Kuwait – executive rules updated

Kuwait – executive rules updated

This article discusses Kuwait’s updated executive rules, which offer guidance on tax filings and assessment procedures.


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The Kuwait tax law1 is brief and its application largely depends on the practice of the Kuwait Tax Authority (KTA). The KTA issues circulars and executive rules (ER) that provide guidance on tax administrative matters, as well as the deductibility of expenses for tax purposes. In December 2013, the KTA updated its existing ERs2 to offer guidance on tax filings and assessment procedures set out in Circular No.1 of 2013.3

The ERs are effective for tax declarations for years ending on or after 31 December 2013. How the KTA will apply the updated ERs remains to be seen.

Highlights of the changes in the updated ERs and their implications for Kuwait filings and assessments are as follows:

  • Declarations must be stated in Kuwaiti dinar and have an opinion from the tax advisors that the tax declaration has been prepared in accordance with the Kuwait tax law. The auditors should quantify the impact of any deviations from the ERs.4
  • Declarations must provide additional details of contract revenue, including: 
  • total contract value 
  • value of income for the current and preceding years in contract currency and local currency 
  • remaining value of the contract (local currency) 
  • value of any retentions made by contract owner (original currency).5
  • New forms were issued for tax clearance certificate applications of Kuwaiti/GCC entities. 
  • Pre-operating expenses must now be claimed in full in the year incurred (instead of amortized over the contract’s life) and be fully supported by appropriate documentation. 
  • Any sub-contracted work requires written approval from the main contract owner. Sub-contracting costs that exceed related revenues are not deductible for tax purposes. 
  • Insurance costs incurred outside Kuwait are no longer deductible. Insurance costs that form part of the costs of imported goods are treated as material costs. 
  • The KTA now applies the following fixed percentages (instead of ranges) for imputing profits on income from goods imported to Kuwait and from design and consultancy services rendered outside Kuwait. 
Source of income Imported goods / material Design services Consultancy services
Head office 15% 25% 30%
Affiliate 10% 20% 25%
Third party 5% 15% 20%

Source: KPMG in Kuwait, 2014.

Circular 1 of 2014

The KTA has recently also issued Circular No.1 of 2014 amending certain aspects of Circular 1 of 2013 regarding: 

  • the submission of declarations in Kuwait 
  • assessment procedures 
  • the KTA’s requirements to prepare declarations in accordance with the updated ERs.

The new circular applies to companies having an assessment for 2009 and/or later years.

For companies filing their tax declarations on the basis of audited financial statements, within 3 months of submitting the declaration, taxpayers must continue to submit a letter to the KTA setting out the computation of the tax due consistent with the most recent assessment (2009 or later). The KTA has stated that tax assessments will be issued within 12 months of submission of this letter (extendable by the KTA where detailed inspection is required), compared to 6 months as previously outlined in Circular No. 1 of 2013. This lengthens the time for taxpayers to obtain their tax clearance certificates for the release of tax retentions. 


1Defined by Decree No. 3 of 1955 as amended by Law No. 2 of 2008 and the Executive Bylaws to Law No. 2 of 2008. 

2Last updated in 2010. 

3Issued in February 2013. 

4ER No. 59, which reiterates the requirements under Article 13 of Executive Bylaw No. 2 of 2008. 

5ER No. 8. 

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