Council of Ministers

Legal Advice & Legislation

Draft Law No.( ) of 2024

Issuing the Business Profit Tax Law

Having reviewed the constitution,

The Amiri Decree issued on 2 of Dhul Qidaa 1445 AH, corresponding to 10 May 2024,
The Decree No. (3) of 1955 regarding the Kuwaiti Income Tax and the amending laws.
Law no. 16/1960 issuing the Penal Code, along with its amendments.
Law no. 17/1960 issuing the Code of Criminal Procedures and Trials, along with its amendments.
Kuwaiti Income Tax Law in the Designated Zone no. 23/1961.
Law no. 48/1966 on adopting the agreement concluded between the State of Kuwait and the Kingdom of Saudi Arabia regarding division of the neutral zone.
Law no. 32/1968 on banknote and Central Bank of Kuwait and organizing the banking profession, along with its amendments.
Law no. 108/1976 Exempting the Arab and foreign airlines from taxes, as amended by the decree-law no. 53/1979.
Decree-Law no. 31/1978 on rules for preparing public budgets, monitoring their implementation, and the final account, along with its amendments.
Decree Law no. 38/1980 issuing The Civil and Commercial Procedure Law, along with its amendments.
Decree Law no. 67/1980 issuing The Civil Code, as amended by law no. 15/1996.
Decree Law no. 68/1980 issuing The Commercial Law, along with its amendments.
Decree Law no. 20/1981 Establishing a Directorate in the Court of First Instance to Adjudicate Administrative Disputes, along with its amendments.
Law no. 26/1995 on Free Zones.
Law no. 56/1996 on issuing the Industry Law, along with its amendments.
Law no. 19/2000 on supporting national workforce and encouraging them to work in non-governmental entities, as amended by law no. 32/2003.
Law no. 35/2000 on adopting an agreement concluded between the State of Kuwait and the Kingdom of Saudi Arabia regarding the submerged zone adjacent to the divided zone.
Law no. 5/2003 on adopting the unified economic agreement among GCC States.
Law no. 10/2003 on the Unified Customs Law for GCC States.
Law no. 46/2006 on Zakat and the contribution of public and closed joint- stock companies to the State budget.
Law no. 22/2009 on adopting the Unified Industrial Organization Law for GCC States.
Law no. 7/2010 on establishing the Capital Markets Authority and regulating securities activity and its amendments.
Law no. 98/2013 on the National Fund for Small and Medium Enterprise Development, along with its amendments.
Law no. 106/2013 on anti-money laundering and terrorism financing as amended by law no. 24/2016.
Law no. 111/2013 on commercial stores licenses.
Law no. 116/2013 on supporting direct investment in the State of Kuwait.
Law no. 20/2014 on electronic transactions.
Law no. 116/2014 on partnership between public and private sectors.
Law no. 109/2015 on adopting an agreement between the Kuwaiti Government and the USA Government to improve the international tax compliance and the application of Foreign Account Tax Compliance Act (FATCA).
The companies law issued by law no. 1 of 2016 and its amendments.
Law no. 13/2016 on organizing commercial agencies.
Law no. 49/2016 on public tenders and the amending laws.
Law no. 76/2018 on approving the agreement of the administrative assistance in tax matters.
Law no. 103/2019 on practicing the profession of auditing.
Law no. 125/2019 on regulating insurance.
Law no. 1/2020 on approving an agreement supplementary to the neutral zone division agreement and the submerged area adjacent to the divided zone division agreement between the State of Kuwait and the Kingdom of Saudi Arabia.
Law no. 2/2020 on approving a memorandum of understanding between Kuwait Government and KSA Government.
Law no. 12/2020 on the right to access information.
Law no. 71/2020 on bankruptcy law.
Decree-Law no. 6/2024 on information exchange for tax purposes
Based on the proposal of the Minister of Finance and Minister of State for Economic Affairs and Investment.
After the approval of the Council of Ministers,

We have issued the following Decree-Law:

Article One

Provisions of the accompanying law shall apply to:

Taxpayers from a group of multinational persons as of the tax periods which start on or after January 1^st 2025. Article (21) of the accompanying law shall be an exclusion where it shall be effective as of the tax periods starting on or after January 1^st 2026.
All taxpayers as of the tax periods starting on or after January 1^st 2027.

Article Two

The following decree, laws, and provisions shall not apply to the group of multinational persons as of the tax periods starting on or after January 1^st 2025:

Decree no. 3/1955 referred to.
Law no. 23/1961 referred to.
Item no. 1 of article 12 and paragraph no. 2 of article 14 of the law no. 19/2000 referred to.
Law no. 46/2006 referred to.

Article Three

Taxpayers from the group of multinational persons shall be granted a six-month grace period as of the effective date of this decree-law to apply to be registered at the Tax Authority without imposing the administrative fine stipulated upon in item 1 of article 33 of the accompanying law.

Article Four

Provisions of this decree-law shall prevail in case of contradiction with any other law.

Article Five

The decree, laws, and provisions of article two of this decree-law shall be hereby revoked as of the January 1^st 2027. However, they shall continue to be applied to the tax periods started before this date.

Article Six

The executive regulation of the accompanying law shall be issued with a ministerial decision within six months of this decree-law publication in the official gazette.

Article Seven

The Prime Minister and Ministers – each within his purview- shall implement provisions of this decree-law. It shall be published in the official gazette and shall come into effect on January 1^st 2025

The Emir of the State of Kuwait

Meshaal Al Ahmad Al Jaber Al-Sabah

Prime Minister

Ahmed AL Abdullah Al Ahmad Al-Sabah

Minister of Finance and Minister of State for Economic Affairs and Investment

Dr. Noura Suliman Salem Al-Fassaam

Issued at Al-Seif Palace on:

Corresponding to:

Business Profit Tax Draft Law

Chapter 1 - General Provisions

Article 1
Definitions

For the purposes of applying provisions of this law, the following words and phrases shall have the meanings ascribed thereto hereunder:

State	:	The State of Kuwait including all its rights in the divided area and the submerged zone divided with the Kingdom of Saudi Arabia.
Divided Area and Divided Submerged Zone	:	an area with shared natural resources or wealth to be distributed equally between the State of Kuwait and the Kingdom of Saudi Arabia in accordance with borders and coordinates confirmed by agreements and Memoranda of Understanding (MOUs) concluded in this regard.
Ministry	:	The Ministry of Finance
Minister	:	The Minister of Finance
Law	:	Business Profits Tax Law.
Executive Regulation	:	the executive regulation of this law.
Tax Authority	:	the competent authority responsible for the implementation of tax laws.
Tax on Business Profits	:	A tax imposed on individual's profits residing in the state or permanent establishment within the State.
Withholding Tax	:	The tax withheld by the tax deducting agent at source, deducted from amounts due to the non-resident taxpayer, and to be paid to the tax authority on their behalf.
Tax Withholding Agent	:	anybody who pays amounts for a non-resident person as specified in article (6) herein, calculates the tax withheld at source, deducts and remits the same to the Tax Authority.
Supplementary Tax	:	a tax imposed on group of multinational persons within limits of difference between the global minimum tax rate and the actual tax rate if it is below 15% in accordance with rules of pillar two established by Organization for Economic Co-operation and Development (OECD).
Pillar Two	:	A global measure within combating the Base Erosion and Profit Shifting (BEPS) project, issued by the Organization for Economic Co-operation and Development (OECD), stipulates a global minimum tax rate imposed on multinational groups of persons.
Effective Tax Rate	:	a tax rate imposed on a multinational group of persons, determined based upon rules issued by Organization for Economic Co- operation and Development (OECD) regarding pillar two.
Global Minimum Tax Rate	:	an effective tax rate of 15% in addition to its amendments as specified by the Organization for Economic Co-operation and Development (OECD) regarding pillar two.
Tax Payable	:	a tax due under this law, whether declared in the tax return by the taxpayer or tax withholding entity or calculated through the actual tax assessment.
Tax Debt	:	a tax due plus imposed fines and penalties under this law.
Person	:	a legal or natural person who practices an activity through a sole establishment, an office, a clinic or any other form of activity practiced by a natural person.
Legal Person	:	Companies subject to provisions of law no. 1/2016 referred to. Partnerships: any agreement that did not take one of the companies forms referred to in article 1/2016; the concluding persons shall be personally and jointly responsible for the arising obligations. Any institution, public establishment, fund or other legal entity to be established under other laws or decisions.
Resident Person	:	the legal person, if he meets one of the following criteria: If it has been established in the state. If its main or effective management center is located in the state. The natural person shall be deemed resident in the state if he meets of the following criteria: If he has a permanent accommodation in the state. If he has been residing in the state for not less than 183 consecutive or nonconsecutive days within a tax period.
Activity	:	any trade in commodities, services, industry, profession, craftsmanship, agency, brokerage, real estate development, exploiting movable and immovable properties, speculation, or any activity with commercial or investment nature.
Taxpayer	:	a taxable person under the provisions of this law even if with tax exemption.
Multinational Group of Persons	:	any group practicing its activity in more than one state or a jurisdiction in which the state is a member whereof -even if through a permanent establishment. Its turnover number shall be as per the rules issued by the Organization for Economic Co-operation and Development (OECD) regarding pillar two.
Governmental Entity	:	refers to an entity which fulfills the following criteria: It should be partially or wholly owned by the government regardless of its legal form. Its main purpose of establishment should be represented in performing a governmental function, managing or developing the governmental assets through investment, possessing investments or managing assets or investment activities related to the state's assets. It shouldn't practice any trade or activity. It should be responsible for its overall performance before the government. Upon liquidation or dissolution, its assets shall devolve to the government while the net profits shall be distributed to the government only. In this item, the word 'Government' means the State of Kuwait government or any other country's government.
Non-Profit Organization	:	refers to an entity established and operated exclusively for religious, charitable, scientific, artistic, cultural, sports, or educational purposes or any other similar non-profitable purposes.
Parent Company	:	the main entity in a multinational group of persons, or an entity who possess controlling stake(s) in securities of other entity and is not subject to the control of any entity within the group as per rules issued by Economic Co-operation and Development (OECD) regarding pillar two.
Related Persons	:	they are persons linked with mutual economic interests with each other or with other person. Also, it refers to any person with effective influence or control over other person or two or more persons under a shared control.
Income	:	actual revenues gained by the taxpayer within a tax period after deducting the actual deductible costs.
Turnover Number	:	actual revenues generated through practicing an activity within the tax period.
Tax Return	:	a statement in which the taxpayer declares their income, the expenses incurred, and the taxes due for the tax period, or the statement in which the tax withheld at source declares the amounts subject to withholding tax and the value of this tax, in accordance with the forms prepared by the tax authority.
Tax Assessment	:	determining the payable tax due, and grounds of its calculation or assessment.
Stock Dividends	:	any income generated through shares or stock whether in the form of cash dividends or free shares, or in the form of bonds or foundation shares and so on.
Participation Shares	:	the proportional contribution in the capital of a legal person in return for shares or stock.
Royalties	:	an income in return for using or the right to use any copyrights of literary, artistic or scientific works including cinematography films, movies, tapes used for radio or television broadcasting, patents, trademarks, designs, models, plans, formulations or secret operations. Moreover, it includes using or the right to use industrial, commercial or scientific equipment, and using or the right to use information related to industrial, commercial or scientific expertise.
Interests	:	an income generated from debt claims from whatsoever type, whether secured by a mortgage, and whether carrying the right to share the debtor's profits. Specifically, it includes any income from governmental securities, bonds and debt securities including installments related to the same.

Article 2
Permanent Establishment

Permanent establishment is a fixed headquarter from which a non-resident person practices its activity in whole or in part.

The expression of 'Permanent Establishment' includes -specifically- the following:

Management headquarter, branch, store, office, factory, workshop, sales points, warehouse, mine, oil or gas well, quarry, or any other location to explore, extract, and exploit natural resources.
Building site, construction project, assembly or installation project, or supervision activities related to such site or projects, provided that such site, project, or activities should continue for more than six months within any twelve months.
Providing services by a non-resident person provided that such activities should continue within the state for a period(s) that exceeds in total of 6 months during any twelve months.
An agent

The executive regulation may specify other cases of the permanent establishment, determines terms and conditions necessary to apply this article provisions.

Chapter 2 - Tax Imposition and Entitlement

Article 3
Taxable Persons

The Business Profit Tax shall apply to the following persons:

The legal residing person for his income whether from inside or outside the state.
The natural non-residing person practicing an activity for his income achieved inside or outside.
The permanent establishment in the state for its income from inside the state.

Article 4
Tax Rate on Business Profits

The Business Profit Tax shall be imposed on taxable income at a rate of 15%. The following shall be excluded:

Income of legal persons wholly-owned by the state, where the rate shall be zero.
Income of business performed in the divided zone or the submerged divided zone, where the rate shall be at a rate of 30% to be calculated based on the total income. A 50% of the tax due shall be claimed with in case the taxpayer paid 50% of the tax due in the Kingdom of Saudi Arabia of the tax due over there. Otherwise, the State of Kuwait shall be entitled to collect the tax due in full.

Article 5
Supplementary Tax

A supplementary tax shall be imposed on the income of a multinational group of persons on the basis of the difference between the effective tax rate if below 15%, and the global minimum tax rate in accordance with rules of pillar two issued by the Organization for Economic Co-operation and Development (OECD).

No tax exemptions shall apply to this tax.

The executive regulation shall define the supplementary tax calculation method and rules related to the application of this tax.

Article 6
Withholding Tax at Source

A withholding tax at source at a rate of 5% shall be imposed to the following amounts originated in the state and paid to a non-resident person without deducting any costs from the same, provided that such amounts should not be related to a permanent establishment within the state. Such amounts include the following income items:

Interests
Royalties
Services value including technical, consulting and administrative services.
Rental amounts of movable or immovable properties
Dividends except for those released by listed companies in the Kuwait Stock Exchange.
The value attained through athletic or artistic activities practiced within the State.
Insurance premiums paid by a source in the state.

The withholding agent shall deduct such tax from the taxable amounts.

Article 7
Source of Income Determination

The state shall be the source of income specifically in the following cases:

An income attributable to a permanent establishment.
An income earned through athletic or artistic activities practiced within the state.
An income earned through exploitation and disposition of real estate and similar assets within the state.
Profits on stocks owned by legal persons residing in the state.
Capital gains earned through disposition of securities owned by legal persons residing in the state.
Profits paid by the government, any residing person or permanent establishment within the state.
Rental amounts, licensing fees, and royalties paid by the government or a residing person or a permanent establishment within the state.
Insurance premiums paid to cover risks within the state.
An income earned through any other activity performed within the state.

Article 8
Tax Period

The tax period is set to be twelve months as per the taxpayer's fiscal year who should notify the tax authority with the same. Otherwise, the calendar year shall be considered as a tax period for the taxpayer.

The tax authority may allow the taxpayer to change the tax period based on his request.

The executive regulation defines the procedures and conditions of enforcing provisions of this article

Article 9
Calculation of Taxable Income

The taxpayer's taxable business income shall be defined based upon total actual revenues, having deducted all actual costs necessary to practice the activity.

The law's executive regulation shall determine terms and conditions related to article enforcement.

Article 10
Deductible and Non-Deductible Expenses

The taxpayer may deduct the actual expenses incurred to earn the taxable business income, including:

Amounts paid by the taxpayer to the Kuwait Foundation for the Advancement of Sciences with a maximum of 1% of the income value for the tax period related to the deduction.
Commodities and services required to perform the taxable activity.
Salaries and wages.
Assets depreciation in accordance with percentages, requirements and conditions stipulated upon in the executive regulation.
Any other costs or expenses as defined by the executive regulation of this law.

The following items shall not be considered as actual deductible costs:

The costs unrelated to the activity.
Any expenses related to legally-exempted or nontaxable revenues or income.
Penalty fines.
Any other costs or expenses as defined by the executive regulation of this law.

The executive regulation defines documents supporting to the actual deductible costs, procedures and conditions of enforcing provisions of this article.

Article 11
Transactions Among Related Parties

The Tax Authority shall have the right to define the taxable profit based on the arm's length price, if the related parties have agreed to set definite conditions in their commercial or financial transactions that differ from its peer made among independent parties, which may reduce the tax base or shift its burden from a taxable person to an exempt or nontaxable person.

The executive regulation defines rules of the arm's length price, all procedures, terms and conditions related to the same.

Article 12
Loss Carryforward

The taxpayer may deduct a loss suffered at the end of a tax period from income of the next tax period. If part of the loss is still unsettled, then it will be carried forward to the following tax periods till the fifth tax period following the tax period in which the loss occurred. At this point, it is not allowed to carry loss forward to other year calculation.

In all cases, deductible loss amount should not exceed 75% of the taxable income of such tax period.

The executive regulation defines the procedures and conditions of enforcing provisions of this article.

Article 13
Avoidance of International Double Taxation

For purposes of avoiding international double taxation, a foreign tax paid by the resident person for his income earned abroad shall be deducted from the local tax which should not exceed the tax due in the state on such income. The taxpayer shall provide supporting documents of the paid foreign tax as specified by the Tax Authority.

Chapter 3 - Tax Exemptions

Article 14
Exemptions

Without prejudice to any exemptions as stipulated upon in any other laws, the following items shall be exempted from the Business Profit Tax:

Dividends received by a resident person from participation shares owned in a resident legal person, or from participation shares owned in a non- resident legal person, provided that the participation share percentage is not less than 10% for at least twelve months before the dividend distribution, and that the participation shares should be subject to tax in the non-resident's country at an effective rate of not less than 15%.
Capital gains earned by a resident person from disposing participation shares owned in a resident legal person, provided that the participation share percentage is not less than 10% for at least twelve months before the disposal, or in a non-resident legal person, provided that the participation share percentage is not less than 10% for at least twelve months before the disposal and the participation shares are subject to tax in the non-resident's country at an effective rate of not less than 15%.
Income of a non-resident person earned in the state through a permanent establishment, from operating aircraft or ships in international transport activities, including the following activities:
1. International transport of passengers, goods, livestock, mail, or parcels.
2. Leasing aircrafts or ships, with or without crew.
3. Leasing essential equipment for the sailing of ships or the flying of aircrafts used in international transport.

This is subject to the condition of reciprocal treatment for the resident person engaged in any of the activities mentioned in item 3 in the state where the non- resident person resides.

Article 15
Entities Exempted from BPT

The following entities shall be exempted from Business Profit Tax:

Kuwaiti Governmental Entities.
Non-Profit Kuwaiti Organizations.
Persons subject to Business Profit Tax in accordance with article 3 herein, whose individual turnover number doesn't exceed one and a half million Kuwaiti dinars during the tax period.

The executive regulation defines terms and conditions of enforcing provisions of this article.

Article 16
Entities Excluded from Supplementary Tax

The following entities, whether Kuwaiti or Non-Kuwaiti, shall be excluded from the supplementary tax:

Governmental Entities.
Non-Profit Organizations.
International Organizations.
Pension Funds.
Investment Funds that are considered as final parent entities.
Real estate investment instrument that are considered as final parent entities.

The executive regulation may remove or add other excluded entities considering the amendments made to the rules issued by Economic Co-operation and Development Organization (OECD) regarding pillar two.

Chapter 4 - Taxpayers' Obligations

Article 17
Registration and Deregistration

The taxpayer should register with the Tax Authority within thirty days of starting the activity. If the taxpayer doesn't register during this timeframe, the Tax Authority shall be entitled to register him based upon the available information, and notifying him with the same by any method it deems appropriate.

The taxpayer should notify the Tax Authority with any change in his activity or registration information within thirty days from occurrence of such change.

The taxpayer should submit deregistration application if it permanently discontinues its operations within thirty days of the discontinuation.

The executive regulation defines the registration mechanism, method of notification and all terms and conditions of enforcing provisions of this article.

Article 18
Tax Returns Filing

The taxpayer shall submit to the Tax Authority a tax return of the business profit tax including financial statements audited by an audit firm certified by the Ministry within six months from tax period expiry date.

The taxpayer, subject to supplementary tax, shall submit to the Tax Authority a tax return with the supplementary tax including financial statements audited by an audit firm certified by the Ministry within fifteen months from tax period expiry date.

The tax withholding agent shall submit to the Tax Authority a tax return with the withholding tax at source within fifteen days from end of month in which the tax withholding became due.

The executive regulation defines procedures, documents, terms and conditions of tax returns.

Article 19
Tax Return Amendments

The taxpayer or tax withholder is entitled to submit an amended tax return if they discovered an omission, material or arithmetic mistake in their original tax return within five years from the deadline of submitting the original return, provided that no tax assessment has been issued for the tax period for which the amended return is being filed, without prejudice to fines and penalties stipulated in this law.

Article 20
Tax Payment and Refund

The taxpayer and tax withholder shall pay or remit the tax due to the Tax Authority within the legal deadlines for filling the tax return. The taxpayer or tax withholder -who has paid or remitted tax in excess- is entitled to recover the excess tax paid or remitted after settling the due amounts.

Article 21
Advance Payments

The taxpayer -whose income exceeds the value specified by the executive regulation- shall pay the estimated tax of the tax period on four advance payments, each payment should be paid within one month starting from the end of each quarter of the tax period. The advance payment shall be calculated based on the quarterly financial statements, and the taxpayer shall submit supporting documents about the advance payment calculation as set by the executive regulation.

The amounts paid under this system shall be settled upon submitting the tax return, while the remaining part of the tax due shall be paid, or excess refund should be claimed as the case may be.

The application of advance payments system shall be optional for other taxpayers.

Article 22
Keeping Books and Records

The taxpayer shall keep books, records, documents and information necessary for his activity to prepare the financial statements and defining the tax base for ten years staring from the expiry date of the relevant tax period.

Should the taxpayer violates provisions of this article, the Tax Authority shall be entitled to perform the tax assessment on an estimated basis in light of the available information without prejudice to imposing fines and penalties stipulated upon herein.

Chapter 5 - Tax Audit and Assessment and Provisional Seizure

Article 23
Tax Audit Procedures

The taxpayers' tax returns shall be audited in accordance with executive rules and instructions issued by the Tax Authority. Audit may be conducted through sampling.

The taxpayers shall enable Tax Authority employees to carry out their duties regarding the procedures of review, audit, compliance, and control concerning the application of this law.

Article 24
Tax Assessment

The tax return is an assessment unless the Tax Authority has amended the tax return or defined income and tax assessment on an estimation basis.

If the Tax Authority has discovered an income without tax assessment or there is a mistake in the assessment, the Tax Authority may re-assess the taxpayer's tax and notify him with the amended assessment within the statute of limitations for the tax debt.

The executive regulation of the law defines terms and procedures related to enforcement of provisions of this article.

Article 25
Anti-Tax Planning

The tax effects of any agreement or transaction shall not be recognized if it is proved that its main purpose is represented in tax reduction, deferral, or exemption. Upon conducting the tax assessment, it is important to consider the true commercial or economic significance of the agreement or the transaction.

The executive regulation defines the terms with which the purpose of the agreement or transaction lies in tax reduction, deferral, or exemption.

Article 26
Objections and Appeals

The taxpayer may object and challenge the tax assessment in accordance with the following procedures:

Objecting the tax assessment should be within sixty days from the assessment letter notification date or upon his knowledge of the assessment notice by any means. The taxpayer shall refute objection reasons and shall furnish supporting documents to the Tax Authority.
The Tax Authority shall decide on the taxpayer's objection and reply to the same within 90 days from the date of objection submission. If such period has been elapsed without any reply from the Tax Authority, then It will be considered as an implicit rejection.
If the taxpayer's objection has been refused explicitly or implicitly, the taxpayer may challenge the refusal decision before the Tax Appeal Committee as stipulated upon in article 26 herein, within 60 days from the date of notification with the objection refusal decision or knowledge of the same, or from the expiry date of the deadline granted to the Tax Authority to decide on the objection without any reply.
The Tax Appeal Committee should decide on the appeal within 90 days of submission date. Such period may be extended for similar periods based upon the taxpayers' request or the Tax Authority's request and the Committee's acceptance.
The Tax Authority or taxpayer may challenge the decision of the Tax Appeal Committee before the competent court within 60 days from date of notification with the decision or knowledge of the same by any means, or from the expiration date of appeal consideration period without a decision.

Article 27
Tax Appeals Committee

The Tax Appeals Committee(s) shall be formed by virtue of a decision from the Minister to be presided by an employee of the Tax Authority with a designation of not less than an assistant undersecretary and a minimum of six members as follows:

A minimum of three employees of the Tax Authority.
Two persons with an experience in tax matters to be nominated by the Minister in coordination with the competent authorities, provided that they should not be working at the Tax Authority, an audit firm, or working at taxable persons or their Board of Directors.
A member from Legal Advice & Legislation Department with a designation of not less than a consultant, to be nominated by Head of the Legal Advice & Legislation Department.

The Committee is responsible deciding on tax appeals, and the Committee cannot be convened unless the majority of its members are present, including the chairman of the committee or any delegate member to preside the Committee in his absence, and a member from the Tax Authority. The Committee's secretariat is handled by employees from the Tax Authority. The Committee issues its decisions by the majority of votes of its present members, and in case of a tie, the side with the chairman or his delegate prevails.

The decision issued to form the Committee specifies rules, procedures, and the Committee's work and compensation.

Article 28
Final Tax

The tax due shall be final in the following cases:

If it is in the same value of tax mentioned in the tax return.
If the deadlines for objecting to the tax assessment have been elapsed without filling an appeal.
If the objection has been refused, and deadlines for appeal before the Tax Appeals Committee have been elapsed without submitting an appeal.
If the objection has been partially accepted and deadlines for grievance before the Tax Appeals Committee have been elapsed without filing a grievance, or if the objection has been wholly accepted.
If the grievance has been refused and deadlines of appeal before the courts have been elapsed without filing an appeal.
If the grievance has been accepted wholly or partially while the deadlines of appeal before the courts have been elapsed without filing the same.
If an agreement regarding tax debt has been reached with the taxpayer in accordance with terms and conditions contained in the executive regulation.
If a final ruling has been passed on the tax debt.

In the previous cases, the tax return, tax assessment letters, the amended tax assessment letter and minutes of the agreement shall be writs of execution.

Article 29
Provisional Seizure

The Tax Authority may -if discovered that the tax debt is losable- ask Head of Execution Department at the competent Court to issue a provisional seizure on the taxpayer's movable properties, in his possession or in the possession of others. The Execution Department shall carry out the provisional seizure.

The provisional seizure may be lifted by virtue of a decision from the Head of Execution Department if the taxpayer has provided sufficient guarantees to pay the tax debt or if the Tax Authority asked to lift the seizure.

Chapter 6 - Administrative Fines

Article 30
Late Submission of the Tax Return

A fine -of at least one thousand Kuwaiti dinars- shall be imposed against anyone who delays in submitting the tax return stipulated upon in article (18) herein, as follows:

5% of the final tax value if submission delayed for less than one month.
10% of the final tax value if submission delayed for more than one month and less than three months.
15% of the final tax value if submission delayed for more than three months and less than one year.
20% of the final tax value if submission delayed for more than one year and before issuance of the tax assessment.

A fine of 25% of final tax value -in minimum of five thousand Kuwaiti Dinars- shall be imposed if the taxpayer has not submitted the tax return until the date of issuing the tax assessment.

The imposition of such fines shall not prejudice to late payment penalties under article (31) hereinafter.

Article 31
Late Payment of the Tax Due

The taxpayer or tax withholding agent shall pay a fine of 1% of the unpaid or unremitted amounts for every thirty days or part whereof in the following cases:

If the taxpayer has not paid the due tax within the legal deadlines of submitting the tax returns. In this case, a late payment fine shall be applied as of the day following the expiration of the deadline of submitting the tax return.
If the tax withholding agent has not remitted the withholding tax at source within the legal deadlines of submitting the tax returns. In this case, a late payment fine shall be applied as of the day following the expiration of the deadline of submitting the tax return.
If the advance payments have not been paid within the legal deadlines. In this case, a late payment fine shall be applied as of the day following the expiration of the deadline of paying the advance payments.

Article 32
Submitting an Incorrect Tax Return

If the taxpayer or tax withholding agent submits an incorrect tax return and the differences between the final tax and the tax based on the tax return is more than 10% of the tax value referred to in the tax return, then the taxpayer or tax withholding agent shall pay a fine of 25% of the value of such differences. If the taxpayer has corrected the mistake voluntarily before being discovered by the Tax Authority, then the fine shall be reduced to 15%.

The imposition of such fines shall not contradict with late payment penalties under article (31) herein.

Article 33
Other Administrative Violations

A fine of three thousand Kuwaiti dinars shall be imposed on anyone who commits any of the following acts:

Failure to register before the deadlines set in this law.
Failure to notify the Tax Authority with any changes in the registration or activity information before the deadlines set in this law.
Failure to provide any documents or information required from the taxpayer.
Preventing or obstructing the Tax Authority employees to perform their duties.
Failure to keep accounting books and records for the period stipulated upon in article (22) hereinbefore.
Breach of the prohibition rules contained in article (40) of this law.

Article 34
Administrative Fines Imposition and Collection

The administrative fines mentioned in this chapter shall be imposed and collected by virtue of a decision issued by the Minister or his delegate. Such decision shall be an executive instrument.

Chapter 7 - Tax Evasion

Article 35
Tax Evasion

Without prejudice to any harsher penalty stipulated by another law, anyone who commits or participates in any of the following acts of tax evasion shall be punished by imprisonment for a period not exceeding three years and a fine not exceeding three times the amount of the evaded tax, or by either of these penalties:

Falsifying, fabricating, hiding, or destructing books, records, documents or data that may affect the value of the due tax amounts.
Using fraudulent methods to acquire a deduction, tax exemption or tax refund.

In the case of reoffending within five years from the date the penalty is fully executed or has expired due to the passage of time, the penalty shall be imprisonment for a period not exceeding five years, and a fine not exceeding five times the amount of the tax evaded, or one of these penalties.

In case of persons, the legal representative, managing partner, manager, chairman of the board, vice chairman, or the CEO who are responsible for the actual management, as the case may be, shall be held responsible for the evasion act.

Article 36
Investigation and Settlement of Tax Evasion Crimes

The Public Prosecution shall be responsible for investigation, disposition, and prosecution in evasion crimes stipulated upon in this law. Public prosecution may not be initiated in this regard except upon the request of the Minister or his authorized representative. The Tax Authority may settle such crimes in return for paying taxes, administrative fines and a fine equal to the evaded tax. In the case of reoffending, settlement shall be made in return for paying the taxes, due administrative fines and a fine equal to duplication of the evaded tax.

The settlement shall not be recognized except after being approved by the Minister or his authorized representative. The settlement shall result in the non- initiation of the criminal case or dismissal of the same, as the case may be.

The executive regulation defines terms and procedures related to enforcement of provisions of this article.

Chapter 8 - Final Provisions

Article 37
Tax Prescription

The Tax Authority's right to claim the tax debt is extinguished only after the passage of ten years from date of tax return submission or from the date on which the Tax Authority became aware of data and elements of the activities which have not been declared by the taxpayer.

The prescription is interrupted by the notification of the assessment notices, the submission of an objection, a grievance, a decision by the Tax Appeals Committee, payment claim letters, or by any action taken in the enforcement process, or any act by the Tax Authority towards the taxpayer or the tax withholding agent that explicitly or implicitly indicates its insistence on the payment of the tax debt, or the taxpayer's tax withholding agent's explicit or implicit acknowledgment of the tax debt, or by any tax dispute filed regarding the tax debt.

The Taxpayer's or tax withholding agent's right to claim refund of the tax amounts paid in excess is extinguished only after the passage of five years from the date on which his right to a refund arises.

Article 38
Obtaining Information

The Tax Authority may obtain all necessary information and documents for purposes of registration, audit, assessment, collection or any other act related to the enforcement of this law, whether in the possession of the taxpayer or their representative, or any other person or entity. It is not allowed to refrain to provide the same to the Tax Authority for any reason.

Article 39
Judicial Police Authority

The Tax Authority employees shall have the status of judicial police officers based upon a mutual decision by the Minister and Minister of Justice. Hence, they will be entitled to access places, in which taxpayers practice their activities or keep their records and documents, to perform review and audit and find the tax violations. For this purpose, they may seek assistance from police officers.

Article 40
Confidentiality

It is prohibited for any person who, by virtue of their position, duties, or work, is involved in assessing or collecting the tax prescribed by this law, or in resolving disputes related to the same, to disclose any information concerning the taxpayers, except in cases permitted by law.

Explanatory Memorandum

Draft Law No.( ) of 2024

Issuing the Business Profit Tax Law

The Organization for Economic Co-operation and Development (OECD) launched an international tax reform initiative under the name "Pillar Two," which specifically targets the practices of multinational companies operating in multiple countries and shifting profits to low-tax states.

The rules of Pillar Two aim at ensuring that multinational companies with global annual revenues exceeding 750 million euros (or the equivalent) pay a minimum effective tax rate of 15% on their profits earned in each country or jurisdiction in which they operate. By implementing this measure, governments can reduce revenue leakage and promote fair tax practices on a global scale.

To keep pace with such global practices, the State of Kuwait joined the Comprehensive Framework on Preventing Tax Base Erosion and Profit Shifting (BEPS) on November 15, 2023. This framework includes more than 140 countries and jurisdictions working together to combat international tax evasion and ensure a more transparent tax environment. The State of Kuwait aims to adopt the global minimum tax rate in accordance with Pillar Two rules by January 2025. Any delay in implementation could lead to significant tax revenue leakage from Kuwait to other countries or jurisdictions that have already adopted the Pillar Two rules.

Therefore, implementing the Pillar Two rules is a critical step for Kuwait to protect its tax revenues.

On the other hand, Kuwait's tax laws need to be restructured. They should be consolidated into a single law rather than the current structure, which includes four separate laws that suffer from various deficiencies and challenges in implementation.

Therefore, the Ministry of Finance has drafted a business profits tax law as part of its commitment to the Comprehensive Framework on Preventing Base Erosion and Profit Shifting (BEPS), and to take benefit from the Pillar Two rules, ensuring the continued protection of Kuwait's tax revenues. In addition, it aims at developing the tax legislation system in the State of Kuwait to be in line with the international standards and global best practices.

Since this law involves a transitional phase for tax periods and the necessity of determining which law applies to the same and its effective dates, and as the Amiri decree was issued on 10 May 2024 stipulating in Article (4) whereof that laws have to be issued by decrees, the draft decree-law issuing the business profits tax law was introduced. It includes seven articles that regulate the transitional phase between the current tax laws and the business profits tax law.

Article (1) of the draft decree-law states that the business profits tax law will apply to tax periods starting on or after 1 January 2025 for multinational group of persons. In order to give this category of taxpayers sufficient time to meet the

law's requirements, it has been stipulated that the commencement of advance payment system implementation will be deferred to tax periods starting on or after 1 January 2026. This article also specifies that the law will apply to other taxpayers starting from tax periods beginning on or after 1 January 2027.

Since the business profits tax law not only introduces rules that meet the requirements of Pillar Two, but also includes provisions that serve as a comprehensive and advanced alternative to the current tax laws, and as this law applies to taxpayers of multinational group of persons as of the tax periods starting on or after 1 January 2025, Article (2) of the draft emphasizes that the current tax laws will not apply to the multinational group of taxpayers from the mentioned date. Noteworthy, according to the general rules and legal logic, the provisions of the current tax laws will continue to apply to those taxpayers for the tax periods that began before 1 January 2025.

Article (3) of the draft decree-law grants multinational group of taxpayers a six- month period from the date the decree-law comes into effect to register with the Tax Authority, without the imposition of the administrative penalty stipulated under item (1) of Article (33) of the Business Profits Tax Law. However, this does not imply that the provisions of the law will apply to this category of taxpayers from the registration date, where the law applies to persons subject to its provisions as of the tax periods starting on or after 1 January 2025 in accordance with article one referred to.

Article (4) emphasized the priority of applying the provisions of this law in the event of a conflict with any other law.

Article (5) repealed the current tax laws as of 1 January 2027, with the exception of the tax-related provisions in Law No. 19/2000 concerning the support and encouragement of national workers to work in non-governmental sectors, as amended by Law No. 32/2003. Specifically, Articles 12 and 14 of that law contained provisions other than tax-related rules. Therefore, the repeal was limited to the tax provisions in these two articles. According to Article 179 of the Constitution, laws apply only to matters that occur after their effective date and do not have retroactive effects, this article clarified that the current tax laws will continue to apply to tax periods that began during their period of validity.

Article (6) of the draft decree-law entrusted the Minister of Finance with the responsibility to issue the executive regulations of the law within six months from the date of its publication in the Official Gazette.

Article (7) stated that the Prime Minister and the Ministers, each within their purview, are obliged to implement the provisions of the law, which will come into effect starting from 1 January 2025.

The draft Business Profits Tax Law contains a total of 40 articles divided into 8 chapters, as follows:

Chapter One includes two articles. Article (1) provides definitions for terms and phrases used in the law that require clarification or conceptual specification.

Article (2) defines, without limitation, the situations that constitute a permanent establishment in the State of Kuwait. It refers to that the fundamental idea of a permanent establishment is a fixed place of business through which a non- resident person conducts business in Kuwait. However, this does not mean that a permanent establishment is limited to a fixed office in the traditional sense.

Under this concept, various forms of permanent establishments are included, and this article provided examples of such establishments.

Chapter Two deals with provisions and rules related to the imposition and entitlement of the tax established under this law. Article (3) clarifies taxable persons subject to business profits tax. Those persons include: resident legal person who is taxed on his income earned both inside and outside the country, and the resident natural persons who engage in an activity and are taxed only on income derived from that activity, whether inside or outside the country. Wages, salaries, or any income generated by a natural person from a source other than the activity shall not be subject to tax. Lastly, the permanent establishment in the State of Kuwait, which are taxed on income generated from within the State of Kuwait.

Article (4) specifies the tax rates on business profits under this law. The standard tax rate is 15% on taxable income. However, to encourage companies, institutions, and public entities fully owned by the State of Kuwait, and to assist them in achieving their objectives, they have been exempted from the standard rate, meaning that their tax rate shall be 0%. This exemption does not apply to public institutions and corporations in which the government owns less than 100%, where the standard tax rate of 15% is applied to their entire taxable income, even if part of it is owned by the government.

For the Divided and Divided-Submerged Zones, this article sets the tax rate on income generated within these zones at 30%. The taxpayers will be required to pay only half of the tax due, provided they have paid half of the tax due in the Kingdom of Saudi Arabia. If this condition is not met, Kuwait has the right to collect the full 30% tax rate. The rationale behind this tax treatment in the divided and divided-submerged zones is to avoid double taxation in the event that the taxpayer is taxed both by Kuwait and Saudi Arabia on the same income.

Article (5) covers the provisions of the supplementary tax, which applies only to multinational groups of persons operating in more than one country, including Kuwait, with a global annual turnover equivalent to 750 million euros, or any adjustments made in accordance with the rules issued by the OECD regarding Pillar Two. For this category of taxpayers, if their effective tax rate in Kuwait is less than 15%, they will be subject to a supplementary tax until the imposed effective tax rate reaches to 15% as a minimum. This article has asserted that no tax exemptions shall be applied when the supplementary tax rules and provisions are

implemented. This ensures that the effective tax rate imposed on multinational group of persons will not be less than 15%.

Article (6) covers the provisions of withholding tax at source, stipulating that this tax is imposed on non-residents to whom payments are made in the form of interests, royalties, service fees, rents, dividends, payments for athletic or artistic activities, or insurance premiums, provided that these amounts are sourced from within Kuwait and are not related to a permanent establishment of the non- resident in Kuwait. The tax is imposed at a rate of 5% on the total amounts paid without any deductions for expenses, and it is withheld at source.

Article (7) relates to source rules, listing examples (without limitation) of situations where Kuwait is considered as the source of income.

Article (8) defines the tax period as twelve calendar months, in accordance with the taxpayer's accounting year, which must be notified to the Tax Authority. If the taxpayer fails to comply with the same, the calendar year will be considered as a tax period, and the taxpayer will be taxed accordingly. This article also allows the Tax Authority to grant permission to the taxpayer to change their tax period upon request.

Article (9) explains how to calculate the tax base for each tax period, which is subject to the business profits tax rate in order to determine the tax due. This base is to be determined based on the taxpayer's all actual or realized revenues, less all actual or realized expenses.

Article (10) specifies deductible and non-deductible expenses. The taxpayer is allowed to deduct the actual expenses incurred to generate the taxable income. However, other expenses are not deductible. This article also provides examples of deductible expenses, such as payments made to the Kuwait Foundation for the Advancement of Sciences, provided that these payments do not exceed 1% of the income for the tax period in question. Additionally, the taxpayers can deduct value of goods and services required for the purposes of their taxable activity, salaries and wages, and assets depreciation based upon rates, conditions and taxes specified by the executive regulations.

Moreover, article (10) provides examples of non-deductible expenses, such as costs not related to the activity, expenses related to exempt or non-taxable income, and penalties. The executive regulations will define the controls and conditions related to how expenses are approved or excluded. Additionally, the regulations may specify other deductible or non-deductible expenses beyond those listed in this article.

Article (11) stipulates that if related persons set terms in their transactions that differ from those applied between unrelated parties, the Tax Authority has the right to disregard those terms and determine the taxable base based on an arm's length price—the price that would be set between independent parties under similar circumstances. This ensures that the price of any transaction or deal is not influenced by the relationship between the parties if they are related.

Article (12) regulates rules for carrying losses forward, allowing them to be deducted from the income of the following tax period, with a maximum of 75% of the taxable income for that period. If part of the loss remains, it can be carried forward to the next tax periods up to the fifth tax period following the one in which the loss occurred. After this period, no remaining loss can be carried forward. In all cases, the total amount of losses allowed to be deducted cannot exceed 75% of the taxable income for the tax period in which the deduction occurs.

For the avoidance of international double taxation, Article (13) clarifies that if a resident taxpayer pays tax in a jurisdiction or country other than Kuwait on income earned in that jurisdiction or country, and he has supporting documentation, he will be entitled, when being taxed in Kuwait, to deduct the tax paid abroad, up to the amount of tax due in Kuwait on the same income.

Chapter Three addresses tax exemptions, with Article (14) confirming the continuation of validity of current tax exemptions issued under other laws. It also adds new cases for tax exemptions on business profits dividends earned by a resident person from participating shares owned in legal resident or non-resident person. In order for such exemption to be effective, the shareholding should not be less than 10% for twelve calendar months as a minimum before the dividends being distributed. Moreover, the participation shares should be subject to taxes in the non-resident's country with an effective tax rate of not less than 15%.

This article also exempts capital gains realized by a resident person from selling participation shares held in a resident or non-resident legal entity, provided that the shareholding percentage is not less than 10% for a minimum of twelve months before the sale and that the participation shares in the non-resident's country are subject to tax at an effective rate of no less than 15%.

Finally, this article stipulates an exemption for the income of a non-resident earned in Kuwait through a permanent establishment, derived from the operation of aircraft or ships in international transport activities, including passenger or cargo transportation, livestock, mail, or parcels, as well as activities related to the leasing of ships or aircraft, whether with or without a crew. It also applies to the leasing of essential equipment necessary for the sailing of ships or flying of aircrafts. However, for the exemption to apply to these activities, there must be reciprocity for residents engaging in similar activities in the non-resident's country of residence.

Article (15) defines the entities exempt from the business profit tax, including Kuwaiti government entities, non-profit Kuwaiti organizations, as well as taxpayers whose annual turnover does not exceed 1.5 million Kuwaiti dinars during the tax period.

Article (16) specifies the entities excluded from the supplementary tax obligations. These entities include governmental bodies, non-profitable organizations, international organizations, pension funds, investment funds that are considered final parent entities, and real estate investment instrument that are considered final parent entities, whether they are Kuwaiti or non-Kuwaiti.

This list of excluded entities is defined in accordance with the rules issued by the Organization for Economic Cooperation and Development (OECD) regarding Pillar Two. Consequently, this article clarifies that if any amendments have been made to this list under the rules referred to, the executive regulations may remove or add other excluded entities in light of such amendments. The excluded entities shall be based upon the amended list.

Chapter Four clarifies the obligations of taxpayers, especially what has been stipulated upon in Article (17), which mandates that the taxpayer must voluntarily register with the Tax Authority within 30 days from the date of starting the activity. If the taxpayer fails to comply, the Tax Authority has the right to register them automatically and notify them accordingly, without prejudice to the imposition of fines and penalties outlined in the law. Additionally, the taxpayer is required to notify the Tax Authority with any changes to their registration data within 30 days of such changes, and must request cancellation of their registration if they no longer meet the registration requirements.

Article (18) emphasizes the obligation of both the taxpayer and the tax withholding agent to file tax returns in accordance with the deadlines, forms, and regulations set forth.

Article (19) grants both the taxpayer and the tax withholding agent the right to submit an amended tax return in case of omission or material or arithmetic mistakes within 5 years from the deadline for submitting the original return, provided that no tax assessment has been issued for the relevant tax period for which the amended return is filed. This is without prejudice to the imposition of fines and penalties specified in Chapters Six and Seven of the law, in case the conditions for them are met.

Article (20) adds that both the taxpayer and the tax withholding agent must pay or remit the tax due to the Tax Authority within the legal deadlines set for filling the tax return. They will have the right to refund any excess tax paid or remitted if applicable.

Article (21) introduces the advance payments system as a guarantee for collection, as well as a method to alleviate the burden on taxpayers by allowing gradual payment of big amounts of tax due. The executive regulation will determine the criteria and standards under which taxpayers are required to apply this system.

Under this system, the taxpayers are required to calculate the tax due for the first three months of their tax period based on their financial statements. The fourth month shall be granted as a grace period to allow the taxpayers to pay the calculated tax due. This process is repeated in the same manner every three months during the subsequent periods of the tax year.

Upon submitting the tax return and paying the tax due for the entire tax period, the taxpayers' tax situation is settled, and they are obligated to pay any remaining tax due or, if the advance payments exceed the tax liability for the entire tax period, they are entitled to a refund of the excess amount.

To allow other taxpayers to take benefit from this system, this article states that the advance payment system is optional for them.

Article (22) stipulates that the taxpayer must retain the books, records, documents, and information related to any tax period for a minimum of 10 years from the end of the relevant tax period. If the taxpayer fails to comply, the Tax Authority shall be entitled to estimate the tax due on an estimated basis, without prejudice to imposing fines and penalties as stipulated in this law, should the conditions for such penalties apply.

Chapter Five addresses the provisions of tax auditing, tax assessment, and provisional seizure, along with the consequent procedures. Article (23) grants the Tax Authority the right to audit the tax returns of all taxpayers, and it may, on an annual basis, audit only a sample of the returns, based on the rules and guidelines issued by the Tax Authority in this regard. Article (23) also requires taxpayers to allow the Tax Authority staff to perform their duties related to such audits.

Article (24) shows provisions of tax assessments. If the Tax Authority approves the information contained in the submitted tax return, the return will be considered a tax assessment. However, if the Tax Authority makes amendments to the return or assesses the tax on an estimated basis, then this will be considered as a tax assessment.

Article (24) highlights the Tax Authority's right to re-assess the taxpayer and amend the tax assessment regarding any income that has not been previously taxed or concerning any tax amounts due to the taxpayer as a result of mistakes in the initial assessment. This is done without prejudice to the statute of limitations outlined in Article (37) of this law.

Article (25) emphasizes an important provision for combating tax planning. It states that if the Tax Authority recognizes that one of the purposes of any agreement or transaction is to reduce, defer, or exempt taxes, the Tax Authority shall have the right to assess taxes based on the true commercial or economic significance of the transaction, while disregarding any tax planning measures as outlined in this article.

Article (26) regulates procedures for objections, grievances, and appeals, ensuring transparency and helping to reduce tax disputes before the courts. It grants the taxpayers the right to object to a tax assessment within 60 days from the date they have been notified or became aware of the assessment notice, whichever is earlier. Moreover, it includes that the objection must contain its reasons and supporting documents. This article also stipulates that the Tax Authority must study, review and respond to the objection within 90 days. If this period has been elapsed without a response from the Tax Authority, the objection shall be implicitly considered as rejected, and the taxpayer can proceed with further actions accordingly.

Furthermore, this article grants the taxpayers the right to appeal a rejected objection (either explicit or implicit) before the Tax Appeals Committee within 60 days. These procedures are in line with current tax laws but are now referred to as 'Tax Appeals" under this framework.

It also states that the Tax Appeals Committee must decide on the appeal within 90 days from the date of submission, with the possibility of extension for an additional period or periods upon request by the taxpayer or the Tax Authority.

Finally, this article regulates procedures for appealing before the judiciary. It allows both the Tax Authority and the taxpayers to appeal the decision of the Tax Appeal Committee before the competent court within 60 days from the date they became aware of the committee's decision or from the date the appeal period expired without a decision.

Article (27) defines the formation of the Tax Appeal Committee and authorizes the Minister of Finance to issue a decision on the rules and procedures for the committee's work and the compensation granted to its members.

Article (28) lists the cases in which the tax due is final and should be collected compulsorily without the need for litigation. It states that the tax declared by the taxpayers in their tax return is considered final, and the Tax Authority may collect the same compulsorily using the return as a writ of execution. This is without prejudice to the Tax Authority's right to amend the return and take necessary actions regarding any tax differences due arising from the amendment. The article (items from 2 to 6) also outlines cases where the tax due becomes final during the objection and appeal stages, whereby either the original or the amended tax assessment becomes a writ of execution, as the case may be.

To reduce judicial disputes, and in cases where the tax due is not final, the article states that an agreement could be reached between the taxpayers and the Tax Authority on the tax debt and settling the dispute. A settlement report is then drawn up according to specific conditions and procedures. In this case, the settlement report becomes a writ of execution, and the tax specified in the same shall be final.

Finally, the article confirms that a final judgment or any enforceable judgment on the tax debt shall be considered a writ of execution, and the tax specified in the same becomes final unless amended by another enforceable ruling.

Article (29) deals with provisions of provisional seizure, stating that when the Tax Authority determines that the tax debt is at risk of being lost, it may take provisional seizure measures to seize the taxpayers' movable assets, whether in their possession or in the possession of others. This article also indicates that the seizure can be lifted by a decision from the head of the Execution Department if the taxpayer provides sufficient guarantees for the payment of the tax debt or if

the Tax Authority requests the seizure to be lifted for reasons it deems appropriate.

Chapter Six addresses the administrative fines that the Tax Authority may impose to increase taxpayers' compliance levels and ensure the smooth functioning of the tax system. Article (30) specifies the fines for delays in filing the tax return, with due attention to graduality of fines based on the length of the delay.

However, in all cases, the minimum fine is set at 1,000 Kuwaiti Dinars. If the fine determined in any case is less than this amount, a fine of 1,000 Kuwaiti Dinars shall be imposed. If the determined fine exceeds this amount, the standard fine shall be applied.

To encourage those who are late in filling their tax returns to do so promptly, the article stipulates a fine of 25% of the final tax amount, with a minimum of 5,000 Kuwaiti Dinars, if the tax return is not filed by the time the tax assessment is issued.

The article further clarifies that imposing these fines does not affect the application of late payment fines specified in Article (31) of this law.

Article (31) defines the fines imposed on the taxpayer or tax withholding agent in cases of late payment of the tax due. The fine is being calculated for every 30 days or part whereof, at a rate of 1% of the unpaid or unremitted amounts. This fine also applies to advance payments.

Article (32) refers to fines imposed for filing an incorrect tax return. If the difference between the final tax and the tax declared is more than 10% of the tax declared, a fine of 25% of the difference is imposed on the taxpayer or tax withholding agent. However, if they correct the mistake before being discovered by the Tax authority, the fine shall be reduced to 15%. The provisions of this article do not affect the calculation of late payment fines specified in Article (31) of this law.

Article (33) stipulates a fine of 3,000 Kuwaiti Dinars for certain administrative violations that affect the smooth operation and organization of the tax process.

Article (34) grants the Minister of Finance, or his delegate, the power to issue decisions related to the imposition and collection of administrative fines outlined in Chapter Six of this law. The decisions issued in this regard shall be considered as a writ of execution, allowing for the collection of these fines without the need to resort to the judiciary.

Chapter Seven addresses tax evasion. Article (35) specifies penalties for individuals involved in tax evasion activities, including imprisonment for up to three years and a fine of up to three times the amount of tax evaded, or either of these penalties. This applies to anyone who commits or contributes to the falsification, fabrication, concealment, or destruction of books, records, documents, or data that affect the value of tax liabilities or the correct calculation of the same. The same penalty applies to anyone who commits or contributes to fraudulent methods aimed at obtaining tax deductions, exemptions, or refunds.

The article tightens the penalty in case of a repeat offense, which occurs if a similar crime is committed within five years from the completion or expiration of the adjudicated sentence. In the case of repeat offenses, the penalty shall be imprisonment for up to five years and a fine of up to five times the amount of tax evaded, or either of these penalties.

This article also clarifies the person liable for tax evasion offenses, specifying that the penalty should be imposed on the legal persons involved.

Article (36) designates the Public Prosecution as responsible for investigating, acting, and prosecuting tax evasion crimes outlined in this law. However, it establishes that criminal proceedings related to these crimes can only be initiated upon the request of the Minister of Finance or his delegate. This article also allows the Tax Authority to settle these crimes through payment of the owed taxes, administrative fines, and a fine equal to the amount of tax evaded or double the amount in case of repeating the offenses. It is specified that the settlement shall not be valid unless it is approved by the Minister of Finance or his delegate, which leads to the non-initiation or dismissal of criminal proceedings, as the case may be.

Chapter Eightcovers the final provisions of the law. Article (37) defines the statute of limitations for tax debts, specifying a 10-year period that begins from the date the tax return is filed or from the date the Tax Authority becomes aware of activities data and elements not declared by the taxpayer. The article also outlines the actions that interrupt the statute of limitations, which reset the 10- year period starting from the date of any such action. Additionally, the article stipulates that the taxpayer's right to request a refund of any overpaid taxes expires after 5 years from the date the right to a refund arises.

Article (38) emphasizes the Tax Authority's right to obtain any information and documents it deems necessary from any person or entity for the purposes of implementing provisions of this law. It also states that there is no valid reason for refusing to provide such information to the Tax Authority, in order to protect public funds.

Article (39) grants the Tax Authority employees, as designated by a decision from the Minister of Finance in coordination with the Minister of Justice, the status of judicial police. This allows them to enter places where taxpayers conduct their activities or store records and documents, in order to detect tax violations and seize related records or documents. They may seek the assistance of police officers when necessary.

Article (40) imposes a prohibition and an obligation on any person involved in the assessment or collection of taxes not to disclose any information about taxpayers, unless legally authorized to do so.