The government is studying a proposal to issue new tax legislation to replace the country’s current tax laws. The proposed legislation, called the “Business Profits Tax Law”, would impose a 15% tax on profits for all legal persons, including major international companies, whilst ensuring that citizens and small businesses are not subject to the tax, reported Al-Rai Daily.
The introduction of the proposed law would involve a two-stage implementation process. The first phase, which would begin on 1 January 2025, would see major international companies being taxed, whilst the current tax laws continue to apply. The second phase would begin on 1 January 2026, involving the comprehensive application of the new tax law to all legal persons, and the abolition of the current tax laws.
Corporate tax is reportedly among the 14 priorities that the government intends to present to the Parliamentary Coordination Committee for approval within the legislative map for the National Assembly session, which is set to begin on 31 October. The sources have explained that, according to the scenario in place, the major international corporate tax will be implemented on the globally specified date of 1 January 2025, with more time being given to Kuwaiti companies to prepare for the comprehensive implementation on 1 January 2026.
A government memorandum submitted to the Council of Ministers has considered the necessary requirements to implement the major international corporate tax. It has been recommended that Kuwait joins the comprehensive framework of the project, preventing the erosion of the BEPS tax base, and contracts a consulting office to provide a comprehensive study of the second pillar, determination of rules, standards, and requirements related to tax application, the preparation of necessary policies to implement the project in line with international best practices, and the drafting of law. The consultant will also train national cadres on the application.
The indicative list of consulting offices includes Price Waterhouse (PWC), Deloitte, Ernst & Young (EY), KPMG, and Baker Tilly. The government’s proposed moves also include the issuance of a tax procedures law, which includes all procedural provisions that regulate the mechanism for implementing all types of taxes. Once a consultant has been contracted for the new tax law, tax awareness regarding the new tax will be spread three months later.
The Planning Committee in the Ministry of Finance is reportedly considering adopting the proposed organisational structure for the tax sector, with employees expected to be trained and supported by some expertise from current consultants and specialists in the tax administration.
The sources have noted the difference between “first-stage” companies and “second-stage” entities. The list of companies ready to begin applying the new tax on 1 January 2025 reportedly includes around 15 multinational companies, including government entities operating in foreign markets, all with annual revenues exceeding €750m.
As for other Kuwaiti companies, these will be those that are financially prepared to enter the tax period in the next two years, with those companies required to prepare their systems and infrastructure for comprehensive implementation from 1 January 2026.
The list of companies subject to tax is expected to double in the second phase. The proposed tax structure will reportedly be dynamic, designed to accommodate the entry of any company in the future once it meets the conditions laid out by the Organisation for Economic Cooperation and Development (OECD).
The government move is intended to push for comprehensive tax legislation in Kuwait that adheres to accounting rules and systems in the country, ensuring that all eligible companies are subject to the new tax law.