Kuwait

Tax Guide
2012
PKF Worldwide Tax Guide 2012 I
FOREWORD
A countrys tax regime is always a key factor for any business considering moving
into new markets. What is the corporate tax rate? Are there any incentives for
overseas businesses? Are there double tax treaties in place? How will foreign source
income be taxed?
Since 1994, the PKF network of independent member rms, administered by PKF
International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide
international businesses with the answers to these key tax questions. This handy
reference guide provides clients and professional practitioners with comprehensive
tax and business information for 100 countries throughout the world.
As you will appreciate, the production of the WWTG is a huge team effort and I
would like to thank all tax experts within PFK member rms who gave up their time
to contribute the vital information on their countrys taxes that forms the heart of this
publication. I would also like thank Richard Jones, PKF (UK) LLP, Kevin Reilly, PKF
Witt Mares, and Kaarji Vaughan, PKF Melbourne for co-ordinating and checking the
entries from countries within their regions.
The WWTG continues to expand each year reecting both the growth of the PKF
network and the strength of the tax capability offered by member rms throughout
the world.
I hope that the combination of the WWTG and assistance from your local PKF
member rm will provide you with the advice you need to make the right decisions
for your international business.
Jon Hills
PKF (UK) LLP
Chairman, PKF International Tax Committee
jon.hills@uk.pkf.com
PKF Worldwide Tax Guide 2012 II
IMPORTANT DISCLAIMER
This publication should not be regarded as offering a complete explanation of the
taxation matters that are contained within this publication.
This publication has been sold or distributed on the express terms and understanding
that the publishers and the authors are not responsible for the results of any actions
which are undertaken on the basis of the information which is contained within this
publication, nor for any error in, or omission from, this publication.
The publishers and the authors expressly disclaim all and any liability and
responsibility to any person, entity or corporation who acts or fails to act as a
consequence of any reliance upon the whole or any part of the contents of this
publication.
Accordingly no person, entity or corporation should act or rely upon any matter or
information as contained or implied within this publication without rst obtaining
advice from an appropriately qualied professional person or rm of advisors, and
ensuring that such advice specically relates to their particular circumstances.
PKF International is a network of legally independent member rms administered by
PKF International Limited (PKFI). Neither PKFI nor the member rms of the network
generally accept any responsibility or liability for the actions or inactions on the part
of any individual member rm or rms.
PKF Worldwide Tax Guide 2012 III
PREFACE
The PKF Worldwide Tax Guide 2012 (WWTG) is an annual publication that provides
an overview of the taxation and business regulation regimes of 100 of the worlds
most signicant trading countries. In compiling this publication, member rms of the
PKF network have based their summaries on information current as of 30 September
2011, while also noting imminent changes where necessary.
On a country-by-country basis, each summary addresses the major taxes applicable
to business; how taxable income is determined; sundry other related taxation
and business issues; and the countrys personal tax regime. The nal section of
each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax
withholding relating to the payment of dividends, interest, royalties and other related
payments.
While the WWTG should not to be regarded as offering a complete explanation of
the taxation issues in each country, we hope readers will use the publication as their
rst point of reference and then use the services of their local PKF member rm to
provide specic information and advice.
In addition to the printed version of the WWTG, individual country taxation guides are
available in PDF format which can be downloaded from the PKF website at www.pkf.com
PKF INTERNATIONAL LIMITED
APRIL 2012
PKF INTERNATIONAL LIMITED
ALL RIGHTS RESERVED
USE APPROVED WITH ATTRIBUTION
PKF Worldwide Tax Guide 2012 IV
ABOUT PKF INTERNATIONAL LIMITED
PKF International Limited (PKFI) administers the PKF network of legally independent
member rms. There are around 300 member rms and correspondents in 440
locations in around 125 countries providing accounting and business advisory services.
PKFI member rms employ around 2,200 partners and more than 21,400 staff.
PKFI is the 10th largest global accountancy network and its member rms have $2.6
billion aggregate fee income (year end June 2011). The network is a member of the
Forum of Firms, an organisation dedicated to consistent and high quality standards of
nancial reporting and auditing practices worldwide.
Services provided by member rms include:
Assurance & Advisory
Corporate Finance
Financial Planning
Forensic Accounting
Hotel Consultancy
Insolvency Corporate & Personal
IT Consultancy
Management Consultancy
Taxation
PKF member rms are organised into ve geographical regions covering Africa; Latin
America; Asia Pacic; Europe, the Middle East & India (EMEI); and North America &
the Caribbean. Each region elects representatives to the board of PKF International
Limited which administers the network. While the member rms remain separate
and independent, international tax, corporate nance, professional standards, audit,
hotel consultancy, insolvency and business development committees work together to
improve quality standards, develop initiatives and share knowledge and best practice
cross the network.
Please visit www.pkf.com for more information.
PKF Worldwide Tax Guide 2012 V
STRUCTURE OF COUNTRY DESCRIPTIONS
A. TAXES PAYABLE
FEDERAL TAXES AND LEVIES
COMPANY TAX
CAPITAL GAINS TAX
BRANCH PROFITS TAX
SALES TAX/VALUE ADDED TAX
FRINGE BENEFITS TAX
LOCAL TAXES
OTHER TAXES
B. DETERMINATION OF TAXABLE INCOME
CAPITAL ALLOWANCES
DEPRECIATION
STOCK/INVENTORY
CAPITAL GAINS AND LOSSES
DIVIDENDS
INTEREST DEDUCTIONS
LOSSES
FOREIGN SOURCED INCOME
INCENTIVES
C. FOREIGN TAX RELIEF
D. CORPORATE GROUPS
E. RELATED PARTY TRANSACTIONS
F. WITHHOLDING TAX
G. EXCHANGE CONTROL
H. PERSONAL TAX
I. TREATY AND NON-TREATY WITHHOLDING TAX RATES
PKF Worldwide Tax Guide 2012 VI
A
Algeria . . . . . . . . . . . . . . . . . . . . 1 pm
Angola . . . . . . . . . . . . . . . . . . . . 1 pm
Argentina . . . . . . . . . . . . . . . . . . 9 am
Australia -
Melbourne . . . . . . . . . . . . . 10 pm
Sydney . . . . . . . . . . . . . . . 10 pm
Adelaide . . . . . . . . . . . . 9.30 pm
Perth . . . . . . . . . . . . . . . . . . 8 pm
Austria . . . . . . . . . . . . . . . . . . . . 1 pm
B
Bahamas . . . . . . . . . . . . . . . . . . . 7 am
Bahrain . . . . . . . . . . . . . . . . . . . . 3 pm
Belgium . . . . . . . . . . . . . . . . . . . . 1 pm
Belize . . . . . . . . . . . . . . . . . . . . . 6 am
Bermuda . . . . . . . . . . . . . . . . . . . 8 am
Brazil. . . . . . . . . . . . . . . . . . . . . . 7 am
British Virgin Islands . . . . . . . . . . . 8 am
C
Canada -
Toronto . . . . . . . . . . . . . . . . 7 am
Winnipeg . . . . . . . . . . . . . . . 6 am
Calgary . . . . . . . . . . . . . . . . 5 am
Vancouver . . . . . . . . . . . . . . 4 am
Cayman Islands . . . . . . . . . . . . . . 7 am
Chile . . . . . . . . . . . . . . . . . . . . . . 8 am
China - Beijing . . . . . . . . . . . . . . 10 pm
Colombia . . . . . . . . . . . . . . . . . . . 7 am
Croatia . . . . . . . . . . . . . . . . . . . . 1 pm
Cyprus . . . . . . . . . . . . . . . . . . . . 2 pm
Czech Republic . . . . . . . . . . . . . . 1 pm
D
Denmark . . . . . . . . . . . . . . . . . . . 1 pm
Dominican Republic . . . . . . . . . . . 7 am
E
Ecuador . . . . . . . . . . . . . . . . . . . . 7 am
Egypt . . . . . . . . . . . . . . . . . . . . . 2 pm
El Salvador . . . . . . . . . . . . . . . . . 6 am
Estonia . . . . . . . . . . . . . . . . . . . . 2 pm
F
Fiji . . . . . . . . . . . . . . . . .12 midnight
Finland . . . . . . . . . . . . . . . . . . . . 2 pm
France. . . . . . . . . . . . . . . . . . . . . 1 pm
G
Gambia (The) . . . . . . . . . . . . . 12 noon
Georgia . . . . . . . . . . . . . . . . . . . . 3 pm
Germany . . . . . . . . . . . . . . . . . . . 1 pm
Ghana . . . . . . . . . . . . . . . . . . 12 noon
Greece . . . . . . . . . . . . . . . . . . . . 2 pm
Grenada . . . . . . . . . . . . . . . . . . . 8 am
Guatemala . . . . . . . . . . . . . . . . . . 6 am
Guernsey . . . . . . . . . . . . . . . . 12 noon
Guyana . . . . . . . . . . . . . . . . . . . . 7 am
H
Hong Kong . . . . . . . . . . . . . . . . . 8 pm
Hungary . . . . . . . . . . . . . . . . . . . 1 pm
I
India . . . . . . . . . . . . . . . . . . . 5.30 pm
Indonesia. . . . . . . . . . . . . . . . . . . 7 pm
Ireland . . . . . . . . . . . . . . . . . . 12 noon
Isle of Man . . . . . . . . . . . . . . 12 noon
Israel . . . . . . . . . . . . . . . . . . . . . . 2 pm
Italy . . . . . . . . . . . . . . . . . . . . . . 1 pm
J
Jamaica . . . . . . . . . . . . . . . . . . . 7 am
Japan . . . . . . . . . . . . . . . . . . . . . 9 pm
Jersey . . . . . . . . . . . . . . . . . . 12 noon
Jordan . . . . . . . . . . . . . . . . . . . . 2 pm
K
Kazakhstan . . . . . . . . . . . . . . . . . 5 pm
Kenya . . . . . . . . . . . . . . . . . . . . . 3 pm
Korea . . . . . . . . . . . . . . . . . . . . . 9 pm
Kuwait . . . . . . . . . . . . . . . . . . . . . 3 pm
L
Latvia . . . . . . . . . . . . . . . . . . . . . 2 pm
Lebanon . . . . . . . . . . . . . . . . . . . 2 pm
Liberia . . . . . . . . . . . . . . . . . . 12 noon
Luxembourg . . . . . . . . . . . . . . . . 1 pm
M
Malaysia . . . . . . . . . . . . . . . . . . . 8 pm
Malta . . . . . . . . . . . . . . . . . . . . . 1 pm
Mauritius . . . . . . . . . . . . . . . . . . . 4 pm
Mexico . . . . . . . . . . . . . . . . . . . . 6 am
Morocco . . . . . . . . . . . . . . . . 12 noon
N
Namibia. . . . . . . . . . . . . . . . . . . . 2 pm
Netherlands (The) . . . . . . . . . . . . . 1 pm
New Zealand . . . . . . . . . . .12 midnight
Nigeria . . . . . . . . . . . . . . . . . . . . 1 pm
Norway . . . . . . . . . . . . . . . . . . . . 1 pm
O
Oman . . . . . . . . . . . . . . . . . . . . . 4 pm
P
Panama. . . . . . . . . . . . . . . . . . . . 7 am
Papua New Guinea. . . . . . . . . . . 10 pm
Peru . . . . . . . . . . . . . . . . . . . . . . 7 am
Philippines . . . . . . . . . . . . . . . . . . 8 pm
Poland. . . . . . . . . . . . . . . . . . . . . 1 pm
Portugal . . . . . . . . . . . . . . . . . . . 1 pm
Puerto Rico . . . . . . . . . . . . . . . . . 8 am
INTERNATIONAL TIME ZONES
AT 12 NOON, GREENWICH MEAN TIME, THE STANDARD TIME
ELSEWHERE IS:
PKF Worldwide Tax Guide 2012 VII
Q
Qatar. . . . . . . . . . . . . . . . . . . . . . 8 am
R
Romania . . . . . . . . . . . . . . . . . . . 2 pm
Russia -
Moscow . . . . . . . . . . . . . . . 3 pm
St Petersburg . . . . . . . . . . . . 3 pm
S
Sierra Leone . . . . . . . . . . . . . 12 noon
Singapore . . . . . . . . . . . . . . . . . . 7 pm
Slovak Republic . . . . . . . . . . . . . . 1 pm
Slovenia . . . . . . . . . . . . . . . . . . . 1 pm
South Africa . . . . . . . . . . . . . . . . . 2 pm
Spain . . . . . . . . . . . . . . . . . . . . . 1 pm
Sweden . . . . . . . . . . . . . . . . . . . . 1 pm
Switzerland . . . . . . . . . . . . . . . . . 1 pm
T
Taiwan . . . . . . . . . . . . . . . . . . . . 8 pm
Thailand . . . . . . . . . . . . . . . . . . . 8 pm
Tunisia . . . . . . . . . . . . . . . . . 12 noon
Turkey . . . . . . . . . . . . . . . . . . . . . 2 pm
Turks and Caicos Islands . . . . . . . 7 am
U
Uganda . . . . . . . . . . . . . . . . . . . . 3 pm
Ukraine . . . . . . . . . . . . . . . . . . . . 2 pm
United Arab Emirates . . . . . . . . . . 4 pm
United Kingdom . . . . . . .(GMT) 12 noon
United States of America -
New York City . . . . . . . . . . . . 7 am
Washington, D.C. . . . . . . . . . 7 am
Chicago . . . . . . . . . . . . . . . . 6 am
Houston . . . . . . . . . . . . . . . . 6 am
Denver . . . . . . . . . . . . . . . . 5 am
Los Angeles . . . . . . . . . . . . . 4 am
San Francisco . . . . . . . . . . . 4 am
Uruguay . . . . . . . . . . . . . . . . . . . 9 am
V
Venezuela . . . . . . . . . . . . . . . . . . 8 am
Vietnam . . . . . . . . . . . . . . . . . . . . 7 pm
PKF Worldwide Tax Guide 2012 1
Kuwait
KUWAIT
Currency: Dinar Dial Code To: 965 Dial Code Out: 00
(KD)
Member Firm:
City: Name: Contact Information:
Kuwait Tareq M Bouresli 226 55 777
tareq@pkf-kuwait.com
A. TAXES PAYABLE
FEDERAL TAXES AND LEVIES
CORPORATE INCOME TAX
The Tax Decree of 1955 (Amiri Decree No 3 of 1955) as amended by Law No 2
of 2008 and the Executive Byelaw issued by the ministerial order No 29 of 2008
governs taxation in Kuwait along with various tax treaties with a number of foreign
nations. These decrees are supplemented by Directives issued by the Director
of Income Taxes. Under the above, foreign companies described in the decree
as bodies corporate which carry on business or trade in Kuwait are taxable.
The term bodies corporate refers to an association that is formed and registered
under the laws of any country or state and is recognised as having a legal
existence entirely separate from that of its individual members. Partnerships fall
within this denition.
No income tax is imposed on companies incorporated either in Kuwait or in other
Gulf Co-operation Council (GCC) countries and wholly owned by nationals of Kuwait
or other GCC countries. The members of GCC are Bahrain, Kuwait, Oman, Qatar,
Kingdom of Saudi Arabia and United Arab Emirates. Under Law No 19 of 2000,
a 2.5% tax is imposed on the annual net prots of Kuwaiti companies listed on
the Kuwait Stock Exchange as National Labour Support Tax.
Foreign companies can carry on business in Kuwait either through an agent or joint
venture or as a minority shareholder in a locally registered shareholding company. Tax
is levied on the foreign companys share of the prot plus any amounts receivable for
interest, royalties, commissions, technical services, management fees etc.
Upon commencement of business, foreign companies are required to register
themselves with Director of Income Taxes within 30 days and apply for a Tax Card.
A taxpayer may follow one calendar year comprising 12 consecutive months as
the rst accounting period. For the rst and last accounting periods, it is possible
to obtain approval for a period shorter or longer than 12 months up to a maximum
period of 18 months.
A tax declaration is to be submitted in Arabic to the Director of Income Taxes in a
specied format, accompanied by audited nancial statements and other specied
documents. The Director of Income Taxes requires that the declaration and the
supporting statements are certied by an accountant in practice in Kuwait who is
also registered with the Ministry of Commerce and Industry.
If a foreign company has more than one activity in a similar line of business in
Kuwait, either directly or indirectly through subsidiary companies, income from all
activities is to be aggregated for tax purposes. Business losses can not be carried
forward for more than three years.
The applicable at tax rate is 15% on taxable income. However, no tax is payable if
the taxable income is below KD 5,250. It is possible to pay the tax due in four equal
instalments if not paid as one deposit together with the Tax Declaration.
TAX INCENTIVES
Kuwait has a number of tax incentives as follows:
(a) Leasing and Investment Companies Law No 12 of 1998 allows the formation
of investment and leasing companies having their principal place of business
in Kuwait, with Kuwaiti or foreign shareholders. The law grants a ve-year tax
holiday to non-Kuwaiti founders and shareholders of such companies, beginning
on the date of establishment of the companies.
(b) Direct Foreign Capital Investment Law (DIFCL) No 8 of 2001 provides a tax
holiday up to ten years with respect to non-Kuwaiti shareholders shares of the
prots from the qualifying projects. An additional tax holiday for a similar period
is granted for further investment in an already approved project.
(c) Businesses set up in the Kuwait free trade zone for carrying on specied
operations are exempt from taxes on operations conducted in the zone and
foreign entities can own 100% of such businesses.
PKF Worldwide Tax Guide 2012 2
(d) Kuwait has begun to use build, operate, and transfer (BOT) method in respect of some
large infrastructure projects. Tax and tariff concessions may be built into a BOT contract.
As per circular No 50 of 2002, issued by the DIT regarding treatment of exempted
companies, the exempted companies shall, however, comply with the provisions
of submission of tax declaration, inspection and assessment procedures like other
companies in order to be eligible for exemption.
B. DETERMINATION OF TAXABLE INCOME
Tax liabilities are generally computed on the basis of prots disclosed in audited
nancial statements adjusted for tax depreciation and other deductions of all expenses
and costs spent on realising such income. The tax inspector has a right to disallow any
expenses that are deemed excessive on inspection conducted during assessment.
GROSS INCOME
Gross Income will include:
a) Income derived from rendering of services in Kuwait
b) Income from leasing of property located in Kuwait
c) Income from operating any manufacturing, industrial, or commercial enterprise
in Kuwait
d) Income from purchasing and selling property, goods and maintaining a
permanent ofce in Kuwait where contracts of purchase and sale are executed
e) Income earned from selling, renting etc any trade mark, design or copyright
f) Prots from disposal of assets
g) Commissions from representation or brokerage
h) Prots from any contracts performed in Kuwait.
DEDUCTIONS
TAX DEPRECIATION
The permissible rates of depreciation, applied using the straight-line method, include
4% a year for building, 20% for plant and machinery, 15% to 20% for motor vehicles
and 15% for ofce furniture.
BUSINESS EXPENSES
For expenses to be deductible, they must be incurred in the generation of income in
Kuwait. Such expenses must be supported by adequate documentary evidence. Such
expenses include:
(a) Salaries, wages and end of service benets
(b) Taxes and fees except Income Tax
(c) Grants, donations and subsidies paid to licensed Kuwaiti public or private agencies
(d) Expenses of Head Ofce.
The following expenses are normally disallowed for tax purposes:
(a) Personal or private expense or any other expense not related to business
(b) Criminal penalties
(c) Reimbursable losses
(d) Provisions as opposed to accruals are not accepted for tax purposes. Thus
terminal benets are only deducted when paid out and debts are only being
written off for tax purposes once they are proved irrecoverable
(e) Interest is accepted if it is paid directly by the branch to a bank in Kuwait and is
reasonable in relation to the activities of business in Kuwait
(f) Salaries paid outside Kuwait to staff working abroad, except where the contract
specically requires technical work to be performed abroad
(g) Transfer pricing of materials and equipment imported. The tax authorities deem
the following prot margins for the imported materials:
imports from head Offce: 10% to 15% of related revenue
imports from related parties: 6.5% to 10% of related revenue
imports from third parties: 3.5% to 6.5% of related revenue.
The deemed prot as above is normally subtracted from the cost of materials and
equipment claimed in the tax declaration.
HEAD OFFICE OVERHEADS
The tax authorities allow the following deductions from income as a contribution
towards expenses incurred by the head ofce of a foreign company:
(a) For contractors and consultants operating through an agent: 1.5% of revenue,
reduced by any amounts paid or payable to sub-contractors
(b) For foreign companies participating with Kuwait companies in the execution of
a contract: 1% of the foreign companys share of the contract revenue reduced
by amounts paid to sub-contractors
(c) For insurance companies: 1.5% of the net premiums
(d) For banking Institutions: 1.5% of direct revenue realised in Kuwait.
Kuwait
PKF Worldwide Tax Guide 2012 3
C. FOREIGN TAX RELIEF
No specic unilateral measures exist for the avoidance of double taxation but, if
taxable income has suffered foreign tax, the foreign tax will usually be allowed as
a deduction from income.
F. WITHHOLDING TAX
There are no withholding taxes in Kuwait. There are, however, retentions made
on payments due to foreign companies until such time as they satisfy their Kuwait
customer that they have dealt with their Kuwaiti tax obligations. Under Ministerial
Order No 44 of 1985, all government departments, public bodies and privately
owned and government owned companies are required to withhold nal payments
due to entities, which should not be less than 5% of the total contract value, until
such entities present a tax clearance from the DIT. Failure to comply with these
rules could result in disallowance of the related contract costs by DIT.
H. PERSONAL TAX
There is no personal income/wealth tax in Kuwait.
I. TREATY AND NON-TREATY WITHHOLDING TAX RATES
Kuwait has entered into tax treaties with several countries for avoidance of double
taxation. Kuwait is a signatory of the Arab Tax treaty and the GCC Joint Agreement,
both of which allow for avoidance of double taxation in most areas. Comprehensive
double taxation treaties are available with Austria, Belarus, Belgium, Canada, China,
Cyprus, Croatia, Ethiopia, France, Germany, Hungary, Indonesia, Italy, Jordan, Korea,
Lebanon, Mauritius, Mongolia, Netherlands, Pakistan, Poland, Romania, Russia,
Serbia and Montenegro, Singapore, Switzerland, Syria, Tunisia, Turkey, Ukraine and
United Kingdom. Kuwait has also concluded limited double taxation agreements in
respect of income arising from international sea and/or air transport with several
countries.
Kuwait
PKF Worldwide Tax Guide 2012 565
www.pkf.com $100