Kuwait Income Tax: Rules for Individuals and Businesses

Kuwait’s economic structure, influenced by its significant oil reserves, has led to a specific approach to taxation. The country is a low-tax jurisdiction, attracting foreign investment and a diverse expatriate workforce. This system has distinct rules for individuals and corporate entities, reflecting the nation’s economic priorities.

Taxation of Individuals

Individuals residing and working in Kuwait are not subject to personal income tax. This applies to all forms of personal income, including salaries and wages, regardless of a person’s nationality.

While direct taxation on income is not a factor, a social security system is in place for Kuwaiti nationals. These contributions are mandated by the Social Security Law, with employers contributing 11.5% of an employee’s monthly salary and employees contributing 10.5%, both subject to salary caps. Expatriate workers are not part of this system.

Corporate Income Tax Applicability

Kuwait’s corporate tax framework has two systems. A Domestic Minimum Top-up Tax (DMTT) of 15% applies to multinational enterprises (MNEs) with annual consolidated revenues of €750 million or more. A separate corporate income tax framework applies to foreign companies that do not meet this revenue threshold.

This tax is levied on any foreign corporate body “carrying on trade or business in Kuwait,” while companies wholly owned by Kuwaiti or other Gulf Cooperation Council (GCC) nationals are generally not subject to this tax. The phrase “carrying on trade or business” is interpreted broadly and is not limited to having a physical office. A foreign company can be deemed to have a taxable presence if it generates income from activities within Kuwait, such as performing a contract or providing services. This includes income from royalties, licensing fees, and franchise agreements. If a Kuwaiti company has foreign shareholders, the tax is applied to the portion of the profit attributable to those foreign owners.

Calculating and Paying Corporate Tax

For foreign entities that do not meet the MNE revenue threshold, Kuwait levies a flat corporate income tax rate of 15% on their net profits. The tax is calculated on income from sources within Kuwait, after deducting allowable expenses like employee salaries and rental costs. Capital gains from the sale of assets are generally treated as part of normal business profits and taxed at the 15% rate.

The compliance process differs by tax system. MNEs subject to the minimum tax must submit returns within 15 months from the end of the tax period. The registration deadline for these entities for the 2025 tax year is September 30, 2025. Foreign companies under the standard corporate tax must register with the Department of Income Tax within 30 days of starting business. They must then file a tax declaration within three months and fifteen days of their fiscal year-end, with the tax payable at that time or in four installments.

Other Tax-Related Contributions

Zakat

Separate from the corporate income tax that targets foreign entities, Kuwaiti shareholding companies are subject to Zakat, a contribution of 1% of their annual net profits to the Zakat fund. This applies to both public and closed Kuwaiti shareholding companies. However, Kuwaiti companies that are part of an MNE group subject to the Domestic Minimum Top-up Tax are no longer subject to this Zakat contribution.

Withholding Tax

Kuwait employs a retention system to ensure tax compliance by foreign entities. All government bodies and private companies in Kuwait must retain 5% from payments made to any contractor or service provider. This retained amount is released only when the recipient provides a tax clearance certificate from the Ministry of Finance, confirming its tax obligations have been settled. This mechanism acts as a security against the final tax liability of the foreign entity.