Kuwait

A company is resident in Kuwait for CIT purposes if it earns income from Kuwait, directly or indirectly. Given that CIT in Kuwait does not apply to Kuwaiti entities, only foreign entities earning income from Kuwait would be subject to tax. In addition, any foreign corporate body that is a shareholder in a Kuwaiti limited liability company would be subject to tax to the extent of the foreign ownership (see the Taxes on corporate income section). For the purpose of the CIT law, GCC entities wholly owned by GCC residents are treated in the same manner as Kuwaiti business entities.

On the other hand, the DMTT law is applicable to MNEs (Kuwaiti and non-Kuwaiti) with global consolidated revenues of at least EUR 750m in any 2 of the last 4 years.

Permanent establishment (PE)

A place of business or the presence of company employees/representatives in Kuwait, even if for short-term visits, can trigger a PE in Kuwait. If the company is proven to have a PE in Kuwait, the Kuwait Tax Authority can subject to tax either the profit attributable to the PE or the full value of the contract, including the value of work performed outside Kuwait. The interpretation and application of the tax law by the Kuwait Tax Authority is usually inconsistent with international standards, and is subject to the widest possible interpretation in order to tax all income from Kuwait.

Unlike the CIT law which operates as above, the DMTT law actually provides a definition for the term 'permanent establishment'. The definition is generally aligned with OECD. However, there is one additional circumstance which could trigger a PE under the DMTT law, which is in cases where the non-resident entity operates in Kuwait through a place of business other than the traditional PE definitions of a place of business (e.g. branch, office, factory), provided that the non-resident entity conducts business activities through it within Kuwait, and the income derived from such activities is not subject to tax in the jurisdiction to which the non-resident entity belongs.