New MNEs tax law takes effect Jan 1

Kuwait introduces tax incentives to attract foreign investment and promote economic growth.

Overview of Decree No. 157 of 2024

Decree No. 157 of 2024 is a significant development in Kuwait’s tax law, aiming to establish a more competitive and efficient tax system. The decree is part of the country’s efforts to attract foreign investment and promote economic growth.

Key Objectives

Align Kuwait’s tax system with global standards

Encourage foreign investment and economic growth

Provide a competitive tax environment for multinational entities (MNEs)

Article 1: Taxation of MNEs

The decree introduces a new tax regime for MNEs operating in Kuwait. The tax is levied on the profits of the MNEs, and the rate is 0% for the first KWD 100,000 (approximately USD 33,333) of taxable income.

Tax Exemptions

MNEs with a minimum of KWD 500,000 (approximately USD 166,667) in annual turnover are exempt from the tax

MNEs with a minimum of KWD 1,000,000 (approximately USD 333,333) in annual turnover are exempt from the tax and also receive a 10% reduction in the tax rate

Article 2: Tax Residency

The decree defines tax residency for MNEs operating in Kuwait.

Multinational companies must pay a minimum tax rate on profits earned in each country they operate.

The OECD has set a minimum tax rate of 15% for companies with a global turnover of over $750 million.

The OECD’s Pillar Two: A Global Approach to Fair Taxation

The Organisation for Economic Co-operation and Development (OECD) has introduced a new framework to combat tax avoidance by multinational companies. This framework, known as Pillar Two, aims to ensure that these companies pay a minimum tax rate on profits earned in each country they operate.

How Pillar Two Works

Pillar Two is designed to address the issue of profit shifting, where companies relocate their profits to low-tax jurisdictions to minimize their tax liability. To achieve this, the OECD has implemented a new approach to taxing multinational companies.