Kuwait: Tax rules for foreign companies with income from franchise arrangements, license agreements
Kuwait: Tax rules for foreign companies
Kuwait imposes a tax on income earned from Kuwait in the form of license fees or royalties on rights to use trademarks, brand names, and other intellectual property. Accordingly, there are tax compliance requirements for foreign brand owners that have franchise arrangements in Kuwait and technology companies earning license fees from Kuwait.
Brand owners and technology companies must register with the tax authority and file annual tax declarations reporting income earned from Kuwait, whether in the form of a royalty or license fee. Kuwait’s tax law does not define the term permanent establishment. In any event, the income is taxable whether the company receiving the income had a presence in Kuwait or not.
The franchisor or licensor must comply with the Kuwait tax obligations in respect of the royalty and license income earned from Kuwait, including that the company must:
- Register with Kuwait tax authority
- File annual tax declaration in respect of the income from Kuwait
- Complete the process of tax inspection
- Obtain a tax assessment and then settle tax as stated in the tax assessment for the year
- Apply for tax clearance certificate
Once these steps are completed, a “tax retention” would be released to the franchisor or licensor directly from the Kuwait franchisee or licensee.
Read a March 2021 report prepared by the KPMG member firm in Kuwait
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