Income tax on a foreign partner's share of a Kuwait WLL

The situation

Kuwait's income tax applies at 15% to foreign corporate bodies. Kuwaiti companies with foreign shareholders are taxed on the foreign shareholders' share of profit.

The law

• Amiri Decree No. 3 of 1955 as amended by Law No. 2 of 2008 (Income Tax Law): 15% tax on net profits of foreign corporate bodies doing business in Kuwait; Kuwaiti and GCC owned companies taxed only on their foreign ownership share

What it means for you

Example: WLL profit KWD 100,000 with a 40% foreign corporate shareholder gives KWD 40,000 taxable at 15% = KWD 6,000. The Kuwaiti and GCC share is outside the income tax. The company needs tax registration and a tax card for the foreign share, and its customers may retain 5% until clearance.

What to do

1. Confirm whether the foreign shareholder is a company or an individual.
2. Register for tax within 30 days of starting activity.
3. Compute tax on the foreign share.
4. File the declaration on time.

Confirm treatment where the foreign partner is an individual, as KPMG notes foreign shareholders in unlisted companies are taxed on their profit share.

Related

• Doing business in Kuwait without a local agent
• Kuwaiti or GCC owned company and income tax
• Activities that need extra approvals in Kuwait
• Choosing between a WLL and a KDIPA entity
• Foreign ownership limit in a Kuwait WLL
• Protecting a minority foreign partner in a Kuwait WLL