Kuwait Contemplating to Impose 15% Business Profits Tax

In a recent development, Kuwait is poised to revamp its tax system through the introduction of the ‘Business Profits Tax Law,’ as reported by Al Bayan on Friday. This signals a substantial shift in Kuwait’s taxation approach.

The initiative is part of a comprehensive plan to modernize the nation’s tax framework and align it with international standards, particularly the OECD/G20 Inclusive Framework on base erosion and profit shifting (BEPS).

If confirmed, this move positions Kuwait as the last member of the Gulf Cooperation Council to join the BEPS framework. BEPS refers to strategies employed by multinational enterprises to exploit gaps in tax rules and reduce tax liabilities. Kuwait plans to implement this corporate tax reform in two stages, aiming for full implementation by 2025.

Under the proposed Business Profits Tax (BPT), various entities, including corporate structures, partnerships, and businesses with distinct legal presence operating in Kuwait, will be subject to a 15 percent tax on profits. Notably, individuals and micro/small enterprises will be exempt from this tax, according to regional media reports.

Presently, only foreign companies conducting business in Kuwait are taxed on profits and capital gains. However, starting January 1, 2025, Kuwaiti multinational companies and government entities with international operations and annual revenues exceeding €750 million ($806 million) will also fall under the purview of BPT. This tax amendment aligns Kuwait with the globally utilized Pillar Two framework. Currently, Kuwait’s corporate income tax law applies to any corporate entity earning income in Kuwait, regardless of its place of incorporation.

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