Kuwait is the only member of the Gulf Cooperation Council that has not yet joined the OECD/G20 Inclusive Framework on base erosion and profit shifting, thus it is prepared to modify its tax structure to do so.
According to the official website of the Organisation for Economic Co-operation and Development, BEPS refers to tax planning tactics employed by multinational corporations that take advantage of gaps and mismatches in tax legislation to avoid paying tax.
The “Business Profits Tax Law,” a new corporate tax policy, will be introduced by the Kuwaiti government as part of a comprehensive strategy to modernise the country’s current tax system. It is anticipated that this change will be completely phased out as early as 2025 and will be done in two stages.
A broad range of operating structures, such as corporations, partnerships, and companies with an independent legal existence that was founded, incorporated, or conducted business in Kuwait, would be subject to a 15 per cent tax under the BPT. Individuals and small businesses, however, will not be subject to this.
At the moment, only international businesses operating in Kuwait are liable to pay taxes on their income from capital gains and profits.
The proposed BPT will come into effect on January 1, 2025, for Kuwaiti multinational corporations, including government agencies operating in foreign markets, whose yearly revenues surpass €750 million ($806 million).
It is also suggested that the current tax rules be amended to incorporate the BPT. This is consistent with the Pillar Two framework that is being used all around the world.
Any body corporate, wherever it may be incorporated, that receives revenue from Kuwait sources is subject to taxation under the current Kuwaiti corporate income tax legislation.
In actuality, businesses that are fully owned by GCC nationals and that are incorporated in the GCC are not currently subject to income taxes. Currently, only income received by non-GCC (foreign) corporations is subject to corporate income tax.
Tax authorities saw that multinational corporations were moving their income from high-tax countries to low-tax countries to lower their global effective tax rate. This was a result of globalisation and the digitalisation of business.