The Tax Decree of 1955 governs taxation in Kuwait along with various tax treaties with a number of foreign nations. Directives issued by the Director of Income Taxes supplement these decrees.
Payment, filing and assessment procedures are covered by tax administration. A taxpayer may request in writing to have a year-end other than the 31st December. An 18-month accounting period is allowed initially, thereafter 12 month accounting period is required.
Where a foreign company has a minority shareholders interest in a locally registered company, tax is levied on the foreign company’s income (whether distributed or not) plus any amounts receivable for interest, royalties, technical services or management fees.
Kuwait tax laws do not distinguish between resident companies, non-resident companies and branches of foreign companies.
Although a partnership is an association of individuals who are not subject to taxation in Kuwait, the Director of Income Taxes treats a foreign partnership as if it were a body corporate and levies taxes on its operations in the normal way.
A joint venture or consortium has no legal status in Kuwait and the tax department normally raises assessments on the consortium involving joint performance of the contract, that is, a combined tax declaration for the total earnings from the contract. Each partner's share of taxable profit may then be taxed individually. Where a consortium involves separate performance by the partners, each partner needs to account for their share of revenue in a separate tax declaration.
There are no withholding taxes in Kuwait, but there are on payments due to foreign companies until such time as they satisfy the customer that they have dealt with their Kuwaiti tax obligations by the presentation of a tax clearance issued by the Director of Income Taxes.
Businesses in Kuwait are also required to inform the Director of Income Taxes of the companies with whom they are doing business as contractors, subcontractors or in any other form. Information to be provided should include the name and address of the company together with a photocopy of the contract. The final payment should not be less than five per cent of the total contract value. When inspecting the tax declaration filed with the Director of Income Taxes, the Ministry of Finance will disallow all payments made to sub-contractors that have not been reported.
Kuwait has signed double taxation treaties with Cyprus, France, Germany and Italy. Treaties with Belgium and China await ratification. Treaties are also in final draft form or are being negotiated with Australia, Austria, Canada, Finland, Hungary, India, Malaysia, Singapore, Switzerland, Turkey and USA. Because Kuwait does not withhold tax on dividends, interest or royalties, these treaties do not provide special withholding rates for payments from Kuwait to residents of these countries.
There are also double taxation agreements with certain countries relating solely to international air and/or sea transport.
Tax Exemption for Approved Projects
Austrade works in conjunction with the Australian Taxation Office (ATO) to administer the income tax exemption available under section 23AF of the Income Tax Assessment Act 1936 ('Tax Act').
Section 23AF should assist the international competitiveness of Australian companies and governmental organisations competing to win international tenders. For further information, visit Tax exemptions for approved overseas projects.