Pillar 2 Dashboard: Kuwait

On June 29, 2025, Kuwait issued Ministerial Resolution No. 55 of 2025 to provide for the Executive Regulations for the QDMTT.

On December 30, 2024, Kuwait published Decree-Law 157 of 2024 for the introduction of a QDMTT from January 1, 2025.

On December 9, 2024, the Kuwaiti Ministry of Finance issued a draft law that includes a 15% DMTT (from January 1, 2025) as part of its overhaul of the Business Profits Tax Regime. The detailed rules for calculation of the top-up tax are to be provided by Executive Regulations.

GLOBE APPLICATION

General

Chapter Three of the Law includes provisions for the application of a DMTT broadly based on the mechanics of the OECD Model Rules. However, most of the detail is provided in the Executive Regulations.

Article 9 does provide for some GloBE income adjustments, including:

1 – Excluding income resulting from dividends.

2 – Excluding gains or losses of ownership rights, including capital gains or losses from shares.

3 – Excluding revenue resulting from the assignment of debts of a taxable entity.

4 – Excluding income resulting from international maritime transport and shipping activities.

Article 10 provides for the substance-based income exclusion (at a high level with the detailed transitional rates provided in the Executive Regulations).

Article 13 of the Law provides for the de minimis rule, broadly based on the OECD Model Rules.

Article 4 of the Law does track (at a very high level) the OECD Model Rules for Excluded Entities.

It provides that the following entities, whether Kuwaiti or non-Kuwaiti, are excluded from the DMTT:

. Government entities.

. Non-profit organizations.

. International organizations.

. Pension funds.

. Investment funds that are the ultimate parent entity.

. A real estate investment vehicle that is an ultimate parent entity.

The definition of a Government entity and investment fund in Article 1 of the Law also replicates the definition in the OECD Model Rules.

The Executive Regulations provide the detail for the application of the DMTT which is based on the OECD Model Rules and the February and July 2023 OECD Administrative Guidance.

Article 116 of the Regulations provides that the application of the rules in Kuwait are to be    interpreted and applied in accordance with:

-The OECD Model Rules;

-The 2024 OECD Consolidated Commentary to the Model Rules; and

-Any subsequent amendments or additions to these.

Administrative Guidance

Various aspects of the OECD Administrative Guidance are included in the Regulations, including:

-Rebasing monetary thresholds in the GloBE Rules (Article 1.1)

-The exclusion of sovereign wealth funds from the definition of Ultimate Parent Entity (Article 1.4)

-The foreign exchange hedge election (Article 2.2)

-The debt release election (Article 2.4)

-Provisions for accrued pension expenses (Article 2.5)

-Excess negative tax carry-forward guidance (Article 2.7)

-Substitute loss carry forwards (Article 2.8)

-The equity gain or loss inclusion election (Article 2.9)

-Provisions on restricted tier one capital for insurance companies (Article 3.3)

-The portfolio shareholding election (Article 3.5)

-Deferred tax assets and tax credits under the transitional rules (Article 4.1)

-The transitional rules and transactions similar to asset transfers (Article 4.2)

-Asset carrying value and deferred taxes under the transitional rules (Article 4.3)

The following provisions of the Second Set of OECD Administrative Guidance (published on July 17, 2023), are included in the law:

-Marketable Transferable Tax Credits

-Interjurisdictional Employees/Assets for the Substance-based Income Exclusion

-Substance-based Income Exclusion: Other Assets

Safe Harbour and Penalty Relief Guidance

Article 14 of the Law specifically provides for the Simplified Calculations Safe Harbour (Article 60 of the Executive Regulations).

Article 15 of the Law provides for the Transitional CbCR Safe Harbour and it includes the three tests from the OECD Safe Harbour Guidance (De Minimis Test, ETR Test and the Routine Profits Test). Article 62 of the Executive Regulations provides for further rules that tie into the OECD Safe Harbour Guidance. However, the amendments in the December 2023 OECD Administrative Guidance (eg Hybrid Arbitrage Arrangements) are not specifically included.

ELECTIONS

Elections in the OECD Model Rules

Most of the elections included in the OECD Model Rules are provided in the Law, including:

-Excluded Entity Election (Article 5 of the Regulations)

-Stock-Based Compensation Election (Article 21 of the Regulations)

-Election to use the Realization Method (Article 24 of the Regulations)

-Election to Spread Capital Gains (Article 25 of the Regulations)

-Consolidation Election (Article 27 of the Regulations)

-Unclaimed Accrual Election (Article 38 of the Regulations)

-GloBE Loss Election (Article 39 of the Regulations)

-Prior Year Adjustment Election (Article 40 of the Regulations)

-De-minimis Election (Article 48 of the Regulation)

-Substance-Based Income Exclusion Election (Article 43 of the Regulations)

-Taxable distribution Election (Article 58 of the Regulations)

-Tax Transparency Election (Article 57 of the Regulations)

The Distribution Tax Regime Election is not included.

Elections in the Administrative Guidance

All elections included in the OECD Administrative Guidance are included in the Law. This includes the:

-Debt Release Election (Article 20 of the Regulations);

-Foreign Exchange Hedge Election (Article 14 of the Regulations);

-Excess Negative Tax Carry-Forward Election (Article 34 of the Regulations);

-Equity Investment Inclusion Election (Article 13 of the Regulations).

-Portfolio Shareholding Election ((Article 12 of the Regulations)

DEVIATIONS FROM THE OECD MODEL RULES/EU GLOBAL MINIMUM TAX DIRECTIVE

The Law only provides for the high-level introduction of a DMTT, with the detailed operation provided in Executive Regulations. 

The Regulations includes detailed transfer pricing and related party rules in Articles 69-74. This includes the basis of determining comparable transactions and the transfer pricing methodologies to be used.

Article 101 of the Regulations includes an anti-avoidance rule. It provides that the tax  effects of any transactions shall not be taken into account if the main purpose or one of the purposes is reducing, deferring or exempting tax under the DMTT.

DOMESTIC MINIMUM TAX

General

Chapter 3 of the Law provides that a top-up tax (DMTT) will be imposed on the profits of a multinational groups of persons based on the difference between the actual rate of tax and 15%, according to the rules as provided in the Executive Regulations. This will apply for accounting periods beginning on or after January 1, 2025.

QDMTT Design Features

As the Law and Regulations only provide for a DMTT, the entire legislation is applied solely for DMTT purposes. This contrasts with many other jurisdictions that also implement an IIR/UTPR under the general GloBE rules and then apply the DMTT by referring to the general GloBE calculation, with a number of adjustments.

The implementation of the DMTT in the Kuwait Law/Regulations does follow the general OECD Model Rules/Commentary and includes a number of the optional/mandatory deviations including:

Accounting Standard

The GloBE Rules generally require the MNE Group to base its GloBE calculations on the accounts used for preparing the Consolidated Financial Statements of the UPE for the purposes of computing the GloBE Income or Loss of each Constituent Entity.

However, the definition of a QDMTT under the Model Rules expressly permits the calculations to be based on a Local Financial Accounting Standard.

Article 9 of the Executive Regulations provides that if the financial statements for all group entities in Kuwait for tax purposes are prepared under IFRS and are subject to an audit by an external auditor, the Kuwait QDMTT must be calculated using those financial statements.

If not all group entities in Kuwait meet these requirements,  or if the financial years for which the annual financial statements are prepared do not correspond, the Kuwait QDMTT is calculated on the basis of the Consolidated Financial Statements of the UPE.

Taxes Pushed Down

Tax paid or incurred by a Constituent Entity-owner under a CFC Tax Regime that is pushed down to a domestic Constituent Entity in the GloBE Rules must be excluded, as provided in the OECD Administrative Guidance. This is included in Articles 33/37 of the Regulations.

This preserves Kuwait’s primary right to tax income accruing to a Kuwaiti member entity which is also a CFC. If there were no statutory derogation from the general GloBE rules for the calculation of the domestic minimum tax, and the CFC tax paid by the controlling company abroad were included in the included taxes of the Kuwaiti CFC, the effective tax rate would be increased. Therefore, excluding the CFC tax from the Kuwaiti CFCs covered taxes allows Kuwait to tax low-taxed income at a higher rate than would be the case under an IIR.

Articles 33/37 also prevents the pushdown of tax to hybrids, PEs and for taxes on distributions (aside from Kuwait withholding tax on distributions).

Eligible Distribution Tax Regimes

The Regulations do not include the Distribution Tax Regime Election as this is not relevant  domestically.

Initial Phase of International Activity Exemption

The UTPR exclusion for MNEs in their initial phase of international activity does not need to be included in a QDMTT, however, it can be included. The Second Set of OECD Administrative Guidance provides jurisdictions with three options regarding the temporary UTPR exclusion in their QDMTT legislation.

Option one allows the jurisdiction not to adopt it.

Option two allows the jurisdiction to adopt it but limits it to cases where no Parent Entity is required to apply a Qualified Income Inclusion Rule with respect to Constituent Entities of an MNE Group located in the QDMTT jurisdiction.

Option three allows the jurisdiction to adopt it without any limitations. (Note, if a jurisdiction opts for Option three, for the purposes of the QDMTT Safe Harbour the Switch-Over Rule would apply).

Kuwait applies Option two in Article 16 of the Law.

100% of the Top-Up Tax

Article 8 of the Regulations provides that Top-up Tax that is subject to the QDMTT is based on the whole amount of the Jurisdictional Top-up Tax calculated, irrespective of the Ownership Interests held in the Constituent Entities located in Kuwait by any Parent Entity of the MNE Group.

Transitional Year

Article 115 of the Regulations provides for the transitional year refreshing rule.

A new transition year, arises in an accounting period in which the entities of an MNE fall within the scope of a qualified IIR or UTPR if this accounting period begins after the beginning of the transition year for QDMTT purposes.

In the new transition year the following attributes of the relevant Constituent Entities are refreshed:

-Any Excess Negative Tax Expense Carry-forward under Article 4.1.5 or Article 5.2.1 is eliminated at the beginning of the new Transition Year.

-The DTL recapture rule in Article 4.4.4 does not apply to any deferred tax liability that was taken into account in computing the ETR under the QDMTT and that was not recaptured prior to the new Transition Year.

-Any GloBE Loss Deferred Tax Asset that arose in a year preceding the new Transition Year must be eliminated. The Filing Constituent Entity may make a new GloBE Loss election in the new Transition Year.

– Article 9.1.2 shall apply to transactions occurring after 30 November 2021 and before the beginning of the new Transition Year.

– If QDMTT was payable due to the application of Article 4.1.5 in respect of a deferred tax asset attributable to a tax loss, the deferred tax asset is not treated as arising from items excluded from the computation of GloBE Income or Loss under Chapter 3 of the OECD Model Rules.

Registration

Article 19 of the Law provides that taxpayers must register with the Tax Administration within 120 days from the date of commencement of the in-scope activity. However, under Article 2 of the introductory provisions in-scope MNE groups must register for DMTT purposes within 9 months from the date of entry into force of the provisions of the Law to avoid an administrative fine.

Filing

Article 18 of the Law provides that MNE groups subject to the DMTT are required to file a DMTT declaration to the tax administration (including the financial statements audited by an audit office approved by the Ministry of Finance) within 15 months from the end of the accounting period.

Payment

Article 20 of the Law provides that MNE groups subject to the DMTT are required to file a DMTT declaration to the tax administration (including the financial statements audited by an audit office approved by the Ministry of Finance) within 15 months from the end of the accounting period.

Penalties

Article 31 of the Law provides for a fine of at least one thousand Kuwaiti dinars for late filing of the DMTT return. There is also a tax-geared penalty based on the length of the delay.

This increases to a fine of 25% of the amount of tax outstanding, with a minimum of five thousand Kuwaiti dinars, if the return is not submitted until a tax assessment is issued.

Article 32 of the Law provides for a fine of 1% of the value of unpaid or non-paid tax. This is levied every 30 days the amount is outstanding.

On July 16, 2025, Kuwait updated its electronic registration portal to include GMT registration.

TO DO