Direct Taxes

Personal Taxation

There is no personal income tax for individuals.

Corporate Income Tax

Corporate income tax is levied only on income of foreign companies operating in Kuwait. Kuwaiti companies wholly owned by Kuwaitis and companies incorporated in GCC countries that are wholly owned by GCC citizens are not subject to income tax.

An income tax of 15% is levied on net profits (i.e. revenue less allowable expenses) earned from the carrying on of a trade or business in Kuwait. Royalties and franchise, license, patent, trademark and copyright fees received by overseas foreign entities from Kuwait are subject to income tax in Kuwait. Capital gains derived from the sale of assets are treated as normal business profits and are subject to income tax

National Labour Support Tax

All Kuwaiti companies listed for public trading on the Kuwait Stock Exchange must pay the National Labour Support Tax, which equals 2.5% of their net annual profits. The purpose of this tax is to support and encourage Kuwaiti nationals to work in the private sector.

Contribution to the Kuwait Foundation for the Advancement of Sciences (KFAS)

All shareholding companies are required to pay 1% of their profits after transfer to the statutory reserve and the offset of loss carry forwards, to the Kuwait Foundation for the Advancement of Sciences, which supports scientific progress. KFAS provides sponsorship and grants for many types of scientific research projects in Kuwait.

Social Security

A social security scheme for Kuwaiti employees requires monthly contributions from both employers and employees. Employers contribute 11.5% of an employee’s salary towards the scheme and employees contribute 8% of their own salary. The total amount of the monthly salary to which the aggregate 19.5% contribution applies may not exceed KD  3,000.

There are no social security obligations for expatriate workers. However, for foreign employees it is generally necessary to make terminal indemnity payment calculated at 15 days pay per year for the first five years of service and one month’s pay per year thereafter.

Zakat Contribution

All Kuwaiti shareholding companies are obliged to contribute 1% of their net annual profits towards a Zakat payment or a payment to the state budget. Companies have the choice of paying towards Zakat or to the state budget.

Indirect Taxes

No indirect taxes exist, with the exception of customs duties.

Without holding Tax

There is no withholding tax in Kuwait as such. However, there is a principle, which resembles a form of contract retention. The rule states that a non-GCC entity that contracts with a Kuwaiti company is required to obtain a tax clearance certificate to confirm that it has satisfied its tax commitments. Until this is done, the Kuwaiti party must withhold an amount that is no less than 5% of the final payment. Such withholding represents a form of collateral against the tax commitments of the non-GCC contracting party.