The Ministry of Finance (MOF) is considering the application of Kuwait income tax on Kuwait-registered branches of Gulf Cooperation Council (GCC) banks, which currently are exempt from income tax in Kuwait.
Under Kuwait income tax law, every corporate body carrying out a trade or business in Kuwait is subject to income tax, irrespective of its place of incorporation. However, it has been MOF practice to exempt Kuwaiti and GCC companies from income tax, and levy income tax only on foreign (non-GCC) entities operating in Kuwait and on foreign shareholders in a Kuwaiti/GCC company carrying out a trade or business in Kuwait. The current income tax rate is 15%.
Given that certain GCC countries apply income tax on all branches of foreign banks, including those headquartered in other GCC countries, the Kuwait MOF is considering the same approach. We understand the MOF will be discussing the proposal with the government’s legal department before proceeding further. It is unclear at this stage when the proposed changes would apply and whether other local taxes/contributions currently levied on such branches would be eliminated (e.g., Zakat and KFAS (Kuwait Foundation for the Advancement of Sciences)).