Kuwait is rolling out a 15% corporate income tax for all businesses starting January 2025, and the local economy is bracing for impact.
According to the draft rules, a phased plan will hit all local and multinational corporations — except those earning less than $4.9 million annually.
Here’s the deal
- Initial tax hits in 2025, with advanced quarterly payments starting in 2026. By 2027, even more businesses will be on the hook.
- Non-residents face a 5% withholding tax on payments like rent or dividends unless tied to a permanent Kuwaiti operation.
- Multinationals dodging 15% rates? They’ll owe supplementary tax and have 15 months to file.
- Late to pay? There is a 1% penalty fee for every 30 days of delay.
The new tax law is part of a broader strategy to align Kuwait with international tax norms set by OECD, Arun Leslie John, chief market analyst at Century Financial, tells MONIIFY. But it is also a play for long-term stability by generating new non-oil streams of revenue.
The law is intended to form a clear tax regime, Vishal Sharma, managing director and UAE tax practice leader at Alvarez & Marsal, tells MONIIFY. Before this, Kuwaiti and GCC-owned businesses were exempt from the 15% corporate income tax.
The tax overhaul runs contrary to the “Kuwaitization” agenda that was launched in 2017, wherein the government prioritized locals over expats.
Earlier this year, the government increased penalties for private-sector companies not meeting Kuwaitization quotas and enforced stricter visa conditions on expats.
The catch
Kuwait’s 15% tax rate, however, outpaces its neighbors, where these hover at 0% to 10%. The UAE, for example, has a tax rate of 9%, and could hoover up some of the businesses who choose to exit instead of choosing to pay more.
It’s a tough sell, Damian Hitchen, CEO of Asia-Pacific and Middle East and North Africa at Saxo Bank, tells MONIIFY. Businesses that are impacted by this will need to see it as the price of being part of a stronger economy, he says.
While the law brings clarity and conformity to a historically murky tax landscape, it will also push compliance costs higher and put pressure on cash flows. The question is: will businesses see it as a burden or an opportunity to be part of the Kuwaiti story?
