The Government Considers Replacing Current Tax Laws With New Ones

The government is studying a proposal to replace the country's current tax laws with a new one. The proposed legislation, called the “Business Profits Tax Law”, would impose a 15% tax on profits for all legal persons, including major international companies, whilst ensuring that citizens and small businesses are not subject to the tax, reported Al-Rai Daily.

A two-stage implementation process would be involved in the introduction of the proposed law. The first phase, which would begin on 1 January 2025, would see major international companies being taxed, whilst the current tax laws continue to apply. The second phase would begin on 1 January 2026, involving the comprehensive application of the new tax law to all legal persons, and the abolition of the current tax laws.

As part of the legislative map for the National Assembly session, which begins on 31 October, the government intends to submit 14 priorities to the Parliamentary Coordination Committee for approval. The sources have explained that, according to the scenario in place, the major international corporate tax will be implemented on the globally specified date of 1 January 2025, giving Kuwaiti companies more time for the comprehensive implementation on 1 January 2026.

A government memorandum submitted to the Council of Ministers outlines the requirements for implementing the major international corporate tax. It has been recommended that Kuwait joins the comprehensive framework of the project, preventing the erosion of the BEPS tax base, and contracts a consulting office to provide a comprehensive study of the second pillar, determination of rules, standards, and requirements related to tax application, the preparation of necessary policies to implement the project in line with international best practices, and the drafting of law. Additionally, the consultant will train national cadres on the application.

Consulting firms include Price Waterhouse (PWC), Deloitte, Ernst & Young (EY), KPMG, and Baker Tilly. As part of the government's proposal, a tax procedures law will also be issued, which will include all procedural provisions governing the implementation of all taxes. Once a consultant has been contracted for the new tax law, tax awareness regarding the new tax will be spread three months later.

According to reports, the Planning Committee in the Ministry of Finance is considering adopting the proposed organisational structure for the tax sector, with employees being trained and supported by current tax consultants and specialists.

Sources have noted the difference between "first-stage" and "second-stage" companies. The list of companies ready to begin applying the new tax on 1 January 2025 reportedly includes around 15 multinational companies, including government entities operating in foreign markets, all with annual revenues exceeding €750m.

Those Kuwaiti companies that are financially prepared to enter the tax period in the next two years will be required to prepare their systems and infrastructure for comprehensive implementation by 1 January 2026.

As a result of the second phase, the number of companies subject to tax is expected to double. The proposed tax structure will reportedly be dynamic, allowing companies to enter once they meet the conditions laid out by the Organization for Economic Cooperation and Development (OECD).

Kuwait's government plans to push for comprehensive tax legislation that follows accounting rules and systems in the country, ensuring that all eligible companies are subject to the new tax law.

 

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