Kuwaiti politician introduces bill to tax remittances of foreign workers

The proposed legislation mandates banks and financial institutions to collect a 5% tax on transfers

The Avenues Mall in Kuwait City. A politician has introduced a draft bill to tax the remittances of foreign workers. AFP

A Kuwaiti politician has proposed legislation to impose a minimum 5 per cent tax on remittances by foreign workers, according to local media reports.

Member of Parliament Osama Al-Menawer introduced the bill on Thursday, which “mandates banks and financial institutions processing the remittances of expatriates to collect a tax on money transferred to other countries”, the Arab Times newspaper reported.

“The Ministry of Finance shall specify the tax amount, which will not be lower than 5 per cent if the transferred amount exceeds 50 per cent of the annual income of the expatriate worker.”

In 2018, the Kuwaiti government rejected a similar proposal after parliament’s financial and economic affairs committee voted to introduce a tax on remittances by non-citizens. Earlier this year, Mr Al-Menawer also introduced a similar bill to tax foreign workers on their remittances.

Outward personal remittances from Kuwait dropped to 1.3 billion Kuwaiti dinars ($4.3bn) in the first quarter of this year, from 1.4bn dinars in the fourth quarter of 2020, according to Trading Economics, which quoted Central Bank of Kuwait data.

Global remittance flows to poor and middle-income countries stood at $540bn in 2020, 1.6 per cent less than the total for 2019, the World Bank said in its migration and development brief earlier this year.

Remittances are set to rise as the global economy recovers from the Covid-19 pandemic, the multilateral lender said.

Despite the impact of Covid-19, the decline in remittance flows in 2020 was smaller than the 4.8 per cent drop recorded during the 2009 global financial crisis, the World Bank said.

In 2019, Kuwait accounted for $15.2bn in foreign remittances, up from $14.3bn in 2018, according to World Bank data.

Under Mr Al-Menawer’s draft legislation to tax remittances, a foreign worker's annual income should be calculated by including all the money deposited into their bank accounts.

“The tax amount will be calculated by the end of every year and the collected tax will be added to the public treasury,” the bill says.

“Expatriates whose salaries are less than 350 dinars per month are exempted from this provision.”

Foreign workers in Kuwait make up about 65 per cent of the country’s population of 3.6 million people.