Kuwait to impose 15 per cent tax on multinational entities

The Kuwaiti Cabinet endorsed a draft resolution on issuing a law imposing a 15-percent tax on multinational entities, which have business in more than one country or a state. This move was taken during its weekly meeting held at Bayan Palace under chairmanship of His Highness the Prime Minister Sheikh Ahmad Abdullah Al-Ahmad Al-Sabah.

The law, which is in line with global taxes’ standards, aims to curb tax evasion and prevent sending tax revenues to other countries. It will come into effect as of January 1, 2025, Deputy Prime Minister and Minister of State for Cabinet Affairs Shereeda Al-Mousherji said in a statement after the meeting, according to the Kuwait News Agency.

Earlier Dr. Anwar Ali Al-Mudhaf, Minister of Finance and Minister of State for Economics Affairs and Investments in the State of Kuwait, underscored the importance of the agreement signed by Kuwait and the UAE to avoid double taxation on income and capital taxes and to prevent tax evasion and avoidance.

In statements to the Emirates News Agency (WAM) on the sidelines of the 8th Arab Fiscal Forum held as part of the Pre-summit day of the World Governments Summit (WGS) 2024, Dr. Al-Mudhaf said that the agreement was signed after discussions and completion of all its axes to reflect the importance of the relations between the UAE and Kuwait.

He pointed out that the agreement is part of the process of economic and financial integration and the free movement of capital between the UAE and Kuwait, adding that the agreement is expected to enhance economic integration and have positive effects on the citizens and investors of the two countries.

Dr. Al-Mudhaf underpinned the importance of the World Governments Summit, which is held annually to explore future opportunities and challenges, and the most prominent challenges facing the world across a number of pressing issues, pointing out that Kuwait’s participation in the summit reaffirms the depth of the strategic and fraternal relations UAE-Kuwait ties.

The Minister of Finance of Kuwait stated that the participation of more than 25 heads of state and government, 140 government delegations and more than 85 international and regional organisations and global institutions in the summit events is a clear indication of the importance and high status that the UAE has reached in the international community, as well as its strategic importance from an economic and political point of view. Earlier in December 2024 the UAE Ministry of Finance has announced updates in relation to certain provisions of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.

These amendments include introduction of a Domestic Minimum Top-up Tax (DMTT), and tax incentives to support growth and innovation.

Introduction of a Domestic Minimum Top-up Tax (DMTT):

Following the issuance of Federal Decree Law No. 60 of 2023, a Domestic Minimum Top-up Tax (DMTT) will be effective in the UAE for financial years starting on or after 1st January 2025. This strategic step reflects the UAE’s commitment to implementing the Organisation for Economic Co-operation and Development’s (OECD) Two-Pillar Solution, aimed at establishing a fair and transparent tax system aligned with global standards.

The Pillar Two rules require large multinational enterprises (MNEs) to pay a minimum effective tax rate of 15 per cent on profits in every country where they operate.

The DMTT will apply to multinational enterprises operating in the UAE with consolidated global revenues of €750 million or more in at least two out of the four financial years immediately preceding the financial year in which the DMTT applies. The UAE’s implementation of the DMTT will closely align with the OECD’s GloBE Model Rules.

Tax Incentives to Support Growth and Innovation: The UAE continues to enhance its business-friendly environment, reflecting its commitment to national strategic objectives such as strengthening economic competitiveness and improving ease of doing business.

To promote sustainable growth, innovation, and investment, the Ministry of Finance is currently considering the introduction of the following Corporate Tax Incentives under Federal Decree-Law No. 47 of 2022.

To encourage R&D activities, foster innovation and economic growth within the UAE, a Research and Development (R&D) Tax Incentive is being considered. Based on feedback received during public consultations conducted in April 2024, the proposed incentive is expected to take effect for tax periods starting on or after January 1st 2026.

The R&D tax incentive will be expenditure-based, offering a potential 30-50 per cent tax credit and will be refundable depending on the revenue and number of employees of the business in the UAE.