kuwait incometax decree.pdf

7/27/2019 Kuwait IncomeTax Decree.pdf

1/8

I. Kuwait Income Tax Decree No. 3 of 1955.

1 - Corporate that are liable of Taxation

Tax range includes any body corporate carrying on trade or business in

Kuwait in a direct or indirect way or any body corporate carrying on trade orbusiness in Kuwait as an agent for others.

2 - Tax base:

Income tax, shall be imposed for each taxable period on every body

corporate carrying on trade or business in Kuwait and obtains an income,the term income means gains and profits of a body corporate derived from

carrying on trade or business in Kuwait:

* The purchasing and selling in Kuwait of property, goods, or rights

thereto and maintaining a permanent office in Kuwait where the

contracts of purchases and sale are executed.

* Operating any other, industrial, or commercial enterprises in

Kuwait.

* Leasing any property located in Kuwait.

* Rendering services in Kuwait.

But do not include the mere purchasing in Kuwait of property, goods,

or right thereto.

3 - Tax rate:

According to Kuwait income tax Decree No. 3 of 1955 provisions, taxes are

calculated on each company income for a taxable year by the percentages

indicated in the following chart:


2/8

Income Exceeding

(K.D.)

Income Not Exceeding

(K.D.)

Percentage (%)

0000 5250 Nil

5250 18750 5

18750 37500 1037500 56250 15

56250 75000 20

75000 112500 25

112500 150000 30

150000 225000 35

225000 300000 40

300000 375000 45

375000 .. 55

Tax Exemption Conditions:

A body corporate income not exceeding KD 5250/- per annum is exemptedfrom taxes.

II. Kuwait Income Tax Law (in the Designated Area) No. 23 of

1961.1- Corporate that is liable for Taxation:

Kuwait income tax is imposed on every body corporate carrying on trade or

business in extraction of a particular materials any natural material from the

neutral zone or designated islands according to a permission or a contract orfranchise granted by the ruler of the State of Kuwait, as well as, the

refinement, manufacturing or treatment of the extracted materials and

natural materials by any other way or transporting and storing suchmaterials.


3/8

2 - Tax base:

Income tax shall be imposed for each taxable period ending

after a fiscal year on every body corporate, wheresoever

incorporated, carrying on trade or business in the designated

area during such taxable period.

3 - Tax rate:

Kuwait income tax for Law No. 23 is calculated according to the companies

income for each taxable year as the following percentage:

Income not exceeding K.D. 500,000 20%

Income exceeding K.D. 500,000 57%

Wherever the percentage is 57% the amount exceeding K.D. 500,000/- of

the body corporate income from such trade or business is added to K.D.

1,000,000/- during the taxable period.

4 - Tax Exemption Cases:

Law has not expressly stipulated the exemption of the

companies operating in the neutral zone from Kuwait

income tax.

III. Chain of Procedures Adaptable by Tax Department to

Settle Payments with Tax payers

1 - Identifying the number of tax payers:

The Tax Department Identifies the number of companies operating in

Kuwait for the submission of such companies to Kuwait Income Tax No. 3


4/8

of 1955 and Law No. 23 of 1961 that is still regulating work operation in

the Designated Area.

2 - Corresponding with Tax payers:

A) Letters will be exchanged with the companies once immediately after

identification, and then another time after 30 days has passed, and lastlycorrespondence will be through the tax return application form stating the

companys activity in Kuwait.

B) The parties contracting with the companies will be corresponded to

insure their application of the Ministerial Order No. 44 of 1985, for seizing

5% of the total contracting amount and for providing the Tax Departmentwith copies of the contracts concluded.

C ) In case of the companies refusal of providing the financial data after 3times of correspondence with the Tax Department, the contracting party will

be acknowledged to provide the Tax Department with the companies

financial data during the taxable period to carry out the assessment

randomly.

3. Tax Assessment Rules:

Tax assessment is based on the companies profits according to the submitted

Tax Declaration on the ready made Forms and according to what is stated in

Kuwait Income Tax Decree No. 3 of 1955 and Law No. 23 of 1961 in thefollowing way:

A) The company should submit a financial statement for each fiscal year of

its income on or before the fifteenth day, of the fourth month to the end of

the taxable period. Provided that he will pay the tax amount stated in the taxreturn in full or in four equal instalments, to be paid in Kuwaiti Dinars to the

Tax Department.


5/8

B) The company may request an application of extension of Tax Return

period as such request will be approved by the Tax Department and then the

letter of Tax Return extension will be issued as a result of the approval.

C) The Tax Department will inform the Taxpayer of the due amount after

inspection and that is by the issuance of the assessment letter.

4. Procedures and Dates Appointed for Contestation against Tax

Assessments Decisions:

Ministerial Order No. 16 of 1997 regulates the Taxpayers objection

proceedings to tax assessment, which provides for as the following:

A) A taxpayer is entitled to file an objection to a tax assessment within sixty

days as of the date he is notified through the assessment letter. Should the

mentioned date elapse without objection, the tax assessment shall bedeemed final and the tax shall be due for settlement to the tax department by

the Taxpayer within the thirty days following the date at which the tax

assessment is deemed final.

B) The Tax Department should resolve upon the objection within ninety

days following the date of its filing, and should the tax department agree

with the Taxpayer on fixing the amount of the income tax due within theperiod referred to in the first paragraph, the tax assessment should be issued

in accordance with this agreement and shall be deemed final and the

Taxpayer should make the payment within the thirty days following the dateof the agreement. If the Tax Department does not respond to the objection

within the period referred to above, this shall lead to a rejection of theobjection.

C) Should the objection of the tax payer be expressly rejected or byimplication, he may appeal against the rejection decision before the Tax

Appeal Committee within thirty days as of the date of his being notified of

the rejection, or as of the date at which the objection should have been


6/8

resolved, elapsed without response. The appeal together with all the

supporting documents shall be submitted to the mentioned Committee.

D) The taxpayer may select his representative in the Committee and notify

the Tax Department of his name upon filing the appeal. The Committees

sessions shall be secret sessions and decisions shall be issued by a majority

of votes. If the votes were equal, the Chairman shall have a casting vote.

E) Any litigation between the Tax Department and taxpayer concerning the

compliance to this decree or the amount of the income tax dues, that isentitled accordingly, may be referred to court by any of the two parties to

have a verdict unless the two parties agree referring the litigation to

arbitration according to Clause 13 of Kuwait Income Tax Decree No. 3 of1955.

5. Method of Tax Collection

A) Tax dues are paid in full or in four equal payments, according to its order

and that in the fifteenth day of the fourth, sixth, ninth and twelfth month ofthe taxable period end date.

B) The Tax Department gives the taxpayer a receipt that certifies paymentof the income tax dues by the taxpayer for the period or periods the taxes

have been paid.

1 - Penalties for Breaching Tax Law

A) Administrative Penalties:

Ministerial Order No. 15 of 1997 regulates fine for delay of declaration on

the following way:

* Fine for Delay in Filing Tax Declaration (Tax Return):

The delay fine is calculated at 1% as of the date at which the filing of he taxdeclaration is due (the fifteenth day of the fourth month following the end of


7/8

the taxable period) and until the date of its submission (or the date of the

assessment letter if no declaration is filed), and on the basis that the tax

amount is as per the assessment. The extension granted by the Ministry shallnot be effective unless the taxpayer complies with the requirement to file the

declaration within the extended period allowed.

* Fine for Delay in the Settlement of the Tax Instalments:

1) Should the company file the Tax Declaration and delay in the settlement

of the tax instalments as per the declaration, it will be subject to a delay fineof 1% as of the date at which each instalment becomes due and until the

actual settlement date on the basis of the instalment amount of the tax as per

the declaration.

2) Once the company files the tax declaration and the subsequent

assessment letter is issued at an amount greater than the amount of tax asper the declaration, a fine will accrue on the company for delay in the

settlement of tax of 1% on the basis of the tax amount as per the assessment,

taking into consideration the amounts that have been settled by the taxpayer

as per the declaration.

3) In case the company has not filed a Tax Declaration, the fine for non-

settlement of tax instalments will be calculated on the basis of the taxamount as per the assessment. This is to be calculated as of the date at

which the instalment becomes due and until the actual settlement date of the

tax due.

4) In case the tax declaration tax return submitted by the company provedto be less than the Tax due, if this statement is right, the company will be

obliged to pay a delay fine at the rate of 1% of the difference between the

tax and the company Tax Declaration.


8/8

B) Penalties:

A) Tax data is considered confidential, and it is not allowed to be examinedby any person other than the governor, or Tax Department director and staff,

without the approval of the taxpayer. It is considered against the law to

reveal such data, and will be punished by a fine not more than K.D. 113/-

according to Decree No. 3 of 1955 and a fine not more than K.D. 100/-according to Law No. 23 of 1961.

B ) Any person intentionally makes false changes in the taxpayer records orgives false declaration that may affect any statement or required certificate

for the purpose of this declaration, will be considered as an act against such

law and he will be subjected to imprisonment for a period of about twoyears or pay a fine , or both.

kuwait incometax decree.pdf

Documents