Kuwait Introduces Minimum Top-Up Tax for Multinational Enterprises

Kuwait introduced a 15 percent Domestic Minimum Top-Up Tax for large multinational groups starting 2025, aligning with OECD BEPS Pillar Two. It creates new compliance requirements and sector-specific impacts, especially in oil, finance, and manufacturing.

On 30 December 2024, Kuwait enacted Decree-Law No. 157 of 2024 (hereinafter, “Top-Up Tax Law” or “Decree-Law No.157”) to introduce a domestic minimum top-up tax of fifteen percent on profits of multinational enterprise groups operating in Kuwait. It applies to financial years beginning 1 January 2025 and to groups whose consolidated annual revenues exceed EUR 750 million (US$882 million) in two of the prior four years.

This measure aligns Kuwait with the OECD/G20 Inclusive Framework on BEPS Pillar Two, supports revenue diversification beyond hydrocarbons, and creates new tax liabilities, compliance obligations, and sector-specific considerations for investors. 

Scope of Kuwait top-up tax 

Decree-Law No. 157 took effect on 1 January 2025 and captures any group whose ultimate parent’s consolidated revenues equal or exceed EUR 750 million (US$882 million) in at least two of the four tax years immediately preceding the 2025 fiscal year. Once in scope, the law covers all activities by those entities anywhere in the State of Kuwait, including rights in both the divided zone and the submerged divided zone—areas containing shared natural resources owned equally by Kuwait and Saudi Arabia under their boundary agreements and memoranda of understanding. No tax exemptions apply to DMTT, and it supersedes: 

• Corporate income tax law (Decree No. 3 of 1955 and amendments); 

• Zakat Law (Law No. 46 of 2006); and 

• Partitioned neutral zone tax law (Law No. 23 of 1961).

Law No. 19 of 2000 for national labor support tax remains in force. Multinational entities listed on the Kuwait Boursa will therefore not incur the two-point five percent NLST in addition to the DMTT.  

Key provisions 

Calculation of taxable income begins with local accounting profit, adjusted by specified add-backs and deductions in forthcoming executive regulations. A substance-based income exclusion reduces the taxable base by reference to payroll costs and tangible assets, reflecting genuine economic substance. Transitional safe-harbor provisions offer limited relief for new international activities and include: 

• Transitional country-by-country reporting safe harbor; 

• Simplified calculation safe harbour; and 

• Exclusion for initial international activities. 

Tax is zero if either: 

• Excluded income based on substance equals or exceeds total net income; or 

• The entity’s effective tax rate is equal to or exceeds fifteen percent. 

Taxpayers must register with the Kuwait Tax Authority within 120 days of becoming subject to DMTT, notify any changes in activity or registration data within 120 days, and deregister within 120 days of ceasing activities or losing in-scope status. For 2025 only, the registration deadline is extended to 30 September 2025. 

Impacted stakeholders 

• Multinational groups: Any Kuwaiti entity that is part of a group meeting the revenue threshold, whether as an ultimate parent entity or a constituent entity; 

• Joint ventures: any Kuwaiti entity with at least fifty percent ownership by an ultimate parent entity that meets the threshold on a standalone or combined basis; and 

• Permanent establishments: any non-resident entity operating in Kuwait or pass-through entities not considered ultimate parents. 

Excluded from DMTT are government entities; non-profit and international organizations; pension and investment funds acting as ultimate parents; real estate investment instruments; and any entity (other than pension services) at least ninety-five percent owned by excluded entities or at least eighty-five percent owned with most income from dividends or equity gains outside net-income calculations.  

Sectoral analysis  

Oil and gas   

Capital allowances and accelerated depreciation commonly defer tax payments below fifteen percent in early project stages. Operators should map allowance schedules, forecast annual effective tax rates, and model top-up liabilities. They may consider reallocating capital expenditure or accelerating tangible-asset investments to maximize the substance-based exclusion. 

Financial services 

Banks, insurers, and asset managers often see effective tax-rate variances across branches and sub-entities. Firms should conduct branch-level profit-and-loss reviews, identify low-ETR operations, and redesign transfer-pricing or repatriation structures. Early engagement with the tax authority on allocation methodologies and top-up exposure modelling is essential. 

Manufacturing and industrials 

Entities in special economic zones benefit from investment allowances, reduced rates, or holidays that drive ETRs below fifteen percent. Manufacturers should inventory incentive-driven deductions, quantify gaps to the minimum rate, and model post-top-up profitability to inform decisions on incentive renewals, operational locations, or asset and workforce investments.  

Logistics and retail 

New warehouses, distribution centers, and retail outlets often enjoy tax holidays yielding zero or nominal ETRs. The DMTT will neutralize these benefits. Businesses should perform cost-benefit analyses comparing pre- and post-DMTT returns, explore alternative incentives such as reduced customs duties, and engage authorities to extend substance-based exclusions through demonstrable local investment and employment growth. 

Next steps for companies 

Companies should review Decree-Law No. 157 with their advisors to determine in-scope status and assess impacts on operations, financial statements, and shareholder returns. They must identify and implement new tools and processes for timely and accurate tax filings. Finally, companies should monitor amendments and clarifications from the tax authorities and regularly review updates to executive regulations that may affect their obligations.

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