KUWAIT CITY, 7 March 2004 — Kuwait’s Council of Ministers has prepared preliminary draft legislation that will introduce income tax for the first time ever to the oil-rich emirate, government officials, analysts, and media reports said yesterday.
The Cabinet has endorsed the draft law and gave it to the council’s economic committee which will send it to an Islamic law department for study and recommendations, said a government official noting that the country’s elected parliament would then have to debate, and vote of the finalized bill.
The law would not apply to normal employee salaries according to excerpts of the draft law published in newspapers over the past two days; but would apply to those running commercial activities, commission businesses, real estate, investment, service, handicrafts or mining activities.
The tax aims to target commercial entities more than individuals, economic analysts said noting that the state would take five percent from businesses that made 2,000 Kuwaiti Dinars ($6,800) in profits, to 25 percent of businesses that earned over one million Kuwaiti dinars ($340 million) per year.
Unmarried individuals earning under KD12,000 ($40,800) would be exempted of the tax as would be a childless married person who earned KD14,000 ($47,600), Al-Qabas newspaper wrote on Friday.
Kuwait now taxes heavily — up to 55 percent — the declared profits of foreign companies, but a new income tax applied to foreigners and nationals alike who are running companies would add hundreds of millions of dinars to state coffers, economists noted. Expatriates who work in Kuwait for more than 183 days per year and have residency permits and are involved in commercial or industrial activities will come under the law, Arab Times newspaper said yesterday citing a copy of the draft.
Kuwait, seeking to attract foreign investment, recently instilled a new Direct Foreign Investment Law, which gives foreign investors tax breaks during the first 10 years of business. But some economists feel the new income tax bill, if it becomes law, would deter those thinking to invest in Kuwait.