With effect from 1 January 2025, multinational enterprise (MNE) groups that fall within the scope of the Domestic Minimum Top-up Tax Law (DMTT Law) – Decree Law No. 157 of 2024 and its Executive Bylaws under Ministerial Order No. 55 of 2025 dated 29 June 2025 – will no longer be subject to the following tax laws:
- Corporate Income Tax Law – Decree No. 3 of 1955 and its amendments, including Law No. 2 of 2008; (Legacy Tax Law)
- Zakat Law – Law No. 46 of 2006; and
- Partitioned Neutral Zone Tax Law – Law No. 23 of 1961.
The National Labour Support Tax Law – Law No. 19 of 2000 on Kuwait shareholding companies (NLST) – is expected to remain in force, with the exclusion of Paragraph (1) of Article (12) and Paragraph (2) of Article (14).
While the DMTT Law effectively replaces the legacy income tax regime for in-scope MNE groups, the application of the tax retention mechanism remained unclear for entities falling under the DMTT.
To address this and certain other matters, the Kuwait Ministry of Finance (MOF) has issued updated Budget Executive Regulations for FY 2026/2027, which:
- Clarify the interaction between the DMTT regime under Decree-Law No. 157 of 2024; and
- Provide guidance on the long-standing 5% tax retention mechanism applied by ministries, authorities and public institutions.
These updates are directed to Kuwaiti government entities via the Budget Executive Regulations for FY 2026/20271 and set out how the 5% tax retention should be applied going forward. The updated guidance is appears to aim towards alignment of the traditional 5% retention rules with the new DMTT framework, and to avoid duplicate or unnecessary withholding where entities are already within the DMTT regime and remain compliant with their tax obligations. This is a positive step for entities contracting directly with the Government entities.
