KPMG in Kuwait presents updates on the country’s draft excise tax bill and the Kuwait Tax Authority’s (KTA) policy on corporate tax retentions.
Kuwait’s Ministry of Finance has prepared a draft excise tax bill in line with the Gulf Cooperation Council (GCC) Unified Treaty for excise taxation. However, the Ministry of Finance has not yet confirmed the bill’s expected date of enactment.
The excise tax would be payable by persons who intend to import, produce and hold excisable goods, and it would apply to the manufacture, cultivation or change in composition of selected excise goods that are considered harmful and certain excise luxury goods. The tax would be imposed at the rate of 100 percent on the sale or retail price of tobacco and energy drink products and at 50 percent on the sale or retail price of soft (carbonated) drinks.
The draft excise tax bill also provides details on registration, filing of tax returns and penalties.
Based on discussions between KPMG in Kuwait and officials with the Kuwait Tax Authority (KTA), it appears that the KTA may consider authorizing contract owners and customers to release 5 percent tax retentions attributable to Kuwaiti shareholders in companies incorporated in Kuwait. The rationale for this treatment is that the Kuwaiti shareholder in the Kuwaiti company would not be considered subject to corporate income tax in Kuwait.
To qualify for this treatment, the KTA requires the foreign shareholder in the Kuwaiti company to be in compliance with the Kuwait tax law (e.g. up-to-date with its annual tax declaration filings, etc.)