Kuwait Corporate Tax Framework

Kuwait maintains a unique tax environment compared to other GCC countries, where Kuwaiti-owned and GCC-owned companies are generally not subject to corporate income tax, though they may be liable for certain local levies such as Zakat, NLST, or KFAS depending on their legal form. In contrast, foreign companies operating in Kuwait are fully subject to the 15% Corporate Income Tax (CIT) along with strict compliance requirements, including tax return filing, 5% tax retention, mandatory tax inspection, and adherence to Kuwait-based banking and documentation standards. However, an important exception applies under the Domestic Minimum Top-Up Tax (DMTT) introduced as part of the OECD Pillar Two framework: DMTT may apply to both local/GCC-owned and foreign companies alike if they form part of a multinational group that meets the global revenue threshold and has an effective tax rate in Kuwait below the 15% minimum. As a result, all qualifying entities—regardless of ownership—must ensure accurate reporting, strong documentation, and full compliance to avoid penalties, satisfy the Kuwait Tax Authority (KTA), and maintain smooth business operations.

This article outlines all applicable Kuwait corporate taxes, with a particular focus on Corporate Income Tax for foreign entities, Domestic Minimum Top-Up Tax (DMTT), and mandatory tax inspections, followed by compliance obligations relating to filings, retention, banking, and documentation.

1. Overview of Taxes and Contributions in Kuwait

Although Kuwait does not impose a unified corporate tax system on Kuwaiti or GCC-owned companies, the following taxes and contributions may apply depending on the nature and ownership of the entity:

1.1 Corporate Income Tax (CIT) – Applicable to Foreign Companies

• Tax rate: 15% on taxable profits.
• Applicability:
• Any foreign company carrying out trade or business in Kuwait.
• Includes foreign companies operating through agents, subcontractors, permanent establishments (PEs), or deriving Kuwait-source income.

1.2 Zakat (1%)

• Applicable only to:
• Kuwaiti shareholding companies (KSC, KSCC).
• Foreign companies are not subject to Zakat unless part of a mixed-ownership entity.

1.3 Kuwait Foundation for the Advancement of Sciences (KFAS – 1%)

• Applicable to Kuwaiti shareholding companies.
• Not applicable to foreign entities.

1.4 National Labour Support Tax (NLST – 2.5%)

• Applicable only to companies listed on Boursa Kuwait.
• Not applicable to foreign companies unless part of a listed entity.

1.5 Domestic Minimum Top-Up Tax (DMTT) – New Requirement

• With the implementation of OECD Pillar Two, Kuwait has introduced DMTT, requiring qualifying multinational groups to pay top-up tax if their effective tax rate in Kuwait is below the 15% global minimum.

2. Corporate Income Tax for Foreign Companies (Main Focus)

Foreign companies deriving any income from Kuwait are subject to Corporate Income Tax at 15%, regardless of whether the foreign company has a:

• Permanent establishment
• Branch
• Representative office
• Agency relationship
• Subcontractor relationship
• Service presence (even remote services can trigger tax in some cases)

2.1 What is considered Kuwait-source income?

• Projects executed in Kuwait
• Services performed in Kuwait
• Services performed outside Kuwait but relating to a Kuwait project
• Sale of goods supplied to Kuwait if accompanied by installation, delivery, or maintenance
• Equipment rentals, royalties, and technical fees
• Subcontracting revenue relating to Kuwait projects