CORPORATE TAXES
SIGNIFICANT DEVELOPMENTS
The income tax law of 1995 has seen little amendment since enactment but has been subject to a series of interpretations and amplification by the Minister of finance and Economy, who is the Director of income Taxes. A new draft law codifying and amending income tax practices was under discussion in 1989 and 1990,but the process was interrupted by the August 1990invasion and has yet to be completed. For the time being the original and the subsequent amendments and interpretations remain
in force. Action should not be taken on the basis of the information in this summary without professional advice on recent changes and developments.
TAXES ON CORPORATE INCOME
There is tax liability on 100% kuwaiti-owned businesses in kuwait. Only the profits and capital gains of foreign"corporate bodies "conducting business and trade in kuwait, directly or through an agent, or carrying on a business or carrying on a business or trade in kuwait as an agent of others are liable to income tax.
Corporate body A corporate body is defined as an association that has a legal existence completely separate from that of its constituent members and is registered as such under the jurisdiction of any country in the world. Foreign partnerships, such as films of lawyers or engineering or management consultants , fall within this definition ,even if they are not recognized as being separate legal persons in their own countries.
Trade or business/Conducting a trade or business includes the
following.
1. Purchases and sales in kuwait and keeping a permanent place of business in kuwait Where contracts for such purposes and sales are executed (other than mere purchases of properties ,goods of services in kuwait).
2. Operation of any industrial or commercial project in kuwait.
3. Rental of properties in kuwait.
4. Provision of services in kuwait.
Income tax applies to the following.
1. Branch operations in kuwait of a foreign corporation.
2. The proportion of profits of a kuwaiti corporate entity attributable to foreign corporate shareholders.
And
3. In the case of a joint venture ,the foreign partner's share of the joint venture profit.
Tax tates/income tax in kuwait is not progressive. Instead, it is levied on the "slab"prin-ciple-the whole amount of profit is taxed at the highest rate. Tax is assessed at the rates shown below.
TAXABLE INCOME
OVER Nor over TAX RAIE
%
0 KD 5,250………………Nil
KD 5,250 18,750……………… 5
18,750 37,500……………… 10
37,500 56,250……………… 15
56,250 75,000……………… 20
75,000 112,500……………… 25
112,500 150,000……………… 30
150,000 225,000………………35
225,000 300,000……………… 40
300,000 375,000……………… 45
375,000 …………55
The law provides for marginal relief when the taxable income is
marginally higher than the preceding slab. Total profit for the year is taxed at the single rate applicable to the relevant taxable income band.
CORPORATE RESIDENCE
A foreign corporate body is any association formed and registered under the law of any country of state other than kuwait that is registered as having a legal existence entirely separate from that of its individual members. No kuwait-registered company is subject to income tax. However,any foreign corporate body that is a shareholder in a kuwait-registered company undertaking business in kuwait is subject to
tax as noted above.
OTHER TAXES
Customs duties/The standard customs duty is 4% on the C.I.F.value of goods. A higher duty ,normally 15% ,is sometimes imposed to protect local industry.
Foreigners whose activity is confined to exporting goods to kuwait are not liable to income tax.
Export tax /An export t
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