Kuwait Considering Taxes on Business Profits

Kuwait is set to overhaul its tax system with the introduction of the 'Business Profits Tax Law,' Al Bayan reported on Friday, marking a significant shift in its approach to taxation. The initiative, according to the report, is part of a broader plan to modernize the nation's tax framework and align it with international standards, specifically the OECD/G20 Inclusive Framework on base erosion and profit shifting (BEPS). With this move, if confirmed, Kuwait will become the last member of the GCC to join this framework. BEPS refers to strategies used by multinational enterprises to exploit gaps and inconsistencies in tax rules to minimize their tax liabilities. Kuwait reportedly plans to roll out this corporate tax reform in two stages, aiming for full implementation by 2025.

According to several regional media reports, the new Business Profits Tax (BPT) will impose a 15% tax on the profits of various entities, including corporate structures, partnerships, and businesses with a distinct legal presence operating within Kuwait. Notably, individuals and micro/small enterprises will be exempt from this tax. Currently, only foreign companies doing business in Kuwait are taxed on their profits and capital gains. However, the reports suggest that starting January 1, 2025, Kuwaiti multinational companies and government entities with international operations and annual revenues over €750 million (US$806 million) will also be subject to the BPT. This tax will be an amendment to the existing tax laws, bringing Kuwait in line with the Pillar Two framework used globally. Presently, the Kuwait corporate income tax law applies to any corporate entity earning income in Kuwait, regardless of where it is incorporated.