) has long encouraged Gulf nations to diversify their economies away from oil dependency. Such diversification would strengthen government finances, create more resilient economies, and foster private sector growth through innovative fiscal policies.

Kuwait’s economy to remain in recession through 2024, predicts IMF

This month, the IMF projected Kuwait’s economy to remain in recession through 2024, with a gradual medium-term recovery expected thereafter. The IMF forecasts a 2.8% real GDP contraction for this year due to further OPEC+ production cuts, followed by a 2.6% expansion in 2025 as these cuts are phased out.

Last year, the United Arab Emirates (UAE) began imposing a nine percent tax on corporate profits exceeding 375,000 dirhams (approximately $102,000).

The UAE Ministry of Finance recently announced amendments to the Corporate and Business Tax Law and revealed plans to introduce new tax incentive packages. These include support for research and development activities and incentives related to high-value employment sectors.

The amendments also feature the introduction of a minimum local supplementary tax, formalized under Federal Decree-Law 60/2023. This tax will take effect for financial years starting on or after January 1, 2025.

Meanwhile, Bahrain announced in September that it would implement a 15% tax on large multinational companies starting January 1, 2024.

More than 140 countries have joined the tax reform program initiated by the Organization for Economic Co-operation and Development (OECD) in October 2021.