Kuwait Tax - A General Summary

on Tax Compliance Requirements

for Foreign Companies

September 2013
 Kuwait Tax Summary

The following is a generic high level summary of the Kuwait tax compliance regulations in Tax Compliance in Kuwait
Kuwait that may be relevant for foreign companies earning income from contracts which
The Kuwait corporate income tax compliance process may be summarised as follows:
generate income of a Kuwaiti source.
 Registration with the Ministry of Finance in Kuwait within 30 days of starting
Taxability in Kuwait activities or signing a contract resulting in Kuwait source income. The registration
forms require appointment of a tax advisor in Kuwait.
 The Kuwait income tax law, set out under Decree No. 3 of 1955 and relevant
amendments under Law No. No 2 of 2008) imposes corporate income tax on the  Submit
S b it an annuall tax
t declaration
d l ti 105 days d after
ft the
th fiscal
fi l year endd (the
(th due
d date).
d t )
income of any body corporate, wherever incorporated, carrying on trade or In the event of a failure to file a tax declaration by the due date, a penalty is
business directly or through a local agent in Kuwait. imposed of 1% of the assessed tax for each period of 30 days or fraction thereof
for which the failure continues. In addition, in the event of failure to pay tax by the
 The income tax law provides for tax at a flat rate of 15% on taxable income for
due date, a penalty is imposed of 1% of the tax payment for each period of 30
fiscal periods commencing after 3 February 2008. Fiscal periods commencing prior
days or fraction thereof from the due date to the date of settlement of the tax due.
to this date are subject to tax at rates of up to 55% of taxable income.
According to Article 13 of the income tax law, an approved report from an auditor
 The income tax law does not define a Permanent Establishment (PE) and under the registered at the Ministry of Commerce and Industry and approved at the Ministry
current practices of Kuwait tax authority (KTA) which administers corporate income of Finance must be attached to tax declaration.
tax in Kuwait, even a single day’s visit of a company’s official to Kuwait may create
 Following the filing of the tax declaration, it is a normal practice for the KTA to
a taxable presence for that foreign company in Kuwait.
carry out an inspection of relevant books and records to verify the income and
 Under the Kuwait income tax law, income such as royalties, license fees and expenses reported in the tax declaration to the supporting documents. Based on
management fees are considered taxable in Kuwait, irrespective of whether any the findings from the tax inspection, adjustments are normally made to the taxable
employees of the foreign company visited Kuwait. profit.
Tax Retention Regulations in Kuwait  Following the tax inspection, a tax assessment letter is sent to the tax payer.
There is a formal process to contest tax assessments that are disputed.
 There is no withholding tax in Kuwait. However, compliance with the corporate
income tax law is enforced through tax retention regulations.  Once the taxes due, if any, for the fiscal period have been settled, the company
may request the KTA to instruct its contract owners to release the amounts
 Under the tax retention regulations, every business entity, authority and ministry
withheld.
operating in Kuwait should retain 5% from all invoices paid to the contractor(s), sub-
contractor(s) service provider(s) or any kind of beneficiaries.
contractor(s), beneficiaries These amounts are The Kuwait tax treaty Network
normally retained with the contract owners and released only when the
Kuwait has Tax Treaty with over 30 Countries which provides Tax relief which vary from
contractor(s), sub-contractor(s), service provider(s) or any kind of beneficiary
Country to Country based on the treaty entered.
provides a tax clearance certificate issued by the KTA authorising the contract
owner to release amounts retained. Foreign companies which are subject to treaty exemptions, are still required to file their
tax declaration in order to claim such exemptions under Article 13 of the Executive
 Where beneficiaries are delinquent in fulfilling their Kuwait tax obligations, the KTA
Bylaws of Law No. 2 of 2008. Therefore, even where the company may apply treaty
has the right to recover tax and penalties debt of the foreign beneficiary from the
benefits it would be required to submit a tax declaration and claim treaty benefits which
benefits,
contract owner, even if in excess of the 5% retained.
would later be substantiated by the KTA when it confirms that the company is eligible to
 In order to obtain release of tax retentions, an entity would have to adhere to the such treaty benefits as claimed.
tax compliance obligations as mentioned below.
© 2013 KPMG Safi Al-Mutawa & Partners, a Kuwaiti Public Accountant and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 1
Printed in Kuwait. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative ("KPMG International").
 For further details please contact:

Zubair Patel
Tax Director
Tel: +965 2228 7531
Mob: +965 9725 9132
zpatel@kpmg.com

Fahim Bashir
Senior Tax Manager
Tel: +965 2228 7532
Mob: +965 9725 8504
fbashir@kpmg.com

Reem Abbas KPMG Safi Al-Mutawa & Partners

Tax Manager Al Hamra Tower, 25th Floor
Tel:+965 2228 7533 Abdulaziz Al Saqr Street
Mob: +965 9720 3680 P.O. Box 24, Safat 13001
reemabbas@kpmg.com State of Kuwait

Tel : +965 2228 7000

Fax: +965 2228 7444

The information contained herein is of a general nature and is not intended to address the circumstances of any
particular individual or entity. The above information is based on the current Kuwait tax regulations and practices of
the Kuwait tax authority which may change from time to time without prior notice. Although we endeavour to provide
accurate and timely information, there can be no guarantee that such information is accurate as of the date it is
received or that it will continue to be accurate in the future. No one should act on such information without appropriate
professional advice after a thorough examination of the particular situation.

© 2013 KPMG Safi Al-Mutawa & Partners, a Kuwaiti Public Accountant and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 2
Printed in Kuwait. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative ("KPMG International").
© 2013 KPMG Safi Al-Mutawa & Partners, a Kuwaiti Public Accountant and a
member firm of the KPMG network of independent member firms affiliated
with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. Printed in Kuwait.
The KPMG name, logo and “cutting through complexity” are registered
trademarks or trademarks of KPMG International Cooperative (“KPMG
( KPMG
International”).