Kuwait to implement new tax law on harmful goods

Kuwait is pushing forward with its tax reform efforts by introducing a selective tax law targeting harmful goods, such as tobacco and sugary beverages, and developing a multinational taxation framework. These initiatives aim to diversify the country's revenue streams and reduce reliance on oil income, aligning with Kuwait Vision 2035.

The selective tax law is expected to generate approximately KD 200 million (around $648 million) annually. Minister of Finance and Minister of State for Economic Affairs and Investment, Noura Al-Fassam, confirmed the ongoing development of this law during an interview with the Kuwait News Agency (KUNA). The initiative is part of a broader economic diversification strategy to build sustainable non-oil revenue sources.

In addition to the selective tax law, the Ministry of Finance is working on a corporate income tax law to regulate business taxation in Kuwait. Al-Fassam highlighted Kuwait's recent membership in the OECD’s Inclusive Framework on Base Erosion and Profit Shifting (BEPS), which enhances global tax cooperation and transparency while combating tax avoidance.

Kuwait is also preparing for a multinational taxation framework projected to generate around KD 250 million (about $810 million) annually upon implementation during the 2027-2028 period. The law includes provisions to prevent double taxation and exempt entities such as government organizations, non-profits, international organizations, pension funds and investment funds. However, companies will still be required to contribute to the Kuwait Foundation for the Advancement of Science, as the tax law does not provide exemptions in this area.

Preliminary assessments estimate the law will apply to approximately 300 entities, including 20 Kuwaiti groups, 25 Gulf-based groups, and 255 foreign entities operating in the country. Exemptions from certain existing taxes, such as the labor support tax and zakat tax, will be provided to entities covered under this framework.

To ensure smooth implementation, the Ministry of Finance is engaging key stakeholders through workshops involving the Ministry of Justice, the Ministry of Commerce and Industry, and the Kuwait Capital Markets Authority. Additional workshops and a dedicated email address will address queries related to the new tax laws.