Decree No. 157 of 2024: Tax Law on Multinational Entities

The State of Kuwait has issued Decree No. 157 of 2024 concerning the tax on multinational entities, marking a significant legislative step aimed at enhancing tax transparency and achieving fairness between local and international companies. This decree comes in response to global economic developments and Kuwait’s commitment to international standards for combating tax evasion, with a focus on regulating the operations of multinational entities working in Kuwait.

The decree defines its scope to include multinational entities that meet the following conditions:

1. Companies with High Global Revenues:The law includes entities whose total global revenue exceeds a threshold set by the decree’s executive regulations.
   This clause aims at targeting large corporations with substantial financial resources.
2. Companies Operating in Multiple Jurisdictions:The law applies to groups with permanent establishments or revenue generation in more than one country, including Kuwait.
   This ensures that multinational entities report their financial activities in every country they operate.
3. Tax-Related Companies in Kuwait:It includes entities that have economic activities or business operations within Kuwait, either directly or indirectly.
   This covers entities benefiting from local services and infrastructure, making them subject to Kuwaiti taxes.

The decree obligates companies subject to it to submit detailed tax declarations, including:

• Global revenues.
• Operational expenses, provisions, and taxes paid in each jurisdiction.
• Economic activities conducted by entities in each country.

This measure aims to enhance transparency and provide accurate data that helps tax authorities assess tax obligations.

The decree imposes a minimum tax rate of 15% on eligible companies.
If a company pays less tax in other countries, it is required to pay the difference to the Kuwaiti government, thus promoting tax fairness and preventing tax avoidance practices.

The law establishes financial penalties for companies that delay submitting declarations or provide inaccurate information.
Legislators have the authority to impose additional penalties, including the suspension of certain privileges for non-compliant companies.

Enhancing transparency is one of the main objectives of the decree, as it requires multinational companies to disclose the details of their global financial operations.
This helps reduce the chances of tax evasion and boosts confidence in the Kuwaiti tax system.

The decree aims to increase government revenues by imposing fair taxes on large companies. These revenues are used to fund development projects, which enhances the country’s ability to achieve economic growth.

The law represents a step towards aligning Kuwait’s tax system with international standards set by the OECD, particularly regarding the initiative to combat base erosion and profit shifting (BEPS).

The decree is expected to have a significant positive impact on Kuwait’s economy.
By increasing transparency and enhancing tax fairness, the country will be able to attract more foreign and local investments. Furthermore, the law provides a stable legal framework that encourages companies to comply with laws rather than seeking loopholes to evade taxes.

However, companies may face challenges related to increased administrative costs, as compliance with the law requires precise reporting and the employment of tax experts to ensure compliance.

In light of the new requirements imposed by Decree No. 157 of 2024 concerning the tax on multinational entities, Al-Dostour Law Firm provides the necessary legal support to ensure full compliance.

The firm helps companies understand the new requirements and prepare tax declarations in line with the law’s provisions. It also offers advice on how to streamline business operations to reduce tax liabilities.

The firm represents companies before tax authorities in case of disputes or audits, offering strong defense to protect the interests of our clients.

The firm assists companies in restructuring their operations to ensure compliance with the law while improving efficiency and reducing tax risks.

Decree No. 157 of 2024 concerning the tax on multinational entities represents an important shift in Kuwait’s tax system, enhancing transparency, supporting the national economy, and providing a legal framework that aligns with international standards. However, compliance with the law requires legal and administrative expertise to ensure timely and accurate submission of the required data.

At Al-Dostour Law Firm, we are committed to providing the necessary support to companies to navigate these challenges and succeed under this new law. Contact us today to ensure your company’s compliance with the decree and achieve your goals with confidence.