Kuwait introduces landmark 15% corporate tax in major revenue reform

Kuwait’s Ministry of Finance has introduced a draft law proposing a 15% corporate income tax, marking a significant shift in the country's tax policy. This reform, set to roll out in early 2025, is part of Kuwait's broader effort to modernize its tax system and reduce reliance on oil revenue.

The proposed Business Profits Tax Law will primarily apply to multinational corporations operating in Kuwait and Kuwaiti companies with overseas operations. However, businesses with an annual turnover under 1.5 million dinars ($4.9 million) will be exempt.

The implementation will be phased. Multinational companies will begin facing tax obligations in January 2025, but advance tax payments won’t start until 2026. The full application of the tax system is expected by January 2027.

Key provisions include:

• Full tax exemptions for state-owned entities.
• A 30% tax rate on income from the divided zone shared with Saudi Arabia, reduced to 15% if Saudi taxes have already been paid.
• A 5% withholding tax on specific payments to non-residents.
• Businesses must register within 30 days of starting operations.
• Quarterly advance tax payments and tax return submissions within six months of the fiscal year-end.
• Loss carry-forward allowances for up to five years.

A Tax Grievances Committee will be established to handle disputes, giving taxpayers 60 days to appeal assessments. Late payments will incur a penalty of 1% for every 30 days of delay, highlighting the government's strict enforcement stance.

This move aligns Kuwait with other Gulf nations modernizing their tax policies to diversify revenue streams.