Kuwait’s new decree-law boosts global tax information exchange
The law aims to align with capital movement and trade developments across the world, which heighten tax evasion risks, necessitating stronger international tax authority collaboration.
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The new decree-law requires every person to comply with the request for information and provide it to the competent authority in the correct format within 21 days from the date of the request.
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Financial institutions must accurately document due diligence procedures as required by law and its regulations, keeping records for at least six years.
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The new law is overseen by the Minister of Finance, his authorized representative, or legal proxy, who may request information from parties and individuals as needed.
A decree-law has been issued concerning the exchange of tax-related information. This law enables Kuwait to request information from any country and empowers Kuwaiti authorities to provide requested information to other countries, according to Al Rai newspaper.
According to the explanatory note, the law was enacted to keep pace with the significant global developments in capital movement and international trade of goods and services. These developments increase the likelihood of tax avoidance and evasion, necessitating enhanced international cooperation among tax authorities to combat them.
Law No. 6 of 2024 comprises twenty articles divided into four chapters: the first chapter defines key terms, the second chapter covers provisions related to information exchange, the third chapter outlines measures and penalties for violations, and the fourth chapter addresses final provisions.
Chapter Two stipulates that the authority responsible for supervising the law is the Minister of Finance, his authorized representative, or his legal representative. It mandates that all parties and individuals must provide this authority with any required information automatically or upon its request.
Article 3 of Chapter Two specifies that the competent authority has the power to request or collect any information within the possession or control of any person within the territory of the State of Kuwait and transmit it to the requesting country. It requires every person to comply with the request for information and provide it to the competent authority in the correct format within 21 days from the date of the request.
Article 4 grants the competent authority the right to transmit information to countries without prior request, in accordance with information exchange agreements for tax purposes.
Article 5 regulates provisions related to the automatic exchange of information, obligating financial institutions responsible for reporting to submit to the competent authority a declaration for each calendar year, containing the information they possess and are required to report.
The same article stated that the lack of information required for reporting for any given year does not exempt the financial institution from submitting a declaration to that effect. It also specified that declarations must be submitted between May 1 and 31 of the year following the calendar year to which they relate, with the competent authority having the discretion to extend this period based on specified criteria.
Article 6 stipulates that information declarations submitted to the competent authority must be audited and certified by one of the auditing firms listed and approved by the competent authority. Furthermore, the auditor must not serve as an auditor for the same financial institution for which they audit and certify declarations.
Article 7 mandates that all financial institutions responsible for reporting establish appropriate systems and internal procedures and appoint a compliance officer to ensure compliance with the provisions of this law and the requirements of information exchange agreements for tax purposes, ensuring proper implementation.
Article 8 requires financial institutions responsible for reporting to compel customers to complete the self-certification certificate form specified in the law and its executive regulations, in accordance with anti-money laundering requirements, when opening a new account. The institution must refuse to approve the account opening if the customer fails to complete the self-certification certificate as required.
Compliance clarity
Article 9 mandates that financial institutions responsible for reporting preserve and document all due diligence procedures and requirements stipulated in the law and its executive regulations accurately and clearly.
These records must be kept for a period of no less than six years from the day following the date of submission of the information declaration to the competent authority.
Institutions are also obligated to submit documents and records to the competent authority or regulatory bodies upon request, and to provide translations if required.
Chapter Three, encompassing Articles 12 to 15, regulates measures and penalties for violations of the law. Article 12 allows for the imposition of one or more of the specified measures.
The regulatory authorities may take various actions in response to violations, including issuing written warnings, imposing specific procedural commitments, requiring regular reports on corrective measures, prohibiting the offender from working in the sector for a determined period, restricting the powers of management, suspending or withdrawing activity licenses.
The executive regulations may include any other measures, which include fines range between 10,000 and 20,000 dinars.
Article 13 states that the penalties outlined in the law do not preempt the application of more severe penalties stipulated in another law, nor do they preempt the right of supervisory authorities to impose administrative measures outlined in this law or any other law.
Article 14 specifies the penalties for crimes committed in violation of the provisions of this law, detailing them as follows: a fine ranging from 10,000 dinars to 20,000 dinars shall be imposed on:
- Any person who fails to comply with the request for information submitted by the competent authority, within the specified time, format, and method as per the provisions of this law, its executive regulations, and tax information exchange agreements, or provides incorrect information.
- Any financial institution responsible for reporting that fails to automatically submit the information declaration and its attachments to the competent authority within the specified deadlines and using the prescribed method according to this law, its executive regulations, and tax information exchange agreements, or submits incorrect or incomplete information.
- Any financial institution required to report that fails to adhere to the due diligence procedures and requirements outlined in this law or its executive regulations.
- Any auditor who approves an information declaration without disclosing contained violations and errors.
- Any financial institution responsible for reporting that fails to comply with any provisions of Articles 6, 7, 8, or 9 of this Law.
- Any financial institution responsible for reporting that fails to facilitate the duties and powers of employees of the competent authority or regulatory bodies as specified in this law and its executive regulations.
- Anyone who violates the obligations stipulated in Article 16 of the Law.
- Any person who completes the self-certification certificate form with incorrect data.
Public Prosecution
Article 15 of the Decree Law assigns sole responsibility to the Public Prosecution for investigating, adjudicating, and prosecuting crimes outlined in the law. Initiation of public prosecution for these crimes is only permitted upon request from the competent authority. Additionally, the article allows the competent authority to reconcile crimes specified in this law by paying the minimum fine stipulated and rectifying the violations. Such settlements result in the dismissal of the criminal lawsuit.
Confidentiality of the information
Article 16 confirms the confidentiality of information obtained by the competent authority in accordance with the provisions of this law, which may not be disclosed except within the limits prescribed by law.
Article 17 stipulates that confidentiality or any other restrictions may not be invoked regarding the implementation of the provisions of this law and its executive regulations, or the requirements of information exchange agreements for tax purposes, in accordance with the conditions determined by the competent authority. Its application is binding in case of conflict.
Article 18 indicates the priority of applying the provisions of this law in the event of a conflict with any other law.
Article 19 assigns the Minister of Finance to issue the executive regulations for this law within six months from the date of its publication in the Official Gazette.