The mechanism for granting tax exemption to the investment entity

Granting tax exemption to the investment entity aims to encourage investment to achieve the economic and social development goals of countries, and is one of the most important advantages offered to attract foreign investors, as any foreign investor seeks to achieve the greatest return from investing his money abroad, and therefore the tax exemption is an effective tool for encouraging investment with what it offers It has the ability to reduce his tax burdens and increase his profits, which makes the foreign investor prefer investing in countries that give him more tax exemptions.

This is what the Kuwait Direct Investment Promotion Authority seeks with the benefits it offers to foreign investors, such as exemption from income tax, or from any other taxes, and also exempting every expansion of the investment entity from the same taxes for a period not less than the exemption period granted to the original investment entity, from the date of Commencement of actual production or operation in this expansion.

Tax exemption concept

It is the state’s waiver of its right to impose and collect tax based on tax or other legislation on income that is already subject to tax according to social and economic considerations, either temporarily or permanently.

The mechanism for granting tax exemption to the investment entity in the State of Kuwait

Tax exemption period

The period of exemption from income tax or from any other taxes should not exceed ten years starting from the date of the actual start-up of the investment entity, and it is calculated for each activity separately from the date of its actual operation. The investor must also submit a tax return for the exempted investment entity according to the dates specified determined by the Ministry of Finance.

Request for tax exemption

An application for obtaining a tax exemption is submitted to the Direct Investment Promotion Authority according to the form prepared for this purpose. The application is also evaluated and the duration and value of the tax exemption is determined in accordance with the principles, rules and standards by the Authority in coordination with the competent authorities.

Conditions that must be met in the application for tax exemption

Several conditions must be met for the tax exemption request to be accepted, which are:

  1. To be complete with all data and documents required by the Investment Promotion Authority
  2. Submit a preliminary study on the project to be evaluated for the authority, which is available on the authority’s website
  3. Provide a timetable showing the date of both the start of implementation and the expected actual start of operation of the investment entity

Criteria for evaluating an application for granting tax exemptions

The amount of the tax exemption value is linked to the extent to which the investment entity complies with the following evaluation criteria:

  1. Transfer and localization of technology and contribute to the diversification of the economic base, and this is measured through the material value of the cost of advanced equipment.
  2. Creating jobs for Kuwaitis and providing training opportunities. This is measured by the cost of spending on wages and training for Kuwaitis and the number of jobs.
  3. Building local content by expanding and activating the role of the Kuwaiti private sector by using local products and services, and this is measured through the cost of renting the headquarters and the value of contracts with local suppliers and national inputs through the purchase of raw materials and intermediate products manufactured locally so that the added value arising from those inputs is not less than 40 % of the value of the final product upon completion of production.

Comply with the instructions and rules issued by the Ministry of Finance

The investor shall abide by the financial and tax instructions issued by the Kuwaiti Ministry of Finance, as well as the instructions related to submitting the tax return and any documents, data or clarifications for the application of the exemption.

Granting a tax exemption certificate to the investment entity

In the case of verifying the validity of the notification data and from the actual start of operation, the Director General of the Investment Promotion Authority must deliver the concerned person, within fifteen days from the date of receiving the notification to him, a certificate of tax exemption, specifying the field of activity and the date of actual operation start, and notify the Ministry of Finance a picture of it.

In the case of expansion, the investment entity licensed for expansion is granted a tax exemption, once the criteria related to granting this advantage are met, In this case, the tax exemption shall take effect from the date of commencement of production or actual operation of this expansion.

In the case of an investment entity with multiple activities, the granting of tax exemptions shall be limited to the activity that the Authority has approved to grant the tax exemption only and for which it is licensed.

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