Kuwait’s Ministry of Finance (MOF) has released the much-anticipated Executive Regulations for Law No. 157 of 2024, which implements a domestic minimum top-up tax that applies to multinational enterprise groups (MNEs) operating in the country (for prior coverage, see the article in the February 2025 issue of Corporate Tax News). The regulations—issued on 30 June 2025—aim to interpret and clarify the provisions of the law, define procedures, implementation mechanisms and provide a clear understanding for all relevant parties. As background, Law No. 157 of 2024 applies to MNEs operating in Kuwait with annual consolidated revenues of EUR 750 million or more in at least two of the four preceding fiscal years (revenue threshold) based on the consolidated financial statements of the ultimate parent entity (UPE). The law, which aims to ensure that MNEs pay tax at an effective tax rate of 15% on their Kuwait profits, introduced a domestic minimum top-up tax (DMTT) that is aligned with the OECD Pillar Two Model Rules.
Subject to any exclusions provided in the law, all entities incorporated or effectively managed in Kuwait and permanent establishments (PEs) in Kuwait of nonresident entities that are members of an MNE group are taxable, as are joint venture (JV) entities in Kuwait where the UPE of an MNE group holds a direct or an indirect ownership interest of 50% or more. The regulations define a JV as an entity whose financial results are reported by the UPE under the equity method of accounting, provided the UPE holds directly or indirectly 50% or more of the JV.
The regulations provide details on the various types of PEs for Kuwait DMTT purposes, which include a place of business PE, a six-month construction PE, a six-month service PE and an agency PE. A “stateless PE” may arise in Kuwait if a nonresident entity carries out operations in Kuwait and the income from such operations is tax exempt in its home country. Exclusions from a place of business PE are provided in certain cases where the overall activities are of a preparatory or an auxiliary nature. The regulations include provisions from the BEPS multilateral instrument to address contract splitting and commissionaire arrangements. Interestingly, a service PE may be created if the “activity” in Kuwait exceeds six months in any 12-month period, irrespective of whether the nonresident is actually present in Kuwait.
Taxable entities must register as a group for DMTT purposes, and each taxable entity must be registered within 120 days of becoming subject to the law.
The appointed constituent entity is required to file one DMTT return on behalf of the taxable entities of the group for each period, even if no tax is due. The deadline for filing is 15 months after the end of the relevant tax period. An approved audit firm must audit the tax return. Kuwait has opted for a single DMTT return for all taxable entities of an MNE group, including JVs.
Transactions between group entities within and outside Kuwait must be on arm’s length terms. The regulations specify that transfer pricing methods must be followed to arrive at the arm’s length price. Additionally, each taxable entity must maintain:
Qais Al Nisf
Rami Alhadhrami
BDO in Kuwait
Taxable Entities
Subject to any exclusions provided in the law, all entities incorporated or effectively managed in Kuwait and permanent establishments (PEs) in Kuwait of nonresident entities that are members of an MNE group are taxable, as are joint venture (JV) entities in Kuwait where the UPE of an MNE group holds a direct or an indirect ownership interest of 50% or more. The regulations define a JV as an entity whose financial results are reported by the UPE under the equity method of accounting, provided the UPE holds directly or indirectly 50% or more of the JV.
Permanent Establishment
The regulations provide details on the various types of PEs for Kuwait DMTT purposes, which include a place of business PE, a six-month construction PE, a six-month service PE and an agency PE. A “stateless PE” may arise in Kuwait if a nonresident entity carries out operations in Kuwait and the income from such operations is tax exempt in its home country. Exclusions from a place of business PE are provided in certain cases where the overall activities are of a preparatory or an auxiliary nature. The regulations include provisions from the BEPS multilateral instrument to address contract splitting and commissionaire arrangements. Interestingly, a service PE may be created if the “activity” in Kuwait exceeds six months in any 12-month period, irrespective of whether the nonresident is actually present in Kuwait.
Tax Registration
Taxable entities must register as a group for DMTT purposes, and each taxable entity must be registered within 120 days of becoming subject to the law.
Tax Return
The appointed constituent entity is required to file one DMTT return on behalf of the taxable entities of the group for each period, even if no tax is due. The deadline for filing is 15 months after the end of the relevant tax period. An approved audit firm must audit the tax return. Kuwait has opted for a single DMTT return for all taxable entities of an MNE group, including JVs.
Transfer Pricing Requirements
Transactions between group entities within and outside Kuwait must be on arm’s length terms. The regulations specify that transfer pricing methods must be followed to arrive at the arm’s length price. Additionally, each taxable entity must maintain:
- A local file and a master file, which must be submitted to the MOF within 30 days of a request; and
- A transfer pricing disclosure form containing at minimum details of related party transactions and the transfer pricing method applied. The form must be filed with the tax return and be audited by an approved audit firm. Additional rules are expected to be issued by the MOF to provide more detail on the content and format of the form.
Qais Al Nisf
Rami Alhadhrami
BDO in Kuwait