Tax compliance requirements for foreign brand owners that have franchise arrangements in Kuwait and technology companies earning license fees from Kuwait
The Kuwait tax law and practice of the Kuwait tax authority (KTA) impose a tax on income earned from Kuwait on rights to use trademarks, brand names, and other intellectual property in the form of license fees or royalties, etc.
This would require brand owners and technology companies to register with the KTA and file annual tax declarations reporting income earned from Kuwait, whether in the form of a royalty or license fee. As the Kuwait tax law does not define the term Permanent Establishment, the income is taxable irrespective of whether the company receiving the income had any presence in Kuwait or not.
The franchisor/licensor would be required to comply with the Kuwait tax compliance obligations in respect of the royalty/license income earned from Kuwait, i.e. the company would be required to:
- Register with Kuwait Tax Authority (KTA);
- File annual tax declaration in respect of their income from Kuwait;
- Complete the process of tax inspection;
- Obtain tax assessment and settle tax as stated in the tax assessment for the year; and
- Apply for tax clearance certificate.
Following completion of the above compliance process, tax retention would be release to the franchisor/licensor directly from the Kuwait franchisee/licensee.
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