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.

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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.

Compliance requirements

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

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

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