Overview of Kuwait tax retention requirements

The Kuwait Tax Retention Rules (“KTRR”) is a set of tax obligations introduced to aid in the collection of taxes in Kuwait and is applicable on foreign as well as local companies.

In principle, Article no. 37 of the Executive Bylaw casts an obligation on all public and private entities (hereinafter referred to as “Payer”), doing trade or business in Kuwait, to retain 5% of total contract value or from each payment made to any person with whom they enter into contracts, agreements or transactions. The scope of Kuwait Tax Retention Rules is wide and covers under its ambit any payment made by a Payer. Foreign as well as Kuwaiti and other GCC companies are required to adhere to the Kuwait Tax Retention Rules.

All or some retained amounts may not be released unless the Kuwait Ministry of Finance agrees to issue the retention release letter of these amounts in the following cases:

• If the entity is not subject to tax, is exempted from it or realized loss during the year
• If the entity settles all its due tax
• If the entity submits a certified bank guarantee or any other guarantee accepted by the Tax Administration to honour the due tax

How BDO can help?

• Review of contracts and advise on tax retentions requirements
• Assisting in restructuring contracts from a Kuwait tax perspective
• Assisting in obtaining tax retention release letter / tax clearance certificate from the Kuwait Ministry of Finance
• Assisting in preparing and filing Tax Retentions Returns/Notifications
• Drafting tax retentions policy and procedures