Corporate Income Tax (CIT) amendment in Kuwait

Corporate Tax in Kuwait - Taxes on Corporate Income

Income tax is governed under Law No. 3 of 1955, which has been amended by Law No. 2 of 2008 and Kuwait imposes Corporate Income Tax (CIT) on the profits and capital gains of foreign 'corporate bodies' conducting business or trade in Kuwait, directly or through an agent and Gulf Cooperation Council (GCC) companies to the extent of the foreign ownership. Effectively no CIT is imposed on companies wholly owned by the nationals of Kuwait or other GCC nationals.

Taxable Income

Irrespective of Place of incorporation, the capacity of partners, its legal form or nature of business, any Income realized by carrying out Business in the State of Kuwait is subject to CIT. The incomes specifically mentioned in the Law as Taxable:

• Any activities/works carried out wholly or partly in Kuwait as well as income resulting from sale of Goods/providing of services, irrespective of jurisdiction where contract is signed.
• Revenue from sale/lease/grant of Franchise /trademark/patent/ design / intellectual property /copyrights or other moral rights, or those related to intellectual property (IP) rights for the use of rights to publish literary, arts, or scientific works of any form.
• Commissions received in cash or in kind resulting from an agreement(s)
• Profit from sale of assets (whole/part)
• Profit from sale of shares of a company whose assets consists mainly of immovable properties in Kuwait
• Income from money lending
• Profit from sale of Rights related to Material/Immaterial assets
• Profit from lease of movable/immovable property
• Provision of services
• Profits derived from business from a Permanent office in Kuwait

Exempt Incomes

• Profit from trade in Kuwaiti Stock Exchange Market, whether directly made or through investment portfolios or funds
• Income realized by Natural Person if he is not representing the share of an incorporated body

Tax Rate

• The current CIT rate is 15%.
• Foreign companies carrying on trade or business in the offshore area of the partitioned neutral zone under the control of Saudi Arabia are only subject to tax in Kuwait at 50% of their taxable profit.

Tax Retention

Government authorities, ministries, public and private companies, societies, natural persons, contractors and all other bodies/institutions in Kuwait (including foreign entities carrying out trade or business in Kuwait) are required to retain 5% of the total contract value, which can be released only on receiving a tax retention release letter from the Tax Department.

Declaration Submission

Each incorporate body (include body corporates which are exempt from paying) required to submit a Tax Declaration in the Arabic language in the prescribed form within 3 and half months from the date of the end of Tax Year.

Tax Treaties

Kuwait has signed double tax avoidance treaties with several countries along with the Arab Tax Treaty and the GCC Joint Agreement, which provide for the avoidance of double taxation on all or a portion of their revenue from the tax in Kuwait.

Source: Law No. 3 of 1955 as amended by Law No. 2 of 2008, Executive Bylaw issued Ministerial order No. 29 of 2008

Last Updated: 14th February 2019

This article is contributed by: 

Amit Mehta

Assistant Director