Kuwait takes new tax direction with "Business Profits Tax Law"

The KUWAITI government is contemplating new tax legislation, planning to replace existing laws with a proposed "Business Profits Tax Law." This law aims to levy a 15% tax on profits for all legal entities, including major international corporations, while ensuring exemptions for citizens and small business owners. The implementation will occur in two phases:

1. Phase One (Starting January 1, 2025): This initial stage applies exclusively to major international companies (multinationals), coexisting with the current tax laws.

2. Phase Two (Starting January 1, 2026): The comprehensive implementation extends to all legal entities, replacing the current tax laws entirely.

During the first phase, major international corporate tax will come into effect while giving Kuwaiti companies more time to adapt their systems before the broader application in the following year. To facilitate this transition, the government is considering forming a committee to develop frameworks aligned with global minimum tax policies, as proposed by the OECD. This committee is expected to include representatives from various ministries, Kuwaiti corporations, and business associations.

The government's plan involves:

•          Joining the comprehensive framework to prevent erosion of the tax base and align with international standards.

•          Contracting consulting services to conduct studies, establish necessary policies, draft laws, and train local experts.

•          Issuing a tax procedures law encompassing procedural provisions for all tax types, currently under study.

•          Initiating tax awareness campaigns three months after engaging with consultants and implementing an automated tax system.

The Ministry of Finance's Planning Committee is considering adopting an organizational structure for the tax sector and preparing employees through training and support from current experts in tax administration.

The distinction between "first-stage" and "second-stage" entities is based on readiness for tax compliance. The first stage includes around 15 multinational companies with substantial annual revenues, while the second stage encompasses Kuwaiti companies financially prepared to enter the tax period by 2026, expected to double the number of participating entities.

The government aims to create a flexible tax structure that accommodates companies meeting OECD requirements in both phases and remains adaptable for potential future entrants.

SOURCE :- https://www.arabtimesonline.com/news/kuwait-takes-new-tax-direction-with-business-profits-tax-law/#:~:text=KUWAIT%20CITY%2C%20Oct%2025%3A%20The,legal%20persons%2C%20including%20major%20international