Kuwait: local rules

Kuwait has two tax regimes for multinational groups. Groups with consolidated revenue of EUR 750m or more in at least two of the four preceding years pay a 15% domestic minimum top-up tax under Decree-Law 157 of 2024 (signed 30 December 2024, for tax periods starting on or after 1 January 2025), with Executive Regulations in Ministerial Decision 55 of 2025 (Kuwait Al-Yawm supplement 1745, 30 June 2025). For those groups the Decree-Law switches off the old foreign company income tax (Decree 3 of 1955), the Law 23 of 1961 tax, parts of the National Labour Support Tax law (Law 19 of 2000, art. 12(1) and 14(2)) and the Zakat Law (Law 46 of 2006) (Decree-Law art. 1). Article 18 of the Decree-Law says deals between related entities must meet the arm's length standard when net income is set, and if not, the Tax Administration can set net income on an arm's length basis. Regulations arts. 71 to 74 add the comparability factors, five OECD methods, the adjustment power and documentation. Groups outside the top-up tax stay under Decree 3 of 1955 (as amended by Law 2 of 2008), a flat 15% on foreign corporate bodies, and Kuwaiti shareholding companies pay zakat of 1% and the NLST and KFAS levies. No arm's length or documentation rule outside the top-up tax law was found.

Only taxable entities in a top-up tax group have transfer pricing documentation duties (Regulations art. 74). They must prepare and keep a master file and a local file and hand them to the Tax Administration within 30 days of its request. They must also file a Disclosure Form of related party transactions, audited by a Ministry of Finance approved audit firm, with the top-up tax return. The form must show at least the value and nature of the deals and the pricing method used. No size threshold or small entity exemption was found in the Regulations. Records must be kept for 10 years from the end of the tax period (Decree-Law art. 23). Books can be in Arabic or English, with an Arabic translation on request (art. 95).

Regulations art. 72 lists five methods: comparable uncontrolled price, resale price, cost plus, transactional net margin and profit split. The entity must use the most appropriate method and may use more than one. Another method is allowed if the entity shows none of the five can be applied and the other method still gives an arm's length result. Art. 71 sets the comparability factors: contract terms, deal features, economic circumstances, functions, assets and risks, business strategies and any other factor the Tax Administration sets. The entity must state the reasons and assumptions behind its method. No range rule (such as the interquartile range) and no comparables update cycle was found.

Penalties are in Decree-Law 157 of 2024, arts. 31 to 36. A late top-up tax return costs 5% of the final tax for up to 30 days late, 10% for 31 to 90 days, 15% for 91 to 365 days and 20% after that until assessment, with a minimum of KWD 1,000. A return never filed by the assessment date costs 25% of the final tax, minimum KWD 5,000. Late payment costs 1% of the unpaid amount for every 30 days or part of it. An incorrect return costs 25% of the difference if it is over 10% of the tax shown, or 10% if corrected before the Tax Administration finds it. A KWD 3,000 fine applies for late registration, late notice of changes, not giving documents or information within 30 days of a request, obstruction, and not keeping records. The last two fit a missing master file or local file, but no separate TP penalty is written. Tax evasion can bring up to 3 years in prison and a fine of up to 3 times the tax.

Kuwait has a domestic minimum top-up tax (DMTT) and, as far as the Regulations show, no income inclusion or undertaxed profits rule. It covers every Kuwaiti constituent entity, joint venture and subsidiary in a group with EUR 750m or more of revenue in two of the four preceding years. Each entity registers with the Tax Administration within 120 days of becoming subject to the tax (Decree-Law art. 19), but groups already in scope on 1 January 2025 had until 30 September 2025 (nine months from 1 January 2025) without a late fine (Decree-Law art. 2). One return per tax period covers the whole group, is filed by the designated Kuwaiti constituent entity within 15 months of the end of the tax period (Decree-Law art. 20, Regulations art. 87), is audited by an approved audit firm, and is due even if the tax is nil. The tax is due by the same date (art. 22). Neither text gives a longer first-year period, so the 15 months applies from the first year. The Tax Administration may also order a Kuwaiti ultimate parent to file a Pillar Two information return, but no date or form for it has been published.

Kuwait has no country-by-country (CbC) filing rule yet. Kuwait signed the CbC multilateral competent authority agreement in June 2026 (KPMG says 22 June, Deloitte says 28 June) and an October 2026 press report says Decree-Law 116 of 2026 approved it, but the signing creates no filing duty and no notification, report or penalty rule has been issued. Foreign bodies outside the top-up tax file an income tax return on or before the 15th day of the fourth month after the end of the tax period (Income Tax Regulations of Law 2 of 2008, art. 13), on a calendar year unless the Tax Administration agrees to a period of up to 18 months. They can ask by the 15th day of the second month for up to 60 more days, and the tax is paid in one amount or four equal instalments (art. 28). The Kuwait weekend is Friday and Saturday. The top-up tax Regulations (art. 113) move any deadline that ends on a holiday or official rest day to the next working day, but the income tax regulations have no such rule.