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Avocado Weekly: Kuwait Said to Mull New Law to Implement Global Minimum Tax Starting 2025

OECD 15% minimum tax rules would apply to foreign multinationals starting Jan. 1, 2025, to Kuwati firms a year later
  • Kuwait’s government is considering new legislation that would replace its current tax laws with a Pillar Two-focused law that includes an estimated 15% tax on major international companies starting Jan. 1, 2025, according to local reports.
  • About 15 multinational companies with over 750 million euros ($790.3 million) in global revenues would be subject to that first phase of the new rules.  
  • The “business profits tax law” would not apply to big Kuwati companies, including oil companies, until Jan. 1, 2026.
  • The tax initiative figures among the government’s priorities for the parliamentary session scheduled to start Oct. 31. The government is reported to be forming a high-level committee, including major Kuwaiti oil industry and other business groups, to consult on new policies to comply with the global minimum corporate tax in the OECD-brokered international tax reform agreement. (Arab Times)

Foreign Companies Already Taxed at 15%

  • Foreign companies are already subject to a 15% tax in Kuwait under existing law, according to a client note from the Kuwaiti branch of international accounting firm network RSM. The new tax law would subject all Kuwait multinationals, which include all oil exploration and production companies and are currently exempt from Kuwait tax, to the new 15% tax, starting Jan. 1, 2026. 
  • “The tax base in Kuwait is currently restricted to non-Kuwaiti businesses only. This would make Kuwaiti businesses subject to income tax in Kuwait,” RSM Kuwait tax partner Tuhin Chaturvedi told LegalAvocado in a message.
  • Some foreign oil companies in Kuwait–Shell and BP–provide consultancy services only, no exploration and production activities. They are treated as foreign companies and already pay tax in Kuwait on their Kuwait-sourced income, Chaturvedi said. (RSM Global)

Slow Implementation of Pillar Two

  • Some 138 jurisdictions in July approved an outcome statement that allows jurisdictions to move forward on implementing the Organization for Economic Cooperation and Development’s two-pillar plan to reform the global tax framework.  
  • Pillar Two of the OECD plan calls for jurisdictions to begin implementing rules that aim to ensure multinationals with over 750 million euros in global revenues pay a minimum 15% in taxes on their worldwide income, starting in 2024. The rules include a so-called domestic top-up tax.
  • In the US there are political obstacles to implementing Pillar Two. (Politico) That could lead to problems with US trading partners, including Canada, Japan, the UK, South Korea, and many EU member states, which have passed or introduced legislation to begin implementing Pillar Two in 2024. (Penn Wharton Budget Model) Five EU member states have said they won’t be able to implement the rules in 2024.
  • Malaysia and Singapore have announced plans to implement the 15% minimum tax and a domestic top-up tax starting Jan. 1, 2025. (LegalAvocado)
  • The United Arab Emirates said in September that it isn’t ready to impose the 15% global minimum tax on multinational companies in 2024, but instead will hold a public consultation on Pillar Two rules. (LegalAvocado)

"Open Issues" on Pillar One

  •  The US has also hit the brakes on progress toward signature of the OECD’s Multilateral Convention to Implement Amount A of Pillar One, which aims to create a mechanism for reallocating rights to tax giant multinationals from investment hubs, where multinationals park large amounts of their profits, to market jurisdictions, where the companies make most of their sales revenues.
  • The treaty would also block countries from implementing national digital service taxes and require France and other countries that already have DSTs to repeal them.
  • After the OECD released text of the treaty earlier this month, US Treasury Secretary Janet Yellen, said that, despite recent progress on the treaty, there remain “open issues” important to the US and other countries. She said the US won’t be able to sign until next year. (LegalAvocado)
  • A report from India this week, citing an unnamed government official, said the country will “most likely” implement the two-pillar plan starting in April 2025, at which point it will eliminate its seven-year-old unilateral national digital services tax, known as the “equalization levy.” (Financial Express)

Australian Tax Authority's "Secret Deal" With PWC

  • The Australian tax authority reportedly made a secret settlement deal with PwC Australia over charges that the Big Four firm made false claims of legal professional privilege. The deal halved penalties against the firm and blocked any further action against it and five of its multinational clients. (Australian Financial Review)
  • French National Assembly deputies slammed the country’s double-tax agreement with Qatar, which they accuse of financing Hamas. (France Info)

Laterals, Moves, Promotions

  • The Institute of Chartered Accountants in England and Wales named Chartered Insurance Institute chief executive officer Alan Vallance to replace the retiring Michael Izza as its CEO when Izza retires in spring 2024 after close to 18 years in the role. (ICAEW.com)
  • Ropes & Gray promoted 20 lawyers to partner across its US and London offices, including four who advise on tax matters–two each in New York and Boston. The promotions are effective Nov. 1. (RopesGray.com)
  • Law firm Eversheds Sutherland US grabbed longtime Crowell & Moring transactional tax partner Charles Hwang as senior counsel in Washington. According to Hwang’s LinkedIn profile, he’s editor of the 13th edition of the Inward Investment and International Taxation Review. (Eversheds-Sutherland.com)
  • Alvarez & Marsal Tax LLP, a unit of the global professional services firm of the same name, hired Deloitte corporate tax partner Kathie Haunton as a managing director in Manchester UK. Arriving after 32 years at Deloitte, she advises clients on research & development tax relief claims. (www.alvarezandmarsal.com)
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