Kuwait Cabinet has approved a significant resolution to introduce a 15% Domestic Minimum Top-up Tax (DMTT) on multinational enterprises (MNEs) operating within its borders. The new law, endorsed during a weekly meeting chaired by His Highness the Prime Minister Sheikh Ahmad Abdullah Al-Ahmad Al-Sabah, is set to come into effect on January 1, 2025. This step is aligned with global taxation standards and aims to curb tax evasion while ensuring that tax revenues are not shifted to other jurisdictions.
The DMTT is designed to ensure that large multinational corporations pay a minimum level of tax in each country they operate, closing loopholes that could otherwise allow companies to minimize their tax liabilities through aggressive tax planning. This move is in line with international efforts, notably those of the Organisation for Economic Co-operation and Development (OECD), to establish a fairer and more transparent global tax system.
In a statement following the Cabinet’s approval, Deputy Prime Minister and Minister of State for Cabinet Affairs Shereeda Al-Mousherji highlighted the significance of the law in preventing tax base erosion and profit shifting. The 15% tax is intended to apply to multinational entities that conduct business in more than one country or state, ensuring that these companies contribute a fair share of taxes in Kuwait.
The new legislation reflects Kuwait’s commitment to international tax reforms and comes at a time when the country is strengthening its economic and financial ties with other nations. For example, Dr. Anwar Ali Al-Mudhaf, Kuwait’s Minister of Finance, recently discussed the agreement between Kuwait and the UAE aimed at avoiding double taxation and preventing tax evasion. The agreement underscores the importance of financial integration and the free movement of capital between the two countries, which will benefit both citizens and investors alike.
Kuwait’s participation in global economic forums, such as the World Governments Summit, further reinforces its dedication to improving economic policy and fostering international cooperation. Dr. Al-Mudhaf noted that such platforms provide an opportunity to address global challenges and explore future opportunities, particularly in strengthening economic relations with key partners like the UAE.
The DMTT is not the only significant tax reform underway in the Gulf region. In December 2024, the UAE also announced the introduction of a DMTT as part of its efforts to implement the OECD’s Two-Pillar Solution, ensuring that multinational corporations pay a minimum effective tax rate of 15% on their profits. This step aligns with the UAE’s broader tax strategy and reflects its ongoing commitment to providing a business-friendly environment while ensuring fair taxation.
With the implementation of the DMTT, both Kuwait and the UAE are signaling their intention to create more equitable and transparent tax systems that align with global standards, ensuring that large multinational corporations contribute appropriately to the economies in which they operate.