Kuwait proposes 15% corporate tax in sweeping fiscal reforms starting 2025

Dubai: Kuwait is poised to introduce a Corporate Income Tax as part of sweeping fiscal reforms, with the Ministry of Finance proposing a 15 percent tax on corporate profits starting in 2025.

The plan, detailed in a draft of the Business Profits Tax Law, is expected to target both local and multinational businesses while exempting smaller enterprises with annual turnovers under 1.5 million Kuwaiti dinars.

The draft law outlines that the tax will apply to profits earned after January 1, 2025, with broader implementation extending to additional businesses starting in 2027.

Initial advance tax payments would begin in 2026. Companies wholly owned by the state would be exempt, while certain income from divided zones, including the submerged divided zone, would face a higher tax rate of 30 percent, reduced for taxpayers who have already paid 50 percent of taxes to Saudi Arabia.

A supplementary tax is proposed for multinational corporations operating with effective tax rates below the minimum 15 percent, ensuring compliance with international tax standards. Additionally, a 5 percent withholding tax would apply to specific payments made to non-residents, such as dividends, royalties, rent, technical services, and insurance premiums, unless tied to permanent establishments in Kuwait.

To comply, companies must register with the Tax Administration within 30 days of beginning operations. Tax returns, accompanied by audited financial statements, would need to be filed within six months of the end of the tax year. The draft law also requires quarterly advance tax payments based on estimated earnings, with any overpayments eligible for refunds upon filing the final return.

The proposed tax system permits deductions for prior-period losses, salaries, depreciation, and contributions to the Kuwait Foundation for the Advancement of Sciences, subject to specific limits.

Businesses must retain financial records for 10 years to meet reporting obligations. Taxpayers may challenge assessments through an objection and appeal process, with disputes escalated to a Tax Grievances Committee or competent courts as necessary.

Taxpayers failing to meet filing or payment deadlines face a penalty of 1 percent for every 30 days of delay. This penalty applies to missed tax declarations, withheld taxes, or delayed advance payments. In cases where tax debts are at risk, the Tax Administration may seek court orders to seize assets, though taxpayers can avoid such measures by providing guarantees.

The reforms aim to modernize Kuwait’s fiscal framework, ensuring alignment with international tax standards while fostering transparency. With mechanisms targeting large corporations, small enterprises, and foreign entities, the proposed law seeks to balance revenue generation with fair treatment of businesses across the economic spectrum.