Government is reportedly considering the introduction of a comprehensive new tax legislation to replace the existing tax laws. The proposed legislation, labeled ‘Business Profits Tax Law’ will impose a 15 percent tax on profits for all legal entities operating in Kuwait, while ensuring that citizens and small businesses are not subject to the tax.
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 Kuwaiti multinational companies being taxed. The second phase, which would begin on 1 January 2026, will involve the comprehensive application of the new tax law on all legal entities in Kuwait. The prevailing tax law will be abolished with the introduction of the second phase at the start of 2026.
Corporate tax is said to be among the 14 priorities that the government intends to present to the Parliamentary Coordination Committee for approval within the legislative itinerary for the National Assembly session slated to start on 31 October. A government memorandum submitted to the Council of Ministers has considered the necessary requirements to implement the major international corporate tax. It has also recommended that Kuwait joins the OECD/G20 Inclusive Framework on Base Erosion and Profit Sharing (BEPS). Kuwait is currently the only Gulf Cooperation Council (GCC) state that has not signed on to this tax framework.
The memorandum also recommends that Kuwait contract with an international consultant specialized in global taxation laws, to provide a comprehensive study to determine the rules, standards, and requirements related to tax application. The consultant will be charged with preparing the necessary policies to implement the project in line with international best practices, and the drafting of laws in this regard.
The consultant will also train national cadres on the application. Once a consultant has been contracted for the new tax law, tax awareness regarding the new tax will be spread three months later.
The report also clarifies the difference between ‘first-phase’ companies and ‘second-phase’ entities. The list of companies in the first-phase include around 15 Kuwaiti multinational companies, including government entities, with annual revenues in excess of €750 million that operate in Kuwait and foreign markets.
The ‘second-phase’ Kuwaiti companies are those that are financially ready to enter the tax structure by 2026, and who will be required to prepare their internal accounting system and infrastructure for implementation of the new corporate tax structure 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.
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