KuwaitTax Obligations Detailed

In Kuwait, employers face various tax obligations, including social security contributions for Kuwaiti employees and a new Domestic Minimum Top-up Tax (DMTT) for large multinational enterprises (MNEs).

Social Security Contributions

• For Kuwaiti Employees: Employers contribute 11.5% of the employee's monthly salary up to a ceiling of KWD 2,750. Employees contribute 8% up to the same ceiling. These contributions cover pensions, disability, sickness, and death benefits.
• For Expat Employees: No social security contributions are required.

Domestic Minimum Top-up Tax (DMTT)

• Effective Date: Applies to fiscal years beginning on or after January 1, 2025.
• Scope: Affects MNEs with global consolidated revenues of at least EUR 750 million in at least two of the preceding four fiscal years. Includes MNEs headquartered both inside and outside Kuwait.
• Rate: 15%. Imposed when the MNE's effective tax rate (ETR) in Kuwait falls below 15%. The tax due is the difference between 15% and the ETR, applied to the MNE's income.
• Exclusions: Several entities are excluded, including government entities, non-profits, international organizations, pension funds, and certain investment and real estate vehicles. Domestic businesses with no foreign operations are also excluded.
• Compliance: In-scope MNEs must register with the Kuwait Tax Authority within 120 days of becoming taxable, although the deadline is extended to September 30, 2025, for the 2025 tax year. Tax returns and payments are due within 15 months of the financial year's end.

Other Taxes

• Corporate Income Tax: Generally 15%, but replaced by the DMTT for in-scope MNEs from 2025 onwards.
• Zakat: 1% of net profits for Kuwaiti shareholding companies. Also replaced by the DMTT for applicable MNEs.
• National Labor Support Tax (NLST): 2.5% of net profits for publicly traded companies. Replaced by the DMTT for relevant MNEs starting in 2025.

Additional Considerations

• Taxes and fees, excluding income tax, are deductible.
• A penalty of 1% of the tax due is levied for every 30 days of late payment.
• Transfer pricing of imported materials and equipment, along with head office overhead allocations, are subject to scrutiny by tax authorities.

It's important to note that this information is current as of February 5, 2025, and tax laws and regulations are subject to change. Consulting with a tax professional is recommended for specific guidance.

In Kuwait, there is no personal income tax on employee salaries. However, Kuwaiti nationals contribute to social security.

Social Security Contributions

Kuwaiti employees contribute to the Public Institution for Social Security (PIFSS). The employer also makes a contribution.

• Employee Contribution: 8% of the monthly salary up to a ceiling of KWD 2,750.
• Employer Contribution: 11.5% of the monthly salary up to a ceiling of KWD 2,750.

The monthly salary used to calculate contributions includes the base salary and most allowances.

Other Taxes

There are no other mandatory payroll deductions for employees in Kuwait related to personal income, wealth, payroll tax, capital duty, real property, or transfer taxes.

Corporate Income Tax (CIT)

While not an employee deduction, it's important to note that Kuwait has introduced a 15% corporate income tax (CIT) effective for fiscal years starting on or after January 1, 2025. This applies to multinational enterprises (MNEs) with a consolidated annual revenue exceeding €750 million in two of the previous four fiscal years.

Domestic Minimum Top-up Tax (DMTT)

Also relevant for some companies operating in Kuwait is the Domestic Minimum Top-up Tax (DMTT), effective from January 1, 2025. It applies to MNEs meeting specific revenue criteria and ensures a minimum 15% tax rate. The tax rate is the difference between the DMTT rate (15%) and the effective tax rate (ETR), if the ETR is below 15%. This affects MNEs operating in Kuwait through entities or permanent establishments (PEs).

Zakat

Kuwaiti shareholding companies are subject to Zakat, a religious tax calculated at 1% of annual net profit. This is a corporate tax and not an employee deduction.

National Labor Support Tax (NLST)

Companies in Kuwait pay a 2.5% National Labor Support Tax (NLST). This is not deducted from employee salaries.

Kuwait's tax system currently does not include a Value Added Tax (VAT). While Kuwait is part of the Gulf Cooperation Council (GCC) which had an agreement to implement VAT, it has not yet been introduced. The Kuwaiti government is currently exploring alternative tax revenue options like excise taxes on specific goods like tobacco, luxury items, and potentially unhealthy foods. Two potential excise tax rates are being considered: 10% and 25%. As of February 2025, no VAT regime exists in Kuwait.

Corporate Taxes

• Taxable Income: Corporate income tax applies to Kuwaiti companies and foreign companies with a permanent establishment in Kuwait. Even a one-day presence of foreign company employees can be considered a taxable presence. Certain income sources like royalties and interest create a tax filing requirement regardless of physical presence.
• Tax Rates: The standard corporate tax rate is 15%.
• Tax Returns: Tax returns are due within three months and 15 days of the end of the tax year. Extensions of up to 60 days are possible.
• Tax Payments: Tax payments are typically made in four equal installments on the 15th day of the fourth, sixth, ninth, and twelfth months following the end of the tax year. If an extension is granted, full payment is due when the extension expires.
• Tax Retention: A 5% retention is applied by contract owners/customers on payments to companies until a tax clearance letter is provided. The payer reports contract details to the Kuwait Tax Authority.

Individual Taxes

• Income Tax: There is currently no individual income tax on employment or investment income.
• Other Taxes: There are no inheritance, gift, or real estate taxes for individuals.

Business Tax Registration

• Tax ID: Kuwaiti companies can obtain a tax ID number through the tax portal.
• Tax Card: Foreign companies operating in Kuwait require a tax card. This does not represent tax clearance or release of withheld funds.
• Temporary Concession: Companies starting operations and in the process of registration with the Ministry of Finance receive a temporary concession regarding the tax card.

This information is current as of February 5, 2025, and is subject to change. It is essential to consult with a tax advisor for the most up-to-date information and personalized guidance regarding your specific situation.

Kuwait's tax landscape is evolving, with new legislation introducing a corporate income tax while maintaining existing incentives for specific sectors and investment activities.

Corporate Income Tax (CIT)

• A new 15% CIT applies to both local and foreign companies, effective from January 1, 2025, for tax periods beginning on or after this date.
• Exemptions: Companies fully owned by the state and smaller companies with revenues below 1.5 million Kuwaiti dinars (approximately $4.9 million) are exempt.
• Top-up Tax: A supplementary tax aligns with the OECD's pillar two rules, targeting multinational corporations with effective tax rates below 15%. Local companies have a grace period until 2027.
• Withholding Tax (WHT): A 5% WHT applies to payments to non-residents, including royalties, rent, dividends, and insurance premiums, unless linked to permanent establishments in Kuwait.

Tax Incentives

• Foreign Direct Investment (FDI) Law: Tax credits are available based on technology transfer, job creation for Kuwaiti nationals, and stimulating the local market. Additional benefits may include exemptions from customs duties.
• Leasing and Investment Companies Law: A five-year tax holiday is granted to non-Kuwaiti founders and shareholders of qualifying companies established under this law.
• Public-Private Partnership (PPP) Law: Tax exemptions and other benefits are available for private companies collaborating with the public sector.

Other Tax Considerations

• No Individual Income Tax: Kuwait does not levy tax on personal income, including salaries.
• Social Security Contributions: Kuwaiti nationals contribute to social security (employee contribution: 8%, employer contribution: 11.5% of monthly salary, capped at 2,750 Kuwaiti dinars). Expatriates are not subject to social security contributions but are entitled to end-of-service indemnities after three years of employment.
• No other indirect Tax: Kuwait currently does not impose property tax, stamp duty, VAT, or sales tax.

It is important to note that this information is based on the latest available data as of today, February 5, 2025, and may be subject to change due to ongoing legislative developments. Consulting with a tax advisor is recommended for the most up-to-date and personalized guidance.