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November 28, 2023

Kuwait joins OECD/G20 Inclusive Framework on BEPS and considers introduction of Business Profits Tax

  • Kuwait has joined the Organisation for Economic Co-operation and Development/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and is now committed to implementing the minimum standards of the BEPS plan.
  • As an Inclusive Framework member, Kuwait has also committed to participating in the implementation of BEPS 2.0, with the objective of addressing the tax challenges arising from the digitalization of economy and encouraging multinational companies to pay their fair share of tax in jurisdictions where they operate.
  • According to media reports, the Kuwait Ministry of Finance is considering the introduction of business profits tax at the rate of 15%, similar to the proposed global minimum corporate tax under Pillar Two of BEPS 2.0.
  • Businesses should keep abreast of new legislations that Kuwait may implement with respect to BEPS minimum standards and the potential introduction of business profits tax in Kuwait.

Executive summary

On 15 November 2023, the Organisation for Economic Co-operation and Development (OECD) announced that Kuwait has joined the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework). Moreover, Kuwait has committed to addressing the tax challenges arising from the digitalization of the economy.

In addition, a 25 October 2023 media report in the Arab Times suggests that the Ministry of Finance is considering introducing a new Business Profits Tax (BPT) Law that could subject all companies carrying on trade and business in Kuwait to 15% BPT from 2025.

Detailed discussion


The Inclusive Framework, which was endorsed by the G20 Finance Ministers in February 2016, was designed and agreed to by the OECD following a call from G20 leaders for increased inclusiveness in international tax rules.

The Inclusive Framework brings together more than 140 countries and jurisdictions to collaborate on the implementation of the BEPS Project, which includes 15 Actions and equips governments with the domestic and international instruments needed to ensure that profits are taxed where economic activities generating the profits are performed and where value is created.

In January 2019, the OECD began the current project with the release of a Policy Note describing two pillars of work: Pillar One addressing the broader challenges of the digitalization of the economy and the allocation of taxing rights to market jurisdictions, and Pillar Two addressing remaining concerns about potential BEPS and tax rate competition among countries. The project is being conducted through the OECD/G20 Inclusive Framework.

Since then, the OECD has released a series of documents on the development of the two pillars.

Inclusive Framework membership

As a member jurisdiction of the Inclusive Framework, Kuwait will work on an equal footing with more than 140 other countries, including other Gulf Cooperation Council (GCC) countries that are also members of the Inclusive Framework, to develop standards on BEPS-related issues and the implementation of the monitoring processes.

In addition, Kuwait is now committed to implementing the minimum standards of the BEPS plan, namely: (i) Measures against harmful tax practices (Action 5); (ii) Model provisions against treaty abuse (Action 6); (iii) Transfer pricing documentation and Country-by-Country Reporting (CbCR) (Action 13); and (iv) Enhancing dispute resolution through the Mutual Agreement Procedure (MAP) (Action 14).

Two-pillar solution participation and the introduction of business profits tax (BPT)

Kuwait is also committed to implementing the measures under Pillar One (profit allocation) and Pillar Two (global minimum corporate tax) of BEPS 2.0.

A 3 October 2023 article in the Arab Times further mentions that to address the global minimum corporate tax of 15% requirement under Pillar Two, the Kuwait Ministry of Finance is considering introducing a new BPT Law. As per the 25 October Arab Times article, the introduction of BPT could result in all companies in Kuwait, including those owned by Kuwaiti/GCC nationals, being subject to 15% BPT from 2025, to mitigate the impact of the global minimum tax on businesses headquartered in Kuwait.

At present, Kuwait has a statutory corporate income tax (CIT) rate of 15%. In practice, only foreign companies operating in Kuwait (either directly or through shareholding in Kuwaiti/GCC entities) are subject to CIT. However, CIT is not imposed on the share of profits that are attributable to Kuwaiti/GCC corporations/nationals.

Kuwaiti closed shareholding companies are subject to zakat at 1% and the Kuwait Foundation for the Advancement of Science (KFAS) at 1%. Companies listed on the Kuwait Stock Exchange are subject to National Labor Support Tax (NLST) at 2.5%.

With the potential introduction of BPT, Kuwait is now considering widening the coverage of its taxes to include all businesses operating in Kuwait.


As a member of the Inclusive Framework, Kuwait will work with other participating jurisdictions to facilitate a consistent and level playing field across the international landscape. As such, legislative amendments are likely to occur. Taxpayers will also be subject to reporting and compliance requirements in Kuwait and may therefore wish to review their structures and arrangements to facilitate compliance with the new international standards.

Businesses should evaluate the impact of Kuwait's joining the Inclusive Framework, as well as the potential introduction of BPT in Kuwait.


For additional information with respect to this Alert, please contact the following:

Ernst & Young (Al Aiban, Al Osaimi & Partners), Kuwait

EY Consulting LLC, Qatar

Ernst & Young LLP (United States), Middle East Tax Desk, New York

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor


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