Kuwait has revealed executive regulations for its tax on multinational entities in the country and expects the levy to add 250 million Kuwaiti dinars ($819 million) in revenues annually.
The country's Ministry of Finance said the new regulations clarify details about the introduction of a supplementary domestic minimum tax (DMTT) under the multinational entities (MNEs) group tax.
They "aim to interpret and clarify the provisions of the law, define procedures and implementation mechanisms, enhance transparency, and provide a clear understanding for relevant parties in line", the ministry said early this week.
The tax rate was not specified, but the country had said in December that it was planning to impose a 15 per cent tax on multinationals in the country.
The new legislation reflects Kuwait's strategy to diversify revenues away from the oil sector, said Noura Sulaiman Al-Fassam, Minister of Finance and Minister of State for Economic Affairs and Investment.
The issuance of the regulations "represents a major milestone in the path of economic reform, given their role in providing a fair investment environment and enhancing tax justice", she said.
She added that preliminary estimates indicate that the expected annual revenues from the tax could reach about 250 million Kuwaiti dinars, "enhancing the state's ability to build a resilient and sustainable economy".
Kuwait's DMTT applies to multinational entities (Kuwaiti or foreign companies) operating in more than one country "whose total revenues meet or exceed annual revenues of €750 million ($885 million) in the consolidated financial statements of the parent entity for at least two of the four tax periods immediately preceding full year 2025", consultancy KPMG said in a note.
Multinational entities should register by September 30 of this year, it said.
"Kuwait’s move to introduce a 15 per cent minimum on MNEs marks a major shift in the country’s fiscal approach," said Vijay Valecha, chief investment officer at Century Financial.
"In the short run, this could prompt some multinationals to reassess their cost models or investment plans as they have long benefited from Kuwait’s low-tax setup."
Sectors like logistics, finance and oilfield services may see some immediate impact, particularly where margins are sensitive to tax exposure. But the medium to longer-term effects could be more constructive, he said.
The tax is expected to generate substantial new revenue, which "will expand the government’s revenue base beyond oil so that the country can better shield itself from the volatility of global energy markets", he added.
The DMTT is in line with the Organisation for Economic Co-operation and Development's Pillar Two programme, which has set up a global minimum corporate tax to ensure large multinational enterprises pay a minimum 15 per cent tax on profits in each country where they operate.
The proposed global minimum tax is expected to result in annual global revenue gains of about $220 billion, or 9 per cent of global corporate income tax revenue, the OECD said in 2023.
The UAE last year also imposed the DMTT on large companies as part of changes to its corporate tax law. Large multinational enterprises are to pay a minimum of 15 per cent tax on the profits generated in the UAE (up from the current corporate tax rate of 9 per cent), effective for financial years starting on or after January 1, 2025.
The DMTT applies to multinational enterprises with consolidated global revenues of €750 million or more in at least two of the four financial years immediately preceding the financial year in which the tax applies.
Bahrain also said in September last year that it would introduce DMTT starting from January 1 on large multinationals.
Most Gulf countries are introducing taxes as they seek to diversify their economies away from oil and strengthen non-hydrocarbon revenues.
Oman is set to become the first in the region to introduce personal income tax from 2028. The Personal Income Tax Law, which was introduced last month, imposes a 5 per cent tax on annual income exceeding 42,000 Omani rials ($109,236), the Oman News Agency said reported.
The law will levy tax on income derived from “specific income types as defined by the law”, the news agency said.
Impact on consumers
The vast majority of Kuwait’s domestic economy, particularly SMEs and local businesses, will "remain out of scope", according to tax consultancy Aurifer. "From an economic growth perspective, the introduction of Pillar Two is unlikely to have a detrimental impact," the consultancy said.
According to Mr Valecha said, although the 15 per cent DMTT in Kuwait primarily targets large multinationals, "a portion of the impact is anticipated to be indirectly passed on to consumers".
"Multinational corporations are likely to respond by adjusting their pricing strategies to maintain profit margins, thereby passing increased costs to consumers," he said.
Sectors that are consumer-facing, such as FMCG, technology and retail are more probable to boost end-user prices.
Meanwhile, companies with a predominant business-to-business focus, such as oil services and industrial companies, may experience a delayed direct impact on consumers.
"Overall, the passing through of costs is expected to occur gradually and may differ according to industry-specific factors and the pricing power of individual companies," he said.
The latest levy by Kuwait comes amid a projected rebound in the country's economy in 2025 after two years of oil sector-led declines, with GDP estimated to grow by 1.9 per cent, according to the International Monetary Fund.
"The upturn will reflect both oil GDP growth turning positive (+1.3 per cent in 2025 from -6.9 per cent last year) as Kuwait begins restoring 135,000 barrels per day of crude oil output withheld since 2024 in line with its Opec+ quota obligations and improving non-oil sector performance," National Bank of Kuwait said in a note last month.
An increase in non-oil growth this year to 2.5 per cent and higher in 2026, from 1.8 per cent last year remains feasible, it added.
