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      Kuwait has taken a significant step toward aligning its international tax framework with global standards on Base Erosion and Profit Shifting (BEPS). Decree No. 62 of 2026, issued on 25 May 2026, approves Kuwait’s accession to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the “BEPS Multilateral Instrument” or “MLI”).

      While the Decree became effective domestically on 7 June 2026, the effect of the MLI on Kuwait’s tax treaties with other jurisdictions will depend on the submission  of the instrument of ratification with the OECD and the alignment of MLI positions between Kuwait and each relevant treaty partner.

      In general, the MLI enters into force on the first day of the month following the expiry of three calendar months from the date on which the instrument of ratification is submitted with the OECD. However, the relevant treaty provisions will become effective only where both treaty partners have ratified the MLI and the treaty has been designated as a Covered Tax Agreement by both jurisdictions.

      The primary objective of MLI is to address gaps in international tax rules that previously enabled multinational corporations to artificially shift profits from jurisdictions where substantive economic activities are carried out to low or no-tax jurisdictions commonly regarded as tax havens.

      This development reflects Kuwait’s commitment to strengthening the integrity of its tax treaty network and addressing risks associated with aggressive tax planning, including treaty abuse, artificial avoidance of permanent establishment status, and the shifting of profits to low or no-tax jurisdictions. The MLI provides a coordinated mechanism to swiftly modify existing bilateral double taxation agreements without the need for individual renegotiation.

      The Decree, following its publication in the Official Kuwait Gazette, mandates the relevant authorities to implement its provisions in accordance with their respective responsibilities. It also confirms that accession to the MLI forms part of Kuwait’s broader efforts to align with the OECD/G20 BEPS Package and enhance transparency, consistency, and dispute resolution within its treaty framework.

      Covered Tax Agreements

      As part of the MLI, Kuwait currently has 45 provisional Covered Tax Agreements (CTAs), based on publicly available information. These agreements will become applicable once the ratification process is completed and the positions of Kuwait and the relevant jurisdictions are aligned.

      The MLI will affect a treaty only if both Kuwait and its treaty partner have designated that treaty as a CTA and have brought the MLI into force. Accordingly, out of Kuwait’s overall network of bilateral Double Taxation Avoidance Agreements (DTAAs), 45 treaties have been specifically identified for automatic amendment under the MLI.

      The MLI contains thirty-nine articles divided into six parts. We set out below a high-level overview summarising the key features of the MLI and outline potential implications for taxpayers in Kuwait.

      Measures & Key Aspects

      The preamble of all matching treaties will be rewritten to state explicitly that the purpose of the treaty is to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or treaty-shopping.

      These measures seek to address mismatches arising from the use of transparent entities and differing tax characterizations, as well as to refine tie breaker rules for dual resident entities. They also clarify the approach to granting relief from double taxation.

      Treaty benefits may be denied where, having regard to all relevant facts and circumstances, it is reasonable to conclude that obtaining such benefits was one of the principal purposes of an arrangement or transaction. This serves as the primary anti avoidance provision within the framework.

      Gains derived from the disposal of shares or comparable interests may be subject to taxation in the jurisdiction where the underlying immovable property is situated, particularly where such property represents the majority of the entity’s value over a specified testing period.

      The provisions broaden the scope of activities that may give rise to a taxable permanent establishment by strengthening the dependent agent rules, limiting the application of preparatory or auxiliary exemptions, and addressing contract splitting arrangements. As a result, a wider range of business activities may trigger local taxation.

      Enhancements are introduced to improve the effectiveness and timeliness of the Mutual Agreement Procedure (MAP). In addition, optional provisions provide for mandatory binding arbitration, which contracting jurisdictions may elect to adopt in order to resolve disputes more efficiently.

      Kuwait Tax Alert: June 2026

      Kuwait Approves Accession to the BEPS Multilateral Instrument

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      Items for consideration 

      While the extent of the impact on taxpayers will ultimately depend on Kuwait’s final MLI reservations and notifications, together with the corresponding positions adopted by treaty partners, set out below are the key areas that taxpayers in Kuwait should consider.

      • Identify current arrangements relying on treaty benefits and assess their robustness under the PPT.
      • Consider whether existing holding, financing and licensing structures remain appropriate in light of the MLI provisions.
      • Ensure relevant entities maintain sufficient operational presence, decision-making capacity and supporting documentation.
      • Review cross-border activities, including service arrangements and agency relationships, to determine potential PE exposure.
      • Maintain clear and contemporaneous evidence of commercial rationale, functional profiles and transaction flows.
      • Revisit withholding tax treatments on outbound payments to confirm continued eligibility for treaty relief.
      • Where risks are identified, early remediation may mitigate future disputes or adverse tax outcomes.

      How KPMG in Kuwait Can Help

      • Comprehensive assessment of the implications of the MLI ratification on Kuwait treaty positions, cross-border investment structures, and treaty entitlement.
      • Review of the permanent establishment position in Kuwait for commissionaire structures, local warehouses, and construction sites against the new, tightened MLI definitions to see if it may trigger a taxable presence in Kuwait.
      • Review of substance position and recommendation in preparation of robust substance and supporting documentation to substantiate treaty benefit claims and demonstrate alignment with evolving international tax standards and anti-abuse requirements.

      Previous Tax Alerts

      MoF Circular No. 1 of 2026 introduces an optional advance tax payment for taxpayers under Kuwait’s DMTT
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      Updates to 5% Tax Retention Rules for MNE groups subject to DMTT Law and for other taxpayers
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      Kuwait MOF issues Executive Bylaws on DMTT Law
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