Accounting and tax in 2021
Corporate tax considerations
- Corporate income tax in Kuwait is levied at a standard rate of 15%;
- Capital gains tax is considered as business profits and is subject to the normal 15% corporate tax rate;
- A 15% withholding tax is applicable on dividends paid to non-resident entities, unless reduced under a DTAA;
- Business losses can be carried forward for up to 3 years, however a carryback is not permitted;
- Companies listed on Kuwait Stock Exchange are subject to a 1% tax on profits payable to the Kuwait Foundation for the Advancement of Science.
- A company wholly-owned by Kuwaiti nationals, Gulf Cooperation Council (GCC) nationals or a combination of the two are entirely exempt from paying any corporate income tax.
- Only income sourced from within Kuwait’s borders will be taxed. Income received for services provided outside Kuwait is not taxed.
Tax incentives in Kuwait
- Under the Foreign Direct Investment Law, certain companies are eligible for a 10-year tax holiday;
- Companies are exempted from withholding taxes on interests, royalties, stamp and transfer duties;
- Value Added Tax (VAT) is expected to be implemented by the Kuwaiti government in 2022.
- Other taxes not levied by Kuwait include i) personal taxes and ii) property tax;
- There is no “thin capitalization” requirements on both resident and non-resident companies.
Tax administration and other tax considerations
- Companies must file annual returns with the Kuwait Tax Department within 3 and half months following the end of the fiscal year;
- Foreign companies are permitted to request for an extension of up to 60 days to file annual returns;
- Kuwait has no existing currency or foreign exchange controls;
- If required, Healy Consultants Group PLC will assist our Client with i) documenting and implementing accounting procedures, ii) implementing financial accounting software, iii) preparing financial accounting records, iv) Preparing forecasts, budgets, sensitivity analysis and other services.
Legal and compliance
Kuwait Company Regulations
- Foreign nationals may only hold up to 49% stake in a Kuwaiti limited liability company, unless they receive approval from the Kuwaiti Investment Promotion Agency (KDIPA);
- All Kuwaiti companies are obligated to appoint an auditor and a resident director/manager at incorporation;
- A company must also sign a lease agreement and submit to Ministry of Commerce and Industry (MOCI) at registration;
- All entities must also file audited financial statements with MOCI within 3 months from the end of the financial year;
- Financial statements must be prepared in accordance with the International Financial Reporting Standards (IFRS).
Kuwait employment regulations considerations
- Employees can be hired on either a fixed or an indefinite term contract;
- The maximum probation period for a new employee is 100 days;
- A typical working week in Kuwait starts from Sunday to Thursday and employees can only work a maximum of 48hrs;
- During the month of Ramadan, employees may not work for more than 36 hours a week;
- Employers and employees are obligated to submit a social security contribution of 8% and 11.5% respectively.
Other legal considerations when doing business in Kuwait
- When filing annual returns, the below company documents may be required by the authorities:
- Stock record and inventory sheets;
- Ledgers and journals;
- Expenses analyses sheets.
- Joint Stock Companies in Kuwait are obliged to contribute 1% or their profits to the state budget as Zakat;
- Employers must issue a 3 month notice in case of termination of an employee on an indefinite term contract;
- Employees are entitled to 30 days annual leave and 15 days paid medical leave after at least 9 months of service.