Kuwait has announced sweeping changes to its tax policies, implementing new levies that are expected to generate $820 million in annual revenue as the oil-rich nation seeks to reduce its dependence on petroleum income.
Table of Contents
Key Changes Taking Effect
Starting in 2026, Kuwait will introduce:
✔ 10% corporate tax for foreign companies (previously 0%)
✔ 5% “sand tax” on oilfield service providers
✔ Luxury goods VAT of 5% on jewelry and premium vehicles
✔ 1-3% tax on large overseas money transfers by expats
What Stays the Same
- No income tax for Kuwaiti citizens
- Tax exemptions for basic necessities like food and medicine
- Preferential treatment for small businesses and startups
Why This Matters
- Economic Shifts
- Oil currently makes up 82% of the government’s income
- New taxes aim to address the projected $12 billion deficit
- Regional Comparisons
- Maintains the lowest corporate rate in the Gulf (vs 9% in UAE)
- Still no personal income tax, unlike some neighbors
- Future Planning
- Funds will support the Silk City megaproject
- 30% of the new revenue is going to the sovereign wealth fund
Potential Impacts
Business Sector
Energy companies face higher service costs while luxury retailers brace for reduced sales
Expatriate Workers
Many are concerned about new charges for sending money home to families
Economists’ View
“Necessary step to prepare for post-oil era,” says financial analyst Ahmed Al-Farsi
Implementation Schedule
- January 2026: Corporate taxes begin
- April 2026: Luxury VAT starts
- July 2026: Remittance tax takes effect
Government Assurance
Finance Minister emphasized the changes are “moderate and measured,” designed to maintain Kuwait’s business-friendly environment while securing future revenue streams.
About the Reforms
The tax changes represent Kuwait’s most significant fiscal policy shift in decades, carefully balanced to generate revenue without deterring investment or drastically impacting citizens’ cost of living.
Businesses and residents are advised to consult with financial advisors to understand how the new rules may affect them.
For More Information
Details are available on the Ministry of Finance website, with hotlines established to answer questions from affected companies and individuals.
Know more about “Kuwait Introduces New Tax System”:
- What is the “new tax system” primarily about in Kuwait?
The main focus is the implementation of a Domestic Minimum Top-up Tax (DMTT) on multinational entities (MNEs), aligning with the OECD’s Pillar Two framework. - When did this new tax system come into effect?
The DMTT is effective for financial years starting on or after January 1, 2025. - Why is Kuwait introducing this new tax?
Kuwait is introducing this to diversify its economy away from oil dependence, align with international tax standards (OECD Pillar Two), combat tax evasion, and enhance its fiscal sustainability as part of its Vision 2035 strategy. - Which companies are subject to the Domestic Minimum Top-up Tax (DMTT)?
It applies to Multinational Entities (MNEs) with global consolidated revenues of €750 million or more in at least two of the preceding four fiscal years. - What is the minimum tax rate under this new system?
The DMTT aims to ensure that the effective tax rate (ETR) for in-scope MNEs in Kuwait is at least 15%. - Does this mean all companies in Kuwait will now pay a 15% corporate income tax?
No, the existing 15% corporate income tax for foreign companies and the 1% Zakat and 2.5% National Labor Support Tax (NLST) will no longer apply to the MNEs in scope of the new DMTT. Local businesses with no operations outside Kuwait are generally excluded from the DMTT. - What entities are excluded from the DMTT?
Excluded entities include government entities, non-profit organizations, international organizations, pension funds, certain investment funds that are Ultimate Parent Entities (UPEs), and real estate investment vehicles that are UPEs. - Is there still no personal income tax for individuals (expats or citizens) in Kuwait?
As of current information for 2025, there is no personal income tax (PIT) imposed on individuals in Kuwait. - Has Kuwait implemented Value Added Tax (VAT) yet?
No, Kuwait has delayed VAT implementation until 2028. It was initially expected earlier but has been pushed back. - Are there any plans for excise taxes on specific goods?
Yes, the government is considering introducing excise taxes on certain goods like tobacco and its derivatives, soft and sweetened drinks, and luxury items such as watches, jewelry, luxury cars, and yachts. - Will this new tax system impact local Kuwaiti businesses?
The DMTT primarily targets large multinational entities. Local businesses with no international operations and those below the €750 million revenue threshold are generally not directly impacted by this specific tax. - What is the “effective tax rate (ETR)” calculation in this new system?
The ETR is calculated based on the aggregated adjusted income and adjusted covered taxes for all non-excluded entities of an MNE group in Kuwait. If the ETR is below 15%, a top-up tax is applied. - Are there any safe harbor provisions under the new tax law?
Yes, the Law provides for safe harbors, including a de minimis safe harbor and a transitional Country-by-Country Reporting (CbCR) Safe Harbour for initial fiscal years, which can simplify compliance. - What are the compliance requirements for in-scope MNEs under the new law?
In-scope MNEs will be required to register with the Kuwait Tax Authority (KTA) within nine months from implementation, and submit tax returns with audited financial statements within 15 months of the tax period end. - Does the new law address transfer pricing?
Yes, the law stipulates that transactions between related parties must comply with the arm’s-length principle, giving the KTA the right to determine net income based on this principle if non-compliance occurs. - Is there a withholding tax for payments to non-residents?
While the DMTT is the primary new tax, there have been proposals for a 5% withholding tax on specific payments to non-residents (e.g., dividends, royalties, technical services), unless linked to a permanent establishment in Kuwait. - What is Kuwait’s “Vision 2035” in relation to these tax reforms?
Vision 2035 is Kuwait’s long-term development plan aimed at transforming the country into a regional financial and commercial hub, and these tax reforms are crucial steps towards diversifying revenue sources and strengthening its economic foundations. - How will the Ministry of Finance support the implementation of this new law?
The Ministry of Finance has issued Executive Regulations to clarify provisions and implementation mechanisms. They also plan to hold a series of awareness workshops for relevant authorities and specialists. - What is the estimated annual revenue gain from this new MNE tax?
Preliminary estimates suggest the tax could generate approximately KD 250 million annually for the state budget. - Where can businesses and individuals find official information about these tax changes?
Official information can be found on the websites of the Kuwaiti Ministry of Finance, the Kuwait Tax Authority (KTA), and reputable international tax advisory firms like PwC and EY.