Kuwait now enforces the Kuwait global minimum tax through a smart and structured system. This tax rule comes under Law 157/2024. It directly targets multinational companies that operate within the country. As a result, Kuwait ensures it collects fair taxes from all foreign businesses.
To begin with, Kuwait uses a jurisdictional blending method. It adds up the income and tax from all related firms based in Kuwait. Therefore, this method helps apply the tax fairly. It stops companies from shifting low-tax profits behind higher-tax ones.
Afterward, these companies must calculate their effective tax rate (ETR). To do this, they divide adjusted taxes by total GloBE income. For example, if Kuwaiti entities earn KD 100 million and pay KD 10 million in tax, the ETR becomes 10 percent. Consequently, this falls short of the Kuwait global minimum tax requirement of 15 percent.
In some cases, firms may report no income. However, if they pay very little tax, they still face a top-up tax under global rules. Thus, even loss-making companies may not escape the tax.
Following that, firms need to calculate their top-up percentage. For instance, if their ETR is only 10 percent, they must add a 5 percent top-up. Still, this extra tax applies only to profits above a certain threshold.
At this point, Kuwait applies the SBIE rule. SBIE means Substance-Based Income Exclusion. It lets firms deduct costs related to real jobs and physical assets. As a result, this supports the Kuwait global minimum tax policy by rewarding real business activity.
Let’s say a company earns KD 100 million in total income. If it has KD 20 million in SBIE deductions, its excess profit becomes KD 80 million. Therefore, it must pay 5 percent of that, or KD 4 million, in top-up tax.
Then, Kuwait brings in the QDMTT. This rule stands for Qualified Domestic Minimum Top-Up Tax. It allows Kuwait to collect the full KD 4 million before any other country can. In turn, this keeps tax revenue within Kuwait’s borders and strengthens the economy.
The Kuwait tax encourages fair reporting and full compliance. It protects Kuwait’s public revenue and builds trust in its business environment. Through this system, Kuwait becomes a strong global tax leader.
