Kuwait’s Domestic Minimum Top-up Tax (DMTT) marks a major shift in the country’s tax landscape. Effective for fiscal years starting on or after 1 January 2025, the DMTT applies to in-scope multinational enterprise (MNE) groups with consolidated revenue of at least EUR 750 million in at least two of the preceding four fiscal years.
Kuwait’s regime is designed as a domestic minimum tax and does not implement the Income Inclusion Rule (IIR) or the Undertaxed Profits Rule (UTPR).
Transfer Pricing Becomes a Key Compliance Consideration
One of the most important practical consequences of the new regime is that transfer pricing is now embedded more visibly in the Kuwait compliance framework.
Related-party transactions must be priced on an arm’s length basis, including transactions between Kuwait constituent entities and related parties in other jurisdictions.
Kuwait’s Executive Regulations and professional guidance indicate that the Tax Authority can adjust transaction values where the arm’s length principle is not followed.
Intercompany Arrangements That Should Be Reviewed
In practice, MNE groups should review every material intercompany arrangement connected to Kuwait, including:
Management services
Cost recharges
Royalties
Financing
Leasing
Secondments
Shared services
Purchases
Sales
The key question is whether the amount recorded in the accounts reflects the same value that independent parties would agree in comparable circumstances.
For Kuwait DMTT purposes, this review is not limited to cross-border dealings. Domestic related-party transactions may also matter where different Kuwait entities are subject to separate effective tax rate calculations.
Recognised Transfer Pricing Methods
The transfer pricing methods commonly recognized for Kuwait DMTT purposes are the familiar OECD-aligned methods:
Comparable Uncontrolled Price (CUP)
Resale Price
Cost Plus
Transactional Net Margin Method (TNMM)
Profit Split
An alternative method may be used only where the taxpayer can show that the standard methods are not reliable for the transaction and that the alternative produces an arm’s length result.
The supporting analysis should explain why the chosen method is the most reliable method for the facts of the case.
Transfer Pricing Documentation Requirements
For internal compliance, the documentation should be maintained at two levels:
Master File: The group should retain a Master File at the UPE or central tax function level.
Local File: Each Kuwait constituent entity should keep a Local File or local support pack for its own transactions.
Public guidance indicates that Kuwait taxpayers within scope should maintain a Master File and Local File and submit them to the Ministry of Finance within 30 days of request.
A transfer pricing disclosure form is also expected to accompany the DMTT return and should identify the related-party transactions and the TP method used.
What Should a Practical Internal Record Include?
A practical internal record should usually include:
Intercompany agreement
Invoice listing
Ledger extracts
Year-end balance confirmations
Method selection memo
Benchmark or comparables study
Allocation keys for services or shared costs
Benefit test support for service fees
Reconciliation to the DMTT computation
Where transactions are between Kuwait entities, it is still advisable to maintain written support, because the arm’s length principle applies to related-party dealings within Kuwait as well.
Linking DMTT and Transfer Pricing Compliance
The safest approach for companies operating in Kuwait is therefore to treat DMTT compliance and transfer pricing as linked workstreams rather than separate exercises.
The DMTT return cannot be prepared properly without understanding the nature, pricing, and documentation of related-party transactions.
Groups that prepare their Master File, Local File, and disclosure schedule early will be better placed to:
Support their Kuwait filing
Reduce exposure to adjustments
Respond quickly to any Ministry of Finance request
Key Takeaway
Kuwait DMTT has made transfer pricing a core part of the tax compliance file.
The message for businesses is straightforward:
Document the policy
Support the numbers
Keep the agreements current
Make sure the Kuwait entity’s file tells a clear and consistent story
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