KUWAIT: Kuwait’s Finance Minister Noura Al-Fassam shared significant details about the multinational entities tax law during a press conference late Wednesday, according to Kuwait News Agency. Speaking to representatives of multinational entities operating in Kuwait, Al-Fassam announced that the ministry is working on a new corporate tax law, with details of that law to be announced later. She said these laws are part of Kuwait’s efforts to diversify its economy and reduce reliance on oil revenues, promoting long-term financial sustainability.

Tax exemptions

The multinational entities tax law aligns with international tax standards, aiming to combat tax evasion and ensure compliance with global tax regulations. Under the new system, businesses with revenues below €10 million (approximately $10.29 million) or net incomes under €1 million (around $1.03 million) will be exempt from paying taxes.

The law’s criteria for determining “excluded income” are based on two main factors: first, total salary costs, which must fall between 5 percent and 9.6 percent of the entity’s total salary expenses, and second, the average value of tangible assets at both the start and end of the tax period, which should be between 5 percent and 7.6 percent of the book value of those assets. Additionally, the law includes provisions like safe harbor regulations and simplified calculations to reduce the administrative burden on businesses.

Penalties starting October

Compliance with the new regulations will begin in 2024, with penalties set to take effect in October 2025. Businesses will also be required to submit specific tax declarations by the first quarter of 2027. The Ministry of Finance plans to provide new registration forms and declaration templates once the regulations are finalized, helping businesses adapt to the updated requirements.

Al-Fassam emphasized that the government, under the leadership of HH the Prime Minister Sheikh Ahmad Al-Abdullah Al-Sabah, is committed to enacting reforms that will drive economic diversification and ensure financial sustainability. The multinational entities tax law marks the first phase of these tax system changes, aligning Kuwait with international standards without negatively affecting businesses. Al-Fassam said the Ministry of Finance will finalize the executive regulations for this law within six months of its publication in the official gazette.